Villa Complex in Hwagok-dong, Gangseo-gu Victimized by Jeonse Fraud
Numerous Mail Items from Courts, National Tax Service, and Police
Housing and Urban Guarantee Corporation Self-Acquired and Acting as Rental Business Operator
Jeonse Listings Without Deposit Loss Concerns
A villa mailbox in Hwagok-dong, Gangseo-gu, Seoul. Mail is piled up in various places, and there are stickers instructing to receive registered mail sent from the court, police agency, and National Tax Service. [Photo by Sim Nayoung]
On the 21st, the mailbox of a villa in Hwagok-dong, Gangseo-gu, Seoul, which was visited, was covered with registered mail receipt stickers from the court, police agency, and National Tax Service, as well as electricity bills, all accumulated over several months. Out of 15 households, 5 mailboxes were this messy. It was decisive evidence of vacant houses that were not visible from the outside.
Jeon Somin (27), who lives in this villa, said, "I moved in last October, but on my floor, all the units except mine are empty." She added, "It gets scary at night," and said, "If this situation continues until my lease contract ends next year, I am thinking about moving to another neighborhood."
It is not only where Jeon lives. In the villa area around Kkachisan Station on Seoul Subway Line 5, there were still unhealed wounds from jeonse fraud. The location is good, and most villas are newly built within about 5 years. Among them, there were places where no one lived and the lights were not turned on even at night.
During the real estate market boom in 2019, homeowners aiming for quick profits purchased many properties with almost no personal capital. However, during the economic downturn in 2022, reverse jeonse occurred, and homeowners could not return the jeonse deposits, turning into jeonse fraudsters.
Residents who had subscribed to the Housing and Urban Guarantee Corporation (HUG)'s guarantee products were paid the jeonse deposits by HUG on behalf of the landlords. However, the jeonse houses they lived in have remained vacant until now.
As jeonse fraud damage gradually surfaced, the number of jeonse houses for which HUG repaid the deposits on behalf of landlords continued to increase. Currently, HUG is even auctioning off those houses and 'self-bidding' on them. HUG has decided to become the landlord and start direct rental business from the second half of this year. This type of purchased rental housing is called 'Dundun Jeonse'.
HUG has acquired 590 households through auctions from last month until the 14th of this month. Among them, in May, HUG acquired 11 villa properties in Hwagok-dong. The sizes vary from 15 to 38 square meters. All are houses that suffered jeonse fraud damage within the last 1-2 years. HUG's goal is to repair the acquired houses, offer them as jeonse at 90% of the market price, recruit tenants from the end of July, and make them 'homes where people live' within this year.
A HUG official explained, "Since the government is the landlord, there is no worry about losing the jeonse deposit, and it is meaningful that people can live in well-located new villas in the metropolitan area at prices cheaper than the surrounding market for up to 8 years," adding, "If you are homeless, you can move in regardless of income or age."
The purchase target is 3,500 households this year and 6,500 households next year. Purchases will be made in Hwagok-dong, where villa villages for low-income people are formed, as well as in Incheon and Bucheon, Gyeonggi Province. The houses that HUG guaranteed for jeonse fraud damage are already built homes, and since no separate purchase funds are required, it is convenient to secure properties.
A HUG official said, "HUG holds the jeonse deposit refund claims for houses that suffered jeonse fraud while paying the jeonse deposits to tenants on behalf of landlords," and added, "When self-bidding at auctions, the bid amount can be offset with these claims, so no additional funds are needed." When HUG rents out the houses, it can secure liquidity by receiving jeonse deposits from new tenants.
A real estate agent in Hwagok-dong said, "Since the jeonse fraud incident, the number of people coming to see villa properties has decreased, and except for properties eligible for HUG guarantee insurance, transactions do not happen at all," adding, "If the government takes the lead, villa jeonse prices may generally fall further, and the perception that villas are livable places can be restored."
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