[Column] The Normalized Fear of 'Deposit Non-Return' Is Not the Answer to Abolishing Jeonse

I am a tenant. I lived in a villa from my days as a single person until just after getting married. In 2021, I decided to move to an apartment. For the baby on the way, I decided to stop enduring cigarette smoke on the streets and inconvenient parking. Unfortunately, it was at a time when the new lease law caused a surge in jeonse prices. Searching for a rare property, I expanded my search to Mullae-dong, Yeongdeungpo, where I knew no one. I barely found a small apartment 15 minutes from the subway station. The deposit was the highest price at 520 million won. Although it felt uneasy since it was over 60% of the house price, I felt reassured because the landlord was a couple of doctors and it was an apartment.

After one and a half years, interest rate hikes caused the interest payment to skyrocket from 760,000 won to 1,820,000 won. The landlord notified me that they did not intend to renew the lease. However, the trusted doctor couple had no means to return the jeonse deposit. They proposed a reverse monthly rent of 700,000 won, but I refused. It was a time when interest rates kept rising. Anxiety overwhelmed me as the landlord was flustered, and I worried about the deposit every night. Fortunately, with the easing of loan regulations, the landlord lowered the jeonse price by 100 million won in January this year and found a tenant. Even I, a real estate journalist by title, became a ‘jeonse refugee’ two years ago and lived as a ‘rent poor’ two years later, experiencing housing insecurity firsthand. The cost of choosing jeonse felt overwhelmingly high.

Several months later, Seoul apartments have become hotbeds of reverse jeonse. Looking at the actual transaction prices of the largest complexes by autonomous districts in May, 21 out of 25 corresponded to reverse jeonse. This means that most tenants live with the everyday fear of not getting their deposits back, just like I did a few months ago. With the reverse jeonse crisis expected to worsen in the second half of the year, the number of tenants unable to recover their deposits may increase.

Now that the reverse jeonse crisis has become ‘commonplace,’ before the damage from deposit non-return grows larger, we must temporarily open financial channels to landlords whose repayment ability has been verified. Raising the Debt Service Ratio (DSR) is a representative measure. Although there are calls to abolish jeonse, realistically, it is not a method everyone desires. Tenants find it difficult to pay large sums monthly as rent, and landlords have no means to return existing deposits without new tenants. Last year, the total domestic jeonse deposit amount reached 200 trillion won.

However, we cannot leave the current jeonse system as is, which has caused reverse jeonse and jeonse fraud through gap investment with little or no capital. The system must be changed so that only financially healthy landlords and tenants who trust them remain in the jeonse market. Various measures exist, such as limiting jeonse deposits if there are mortgages or debts, or lowering the jeonse deposit ratio. Although painful, there is definitely a way to save the jeonse market in crisis.