Providing 16,000 Public Rental Homes for Jeonse Accident Houses over 2 Years through 'Dundeun Jeonse'

The government announced measures to expand housing supply for national housing stability, and will announce new housing sites for 50,000 households in November. The photo shows a densely packed villa area in Yongsan-gu, viewed from Namsan, Jung-gu, Seoul on the 9th. Photo by Jin-Hyung Kang aymsdream@

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The supply scale of 'HUG Dundeun Jeonse Housing,' where the Housing and Urban Guarantee Corporation (HUG) purchases houses involved in jeonse deposit return guarantee accidents and utilizes them as public rental housing, will increase from 10,000 households to 16,000 households.

On the 22nd, the Ministry of Land, Infrastructure and Transport announced that to expand the supply of Dundeun Jeonse Housing, HUG will newly create a type called 'Dundeun Jeonse Housing II,' which involves HUG negotiating to purchase and rent out jeonse guarantee accident houses before the auction process.

The existing Dundeun Jeonse Housing is a form of public rental housing where HUG repays the jeonse deposit to tenants on behalf of the landlords and then directly bids on the auctioned houses to supply them as jeonse rentals. This type aims to supply 3,500 households this year and 6,500 households next year.

Here, 'supply' refers to HUG securing ownership of the respective house. Even if ownership is secured, if someone currently lives in the house, issues such as eviction or facility renovations may arise, so there may be a time lag before actual move-in.

After securing ownership of the house through auction, HUG rents out the jeonse to non-homeowners without income or asset restrictions through a lottery system. From the tenant's perspective, since the house is owned by a public institution, there is no risk of losing the jeonse deposit, and they can live for up to 8 years with a deposit at about 90% of the surrounding market price.

Since May, HUG has won bids on 1,098 houses involved in jeonse guarantee accidents at auctions over three months. During the first tenant recruitment conducted at the end of July after defect repairs, 2,144 people applied for 24 units. The average competition rate was 89 to 1. The second tenant recruitment will be held for 60 units from the 30th of this month to the 13th of next month.

The newly created Dundeun Jeonse Housing II is another type where HUG directly purchases and rents out houses whose landlords failed to return the jeonse deposit due to reverse jeonse problems. Before the auction proceeds, HUG negotiates to purchase the landlord's house within the amount of the subrogation payment paid to the tenant on behalf of the landlord, then rents it out again as jeonse.

Considering that the average bid rate for auction-purchased houses is 80-82%, HUG plans to negotiate purchases at less than 90% of the house market price. Since it takes more than a year from subrogation payment to auction bidding, there is a limit to increasing supply volume. However, negotiated purchase has the advantage of shortening this time.

In this case, if the landlord who failed to return the jeonse deposit on time sells the house to HUG, the remaining debt (subrogation payment - HUG purchase price) will have a principal repayment deferral for six years. If the landlord wishes, they can repurchase the house at the time of repaying the remaining debt.

The view of a villa neighborhood from a building in Yangcheon-gu, Seoul, where villa transaction volumes are increasing on the 11th. Photo by Mun Ho-nam munonam@

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Starting from the 6th of next month, HUG will accept applications for negotiated purchase of Dundeun Jeonse Housing II from existing landlords. Only landlords with two or fewer houses enrolled in jeonse guarantee can apply for negotiated purchase. Normally, after HUG's subrogation payment, if forced execution is decided, interest of 12% per annum is added to the subrogation payment. By transferring through negotiated purchase, landlords can reduce interest burdens. HUG aims to purchase 2,000 houses this year and 4,000 houses next year, totaling 6,000 houses over two years through negotiated purchase of jeonse guarantee accident houses.

Dundeun Jeonse Housing II has the same conditions as the existing Dundeun Jeonse Housing. It is supplied by lottery to non-homeowners and allows residence for up to 8 years at rent below 90% of market price.

Korea Land and Housing Corporation (LH) also operates Dundeun Jeonse Housing by purchasing newly built multi-family, row houses, and urban lifestyle housing sized 60-85㎡. Through the first tenant recruitment in June this year, 1,642 households were supplied. The competition rate in Seoul reached 101 to 1. LH plans to conduct a second tenant recruitment of 1,000 households in November this year.

LH supplies all Dundeun Jeonse Housing as 'sale-conversion type purchase rental housing.' Tenants can choose whether to purchase after living as renters for at least six years. Detailed information such as sale-conversion eligibility and tenant qualifications will be disclosed in the Dundeun Jeonse Housing tenant recruitment announcement in November.

LH's supply target for Dundeun Jeonse Housing is 8,000 households this year and 14,000 households next year, totaling 22,000 households over two years. Combining LH and HUG volumes, the total supply target for Dundeun Jeonse Housing reaches 38,000 households by next year.

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