WEEKENDER Foreign victims shut out of Korea's 'jeonse' fraud relief efforts

At the start of 2022, Nan Ming-ji, a 40-year-old with Chinese citizenship, moved with his parents into a home in Ansan, Gyeonggi Province. The family put down a 140 million won ($104,000) deposit — money his parents had saved since arriving in Korea two decades ago.

It was no small sum. But under the country’s distinct “jeonse” system, such large upfront deposits have long been the norm. Instead of paying monthly rent, tenants put down a lump sum that is returned in full when the lease ends. For landlords, the deposits provide access to a large pool of capital they can invest or earn interest on.

In October 2023, Nan’s father found a notice saying their home was being put up for auction. Just weeks later, the family learned that their landlord owned several other buildings in his wife’s and brother-in-law’s names. Those properties, too, had been flagged for auction.

The family had fallen victim to a form of jeonse fraud that has spread rapidly across Korea over the past decade. Some landlords used deposits from multiple tenants to acquire properties with little of their own capital. But when the real estate market weakened and new deposits stopped flowing in, they found themselves unable to return deposits when leases expired, leaving renters facing the sudden loss of their hard-earned savings.

Nearly three years later, the family still lives in the home. A bank and later a credit union moved to auction the property, but Nan managed to file petitions that delayed the sales.

“And now, the claim has been transferred to a capital company,” he said. When the company initiated another auction this year, he applied for another postponement. This time, however, the Ansan court rejected his request.

“There have already been two auctions, but both failed to attract a buyer. The next one is expected to be held in September or October. If someone buys the house this time, we’ll have to leave.”

Both of his parents are over 60, and the three family members have struggled to find stable work.

“If we are forced out of this home, our lives will be ruined,” he said. “We’d have no choice but to go back to China after losing everything we’ve worked for.”

Nan’s experience is not an isolated one among foreign residents.

As of Aug. 31, the Ministry of Land, Infrastructure and Transport had officially recognized 40,936 people as victims under the Special Act on Support for Jeonse Fraud Victims and Housing Stability. Foreign nationals accounted for 547 cases, or 1.3 percent of the total.

The actual number is believed to be higher, however, as some victims have been unable to meet the law’s eligibility requirements.

The special act does not bar foreign residents from being recognized as victims, but even after receiving official recognition, they remain ineligible for some of the relief measures available to Korean citizens, including public rental housing and financial assistance backed by the Housing and Urban Fund.

In early August, the Gyeonggi Provincial Government proposed that the central government extend such assistance to international residents who are legally living in Korea.

More specifically, it called for allowing Korea Land & Housing Corp. (LH) to purchase foreclosed housing occupied by foreign victims and convert them into emergency housing, enabling those affected to remain in their homes.

The province also urged broader financial support, including access to low-interest jeonse loans and refinancing programs that would allow borrowers to replace existing housing loans with more affordable ones.

But Nan is skeptical that the provincial government’s proposal will lead to meaningful change.

“It may have symbolic significance, but I don’t think it will actually help,” he noted. “We’ve been knocking on the doors of the land ministry ourselves for about three years, asking for financial support, but they keep sending us elsewhere, saying the law has to be decided by the National Assembly.”

For him, the issue ultimately goes beyond whether a victim is Korean or foreign, or whether they qualify for government assistance. At its core, the problem is that too little is being done to recover the money victims have lost.

Over the past five years, the Korea Housing & Urban Guarantee Corp. has paid out 15 trillion won on guarantee claims after landlords failed to return tenants’ deposits, but has recovered only about 20 percent of that amount. The growing backlog of unrecovered claims has been attributed in part to shortcomings in identifying debtors’ assets and actively pursuing collections.

“Most jeonse scam victims have losses running into hundreds of millions of won,” Nan said. “We’re not asking for welfare. We’re asking for justice to be served and for efforts to recover the money we lost. But so far, we haven’t seen much tangible action on that front.”

Human rights activists are taking the dispute to the administrative appeals process, arguing that foreign victims should also be eligible for their foreclosed homes to be purchased by LH if they have been affected by housing scams.

“The special act was created to support victims of a crisis caused by structural problems in Korea’s rental system. It is aimed at supporting those affected, meaning the state has an obligation to provide assistance regardless of nationality,” said Seo Dong-kyu of Min Snail Union, a housing rights advocacy group.

The government has stated that foreign nationals cannot benefit from the LH purchase program because it is financed through the Housing and Urban Fund, which is restricted to Korean nationals under the Housing and Urban Fund Act and the Special Act on Public Housing.

Seo, however, pointed to provisions in the special act on support for jeonse fraud victims that allow victims’ homes to be purchased not only with money from the fund but also with local government budgets.

“The law doesn’t rely solely on the Housing and Urban Fund. Local government funds can also be used, and there is no restriction on using them to support foreign nationals,” he said.