Junior-Priority Tenants to Receive Relief as Seoul Overhauls Youth Safe Housing System

SH to Return Deposits to Junior-Priority Tenants
Shinhan Bank to Acquire Senior-Priority Tenant Claims
Operator Soundness to Be Verified in Four Stages
Request to Ease Guarantee Insurance Requirements

A pathway has opened for tenants of the Youth Safe Jeonse Housing who suffered from the recent large-scale deposit non-return crisis to receive relief. Not only senior-priority tenants but also junior-priority tenants are now expected to be recognized as victims of jeonse fraud and will sequentially receive their deposits back starting from December. The Seoul Metropolitan Government has also decided to overhaul the Youth Safe Housing system by verifying the financial soundness of operators to prevent further damages.

On October 2, the city announced its protection and restructuring measures for Youth Safe Housing tenants, which include these details. The new policy consists of three main strategies: strengthening tenant protection, expanding financial support for operators, and urging the central government to cooperate in improving the system.

Youth Safe Housing is a rental housing program supplied by the Seoul Metropolitan Government and private operators to alleviate housing costs for young people and newlyweds. A total of 80 sites (26,654 units) are currently in operation, with the deposit non-return issue arising in 296 units at four private operator sites: Jamsil Central Park, Sadang-dong Cove, Ssangmun-dong Edgar Ssangmun, and Guui-dong Oksan Green Tower.

◆Deposit Payment for Junior-Priority Tenants...Shinhan Bank to Acquire Senior-Priority Claims

First, the city will prepay deposits not only to senior-priority tenants but also to junior-priority tenants. If junior-priority tenants are officially recognized as victims of jeonse fraud by the Ministry of Land, Infrastructure and Transport, they can receive their deposits back through Seoul Housing & Communities Corporation (SH) starting in December. In this structure, SH will acquire the right of first refusal from tenants for the affected properties, return the deposits, and later recover the funds through auction. The eligible tenants are those residing in the Jamsil (7 units), Sadang-dong (85 units), and Guui-dong (56 units) sites.

Senior-priority tenants can receive their deposits starting in November through a deposit return claim transfer agreement with Shinhan Bank. Shinhan Bank will acquire the deposit return claims from tenants and pay out the deposits using the budget provided by the Seoul Metropolitan Government. Afterwards, Shinhan Bank will return the recovered deposits to the city after auction proceedings. The city has already secured the budget for these prepayments. The expected beneficiaries are 127 tenants from the Jamsil site and 13 tenants from the Ssangmun site. Tenants can verify their eligibility through the Youth Safe Housing Integrated Support Center and then apply for deposit return at the Shinhan Bank Seoul City Hall branch.

However, among the junior-priority tenants, one tenant at the Jamsil site and 18 tenants at the Guui-dong site who qualify as top-priority repayment tenants will receive their deposits back in December under the same process as senior-priority tenants.

◆Expanded Financial Support for Operators...Four-Stage Soundness Verification

The city will also significantly increase financial support for youth rental housing operators. This decision is based on the assessment that a surge in bankruptcies among operators, who are unable to withstand rising project financing interest rates, has led to the deposit non-return crisis.

To begin with, the city will provide loans for land costs at an interest rate of around 2% for up to 100 billion won, within 20% of the total project cost. In addition, a new "for-sale" housing type will be introduced, allowing up to 30% of units to be sold, thereby improving project viability. For example, whereas previously SH pre-purchased 30% of Youth Safe Housing units, now a portion of these may be converted to for-sale units.

Furthermore, the maximum amount of construction funding eligible for a 2% interest subsidy will be doubled from 24 billion won to 48 billion won. This aims to protect operators from external variables such as interest rate fluctuations.

To prevent further deposit non-return incidents, the city will verify the financial soundness of operators through a four-stage process. The Public Support Private Rental Housing Operations Committee will conduct a preliminary review of business structure and funding plans, followed by a main review of financial safety. The final stage will assess the possibility of joining a rental guarantee, and operators will be required to submit annual financial statements for ongoing operational verification.

◆Lowering LTV Standards and Referencing Previous Appraisals...Requesting Legislative Amendments from Relevant Departments

To stabilize the business structure, the city will also undertake a comprehensive overhaul of the Youth Safe Housing-related system. The city is urging the central government to amend laws and regulations that are essential for the stable operation of the program.

The core measure is to ease the requirements for joining guarantee insurance. Since June, a new system has been in place where the Housing and Urban Guarantee Corporation (HUG), rather than the rental operator, directly commissions property appraisals. As a result, appraised values have been up to 20% lower than before, causing tenants to fail to meet the loan-to-value (LTV) ratio required for guarantee insurance, and thus being denied coverage. In response, the city has requested that the government relax the conservative LTV calculation standards and allow reference to previous appraisals when renewing guarantee insurance.

The city is also seeking to adjust the timing for joining guarantee insurance from before completion to after completion but before tenant recruitment. This takes into account that "responsible completion-type managed land trusts," where developers entrust land to a trust company for funding, cannot obtain insurance before completion. The city will also request the development of products that allow for stable guarantee insurance coverage for up to 10 years to address difficulties encountered before insurance renewal.

Additionally, the city has requested the government to amend laws so that the purchase price for public rental housing is set at 80% of the standard construction cost, and to require financial statements and other documents to verify the soundness of rental operators during registration.

Seoul Mayor Oh Sehoon stated, "We will fundamentally improve the system and provide immediate relief to Youth Safe Housing tenants, so that this program can truly become a housing model where young people can live with peace of mind." He added, "Since there are limits to what the city can do with its own financial support and tenant protection, we strongly urge the central government to swiftly cooperate in improving the system."

This content was produced with the assistance of AI translation services.