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ED Turmoil over 'jeonse'

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It is urgent to overhaul controversial laws on housing lease

Tenants are facing growing difficulties in looking for “jeonse” housing after three controversial laws on apartment leasing went into effect in July. Unique to Korea, jeonse is a home rental system whereby tenants pay a refundable lump-sum deposit instead of monthly rent.

Prices of jeonse apartments in Seoul rose by 37.56 million won ($33,000) over the three months from August, according to a monthly report from KB Kookmin Bank. The increase is equivalent to the rise posted over the previous 21 months. The jeonse supply index for October also came to 191.1, the highest level since August 2001. The higher the index is within a cap of 200, the more serious the undersupply of jeonse housing is.

The three controversial laws the ruling Democratic Party of Korea (DPK) passed unilaterally in the absence of the main opposition People Power Party (PPP) authorizes tenants to extend their jeonse contract period by another two years while imposing a cap on deposit hikes. Consequently, more landlords want to live in their homes instead of leasing their property, resulting in a severe shortage. In Seoul and the metropolitan area, many apartment complexes are devoid of jeonse apartments while the price surge is spreading across the country.

Policymakers appear at a loss at what to do. The government has announced measures to expand the supply of public rental houses and tax incentives for monthly rent. Yet it is doubtful if these measures, which will take at least three years to materialize, will ease the shortage of jeonse housing.

Land, Infrastructure and Transport Minister Kim Hyun-mee dumbfounded the public recently by blaming COVID-19 and low interest rates for the ongoing property brouhaha, and said time will solve the problem, something that is hugely irresponsible. The authorities cannot stabilize jeonse prices without addressing the root cause of the problem. What is needed first is to overhaul the three laws on home leasing that ignited the current turmoil.