Monthly rent now more popular than Korea’s ‘jeonse’ rental system

An apartment complex in Seoul / Yonhap

A couple in their 50s, living in Suwon, Gyeonggi Province, is facing the ultimate housing dilemma: Korea’s complex "jeonse" system, where tenants pay a large lump-sum deposit or the option of monthly rent.

After four peaceful years of using the jeonse system, it's time for them to move. However, their new destination is a neighborhood once notorious for jeonse fraud. Even jeonse insurance isn’t enough to ease their anxieties.

“If I switch to monthly rent, it’ll come out to around 700,000 won ($475.58) a month when you add everything up. It feels like a waste since it’s money I’ll never get back — but at the same time, maybe that’s better than constantly worrying about getting scammed with jeonse,” the wife, who requested anonymity due to privacy concerns, said.

She then asked, “Do you think jeonse might still be the better choice?”

Jeonse is a unique rental system in Korea where tenants provide landlords with a lump-sum deposit — typically 50 percent or more of the property's market value — instead of paying monthly rent. The landlord is required to return the full deposit when the lease ends. The system is believed to have originated in the 1970s, during Korea's rapid industrialization, as a form of peer-to-peer financing for urban housing.

For decades, jeonse has contributed to wealth accumulation among ordinary people. Many young adults begin their housing journey with monthly rent, save up a deposit, transition to a jeonse lease, and eventually use their growing deposit as a stepping stone to homeownership. During housing booms, homeowners have leveraged jeonse deposits to purchase additional properties.

Yet the numbers are beginning to tell a different story. In February, government data revealed that monthly rentals now account for over 60 percent of new lease contracts nationwide — a more than 20 percentage point increase in just four years.

This shift is especially pronounced in regional areas, where over 80 percent of tenants in non-apartment housing have opted for monthly rent agreements.

What’s causing this once-popular system to lose its appeal?

No single factor explains the whole story, but the most recent blow came from a series of high-profile jeonse fraud cases. Some landlords have failed or refused to return deposits after contracts expired, leaving many tenants — particularly young and vulnerable ones — without both a home and their savings.

According to the National Police Agency, about 16,000 people fell victim to jeonse fraud between July 2022 and July 2024, with total damages estimated at around 2.5 trillion won. Of the 8,323 individuals arrested, most were found to have posed as fake landlords or tenants.

Women look at ads for properties in front of a real estate broker's office in Seoul, March 24. Yonhap

Soaring house prices and the corresponding rise in jeonse deposits have also played a key role. People now have to take out large loans, which come with high monthly interest payments.

“Even jeonse prices are now extremely expensive in Seoul. Without family support, it takes a really long time to save up for a jeonse deposit on just your salary. For many of us, monthly rent is the only realistic option now,” said Jeong, a 34-year-old office worker living in Seoul.

For tenants, taking out loans to cover jeonse deposits now comes with interest payments that often rival monthly rent. Meanwhile, more landlords are shifting to monthly rental arrangements to offset their own rising mortgage costs. These trends are likely to persist as interest rates remain high and the government tightens its grip on household debt.

Experts warn of a vicious cycle. If the supply of jeonse listings continues to shrink, more tenants will turn to monthly rentals, pushing jeonse prices even higher. They acknowledge the jeonse system isn’t perfect but caution that Korea may see greater asset polarization without it.

“If the jeonse system were to disappear, it would pose serious challenges to homeownership in Korea, where the housing finance infrastructure remains underdeveloped,” said Shim Hyung-seok, director of the Woodaebbang Real Estate Corporation Group. “More than 50 percent of jeonse tenants eventually purchase a home, but for monthly renters, the homeownership rate falls below 10 percent.”

Sohn Eun-kyung, a senior researcher at KB Financial Group's research center, echoed similar sentiments. Sohn said, "Given that many households have a strong intention to eventually purchase a home, tailored support measures are needed to help them move up the housing ladder."

New path to homeownership?

In response to growing concerns, the government says it is considering the introduction of a shared equity housing finance model. This approach would allow policy-based financial institutions to invest as co-owners when individuals purchase a home, reducing the buyer’s financial burden.

"As housing prices continue to climb and regulations gradually tighten, those without significant cash reserves will face mounting obstacles to homeownership. At the same time, relying on borrowing to facilitate purchases could pose risks to macroeconomic stability," Financial Services Commission Chairman Kim Byoung-hwan said Saturday at a press meeting.

Kim said the government is in the process of "exploring ways to stimulate demand more sustainably."