By Lee Hyo-sik
Staff Reporter
The government is considering extending money to homeowners struggling to keep their units occupied, with disputes between landlords and tenants over rental money intensifying amid the slumping housing market and a worsening liquidity shortage.
Many homeowners, who bought apartments in the past with bank loans and rental money on expectations that home prices would go up, are suffering from a cash flow problem as a result of asset deflation in recent months. They find it increasingly difficult to return rental money, or ``jeonse'' in Korean, to tenants who want to get out of the existing housing contract to shop for cheaper property.
Jeonse is a lease system in which a tenant pays a lump-sum deposit for a two-year rental. At the end of the contract, the landlord must return the full amount. However, the feeble economy has impaired an increasing number of homeowners' ability to pay back the large deposit.
Additionally, it has become harder for landlords to find new tenants due to abundant home supply over the past few months, particularly in southern Seoul, pushing down jeonse prices. With many landlords being unable to return the rental money, conflicts over jeonse has been escalating with some developing into a legal dispute.
Against such a backdrop, the Ministry of Strategy and Finance is considering introducing a loan program for cash-strapped homeowners to financially help them return the rental money.
``Conflicts between landlords and tenants over jeonse have increased in recent months because of falling rental prices and ample supplies of new apartments. We are currently thinking about possible ways of financially helping owners of small homes who need large sums of cash to give back the rental money,'' a senior ministry official said.
He said the envisioned loan program could be in place as early as February, with Korea Housing Finance Corp. providing funds to cash-strapped landlords.
When the program is introduced, homeowners in southern Seoul and other areas in which a large number of new apartments were completed over the past few months, can get the financial support.
However, the prospect for such a loan program is uncertain as the Ministry of Land, Transport and Maritime Affairs has expressed a negative view about it.
A ministry official said the oversupply of apartments in southern Seoul and nearby areas is temporary, stressing the government should think twice about helping homeowners in affluent areas.
``We first need to make sure whether holders of apartments in southern Seoul are actually suffering from a cash shortage. Normally, it is not appropriate to regard homeowners as low-income brackets that need state help. We should be cautious before introducing the state-loan program for homeowners,'' he said.