Lack of Mechanisms to Verify Financial Structure of Private Rental Operators
"Need for Measures to Prevent Recurrence of Security Deposit Non-Return"
Oh Se-hoon, the Mayor of Seoul, emphasized the need for fundamental measures, including legislative action, to prevent a recurrence of security deposit non-return incidents in the Youth Safe Housing program. He pointed out that the strict requirements for joining deposit insurance could lead to repeated incidents of non-return.
On August 28, during the 332nd temporary session of the Seoul Metropolitan Council, assembly members raised questions about the causes of the Youth Safe Housing non-return incidents and possible countermeasures.
Youth Safe Housing is a system introduced by the city in 2016, referring to rental housing supplied through cooperation between the public and private sectors. Recently, some Youth Safe Housing units have been subjected to compulsory auctions and provisional seizures. In the case of Jamsil Central Park Youth Safe Housing, the developer failed to pay construction costs to the contractor, resulting in a decision to initiate a compulsory auction. In Sadang-dong, Dongjak-gu, about 50 households in the 'Cove' Youth Safe Housing have been provisionally seized due to the private operator's debt issues, as the deposit insurance subscription has been delayed for nearly a year.
In response, the city decided to prioritize the payment of security deposits to senior tenants and to proceed with the cancellation of rental business registrations for new Youth Safe Housing units that have not joined deposit insurance by the end of September.
Regarding the causes of the incident, such as the failure to join deposit insurance, Mayor Oh stated, "There is no mechanism in the Special Act on Private Rental Housing to verify the financial structure of operators."
Regarding the requirements for joining deposit insurance, he said, "The Korea Housing & Urban Guarantee Corporation (HUG) has excessively raised the loan-to-value (LTV) ratio standard, making it increasingly difficult for new operators to join or renew insurance. This increases the likelihood of incidents occurring," and explained, "This is an opportunity to discuss in the public sphere whether HUG's strict stance on deposit insurance subscription is truly desirable, and there is room for debate through a process of public discussion."
Mayor Oh stressed the need for fundamental measures to prevent recurrence. He said, "There are limits to the city creating its own regulations and managing through ordinances in the absence of established rules," and emphasized, "We must first establish a legal basis and then implement appropriate safety measures to prevent repetition."
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