"Stable Residence for up to 20 Years in Public Rental Housing"
First 10 Years Rent-Free... Afterwards 50~70% of Market Price
LH Also Purchases Illegal Buildings and Trust Fraud Houses
Government Proposes "Re-discussion by Ruling and Opposition Parties in the 22nd National Assembly"
Korea Land and Housing Corporation (LH) has introduced a government measure to support rental fees when purchasing houses affected by jeonse fraud at auctions and supplying them as public rental housing. The plan is to return the profit (LH appraisal price - auction winning bid) generated during the auction process to the victims. If it is difficult to support rental fees with auction profits, the government will inject funds. Victims can either live rent-free for up to 10 years in the existing residence purchased by LH at auction or receive the auction profit immediately and move out.
Minister of Land, Infrastructure and Transport Park Sang-woo is announcing the "Measures to Strengthen Housing Stability Support for Jeonse Fraud Victims" on the 27th at the Government Sejong Complex. [Photo by Ministry of Land, Infrastructure and Transport]
On the 27th, the Ministry of Land, Infrastructure and Transport (MOLIT) announced the "Strengthened Support Plan for Housing Stability of Jeonse Fraud Victims" jointly with related ministries. Minister Park Sang-woo of MOLIT said at the government Sejong office, "The housing stability of victims is becoming unstable due to jeonse fraud," adding, "The key to quickly rescuing jeonse fraud victims is to guarantee housing stability." This measure was announced a day before the National Assembly plenary vote on the special law amendment for jeonse fraud victim support led by the Democratic Party of Korea. The 'prior rescue, later recovery' plan included in the amendment was excluded.
To ensure housing stability for victims, MOLIT allows victims to live in houses purchased and supplied by LH for up to 20 years. Under the current special law, LH acquires the right of first refusal from victims to purchase the affected house at auction and then leases it to the victims. Victims can live rent-free for the first 10 years and then pay rent at 50-70% of market rates for the next 10 years. LH’s housing purchase budget totals 6 trillion KRW, including 5.3 trillion KRW for general public rental housing and 700 billion KRW for houses affected by jeonse fraud.
Victims’ rental fees will be supported from LH’s auction profits. If LH purchases the affected house at auction for less than the appraisal price, it effectively increases LH’s profit. MOLIT plans to use this profit as auction profit to support victims’ rental fees. Any remaining profit will be paid to victims when they move out of the public rental housing. If the profit is insufficient, the government will use public funds to guarantee victims’ rent-free residence for 10 years.
An MOLIT official said, "LH can purchase jeonse fraud victim houses at auction at the winning bid price rather than the appraisal price," adding, "Since the winning bid price is about 60-70% of the appraisal price on average, using the profit allows affected tenants to live stably."
Recently, the winning bid rate, which is the ratio of winning bid price to appraisal price, has been declining, so auction profits are expected to increase. According to MOLIT, the average winning bid rate for row houses and multi-family houses nationwide over the past year is 67.8%. If LH wins an auction for a jeonse fraud victim house appraised at 100 million KRW for 67.8 million KRW, it means 32.2 million KRW will be used to support victims. Areas where jeonse fraud issues have surfaced, such as Gangseo-gu in Seoul (69.9%) and Michuhol-gu in Incheon (63.8%), show winning bid rates far below appraisal prices. An MOLIT official said, "The winning bid rate has been declining further this year, so LH’s auction profits are expected to increase."
Also, if all victims of multi-family house jeonse fraud agree, auction profits can be divided according to the proportion of their losses. Previously, in a multi-family house appraised at 700 million KRW and auctioned at 500 million KRW, with a senior mortgage of 400 million KRW held by a bank and deposits of 100 million KRW each from tenants A, B, and C, the auction distribution would allocate 400 million KRW to the bank and 100 million KRW to tenant A, leaving tenants B and C each with a loss of 100 million KRW. However, under MOLIT’s support plan, the auction profit (200 million KRW) would be divided, allowing tenants B and C to each receive 100 million KRW.
MOLIT plans to relax conditions so that LH can purchase houses excluded from its acquisition targets, such as illegal buildings and houses affected by trust fraud. This is to eliminate blind spots in housing support for victims. For illegal buildings, temporary legalization measures such as exemption from enforcement fines will be considered if there are no safety issues for residents. Violations will be addressed through repairs to ensure safe living. For trust fraud properties, LH will be allowed to participate in public sales.
Loan policy requirements will also be eased. When victims receive Didimdol loans, the situation where loans are made excluding the highest priority repayment (defense priority) will be prevented, allowing victims to borrow 100% of the funds. Additionally, residential officetels will be added to the support targets for victims’ Bogeumjari loans, and victims will be able to refinance existing jeonse loans at lower interest rates without registering tenant rights even before the lease contract ends.
Furthermore, MOLIT plans to strengthen tenants’ access to information during lease contracts to prevent jeonse fraud. Through the Safe Jeonse application, risk indicators such as the number of houses owned by landlords and the number of guarantee accidents will be provided, and tenants will be able to view fixed-date registration information at community service centers without landlords’ consent.
Minister Park said, "Supporting jeonse fraud victims is a vital livelihood issue, and it is important to prepare realistic alternatives and implement them quickly," adding, "Once the 22nd National Assembly is formed, the government will work closely with ruling and opposition parties centered on the government proposal to ensure housing stability for victims."
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