Expanding Only Jeonse Fraud Victim Support Risks Worsening Market Problems [New Government Policy Issue]

The Scale of Jeonse Deposit Return Guarantee Accidents Continues to Grow
Accident Amount Reached 4.4896 Trillion Won Last Year
Government Seeks Improvements to Support Victims
Expected to Encourage Shift from Tenant to Landlord Insurance Subscription
Concerns Raised About Focusing Solely on Compensation
"Focus Should Be on Normalizing the Market Ecosystem"

As the number of victims of jeonse fraud continues to rise each year, the government is seeking countermeasures. There are expectations that, alongside support for victims, the government may expand the mandatory subscription of jeonse guarantee insurance for landlords. However, experts warn that if the government focuses solely on victim support, this policy direction could inadvertently sustain the risky jeonse system. Some also argue that the current dichotomous approach, which separates victims (tenants) and perpetrators (landlords), needs to be improved.

Jamsil Apartment. Photo by Jo Yongjun

According to the Ministry of Land, Infrastructure and Transport and the Korea Housing and Urban Guarantee Corporation (HUG) on July 30, the new administration is currently reviewing how to improve the guarantee insurance system, which is operated for the return of jeonse deposits. While increasing support to prevent jeonse fraud, the government is also closely examining measures such as switching the mandatory insurance subscription from tenants to landlords. A government official explained, "We are reviewing the relevant matters internally."

The government's active response to jeonse fraud is driven by the president's determination. Previously, President Lee Jaemyung pledged during the 21st presidential election to treat jeonse fraud as a social disaster and to expand the scope of victim support under the Special Act on Jeonse Fraud. He also promised to revise related laws to prevent jeonse fraud and strengthen punishment for perpetrators. Additionally, he announced plans to establish a 'Jeonse Fraud Guarantee Insurance System' that anyone can join, and to encourage the shift of policyholders from tenants to landlords, so that tenants are not held responsible and no one needs to worry about jeonse fraud. However, according to the Ministry of Land, Infrastructure and Transport, rather than creating an entirely new system, the focus will be on improving the existing guarantee insurance system.

The scale of guarantee accidents, in which the guarantee institution repays the jeonse deposit on behalf of landlords who cannot return it to tenants, has increased each year. The number of accidents and the amount of compensation paid by HUG under the Jeonse Deposit Return Guarantee have grown annually since statistics were first compiled in 2015. In 2022, as jeonse fraud became more prominent, the amount of compensation paid in 2023 surged to 4.3347 trillion won, nearly four times that of the previous year. Last year, the amount increased further to 4.4896 trillion won.

In the field, there are calls to make it mandatory for landlords to subscribe to guarantee insurance before signing a lease contract, and to require the insurance certificate as an essential document during lease brokerage. This would address the current system, in which the tenant pays the premium and subscribes to the insurance after the jeonse contract is signed.

There are also concerns that the government should not become fixated on compensating all damages when improving related policies. Jeonse inherently has structural risks of deposit losses, and as losses increase, more people may avoid choosing jeonse, causing the system to shrink. However, if government support increases, it could instead incentivize people to choose the riskier jeonse option.

Some argue that it is problematic to improve the system solely by regulating landlords within a dichotomous framework of victim (tenant) and perpetrator (landlord). Jo Junghun, an appraiser and chair of the Land and Housing Committee at the Citizens' Coalition for Economic Justice, explained, "Simply investigating and disclosing how many properties a landlord owns is not a solution. Even if someone owns 100 properties, they can still operate their business legitimately." He emphasized, "The government should focus on normalizing the market ecosystem."

Meanwhile, Kim Yoonduk, nominee for Minister of Land, Infrastructure and Transport, stated at a National Assembly confirmation hearing the previous day, "At least regarding the issue of jeonse fraud, the government will take responsibility and move quickly to provide relief." Regarding concerns that jeonse-related guarantees may cause fraud, she said, "If I become minister, I will form a dedicated task force (TF) to thoroughly review and discuss the system."