Cases of Guarantee Insurance Application (Renewal) Denials Due to Changes in Public-Supported Private Rental Appraisal Method
City Requests Grace Period and Rationalization of Evaluation Criteria
The Seoul Metropolitan Government and the Ministry of Land, Infrastructure and Transport have decided to develop supplementary measures to address the guarantee insurance issue for Youth Safe Housing. This comes amid concerns that changes to the appraisal method for public-supported private rental housing could make it difficult for tenants to obtain guarantee insurance for Youth Safe Housing.
On September 9, the Seoul Metropolitan Government announced that, in response to the recently revised "Enforcement Decree of the Special Act on Private Rental Housing," it would begin working on supplementary measures to protect the deposits of Youth Safe Housing tenants. This includes requesting the Ministry of Land, Infrastructure and Transport to grant a grace period for the new appraisal calculation method.
Previously, the appraisal for public-supported private rental housing was commissioned by the rental business operator to an appraisal agency. However, the method has changed so that the Housing and Urban Guarantee Corporation (HUG) now commissions the appraisal. As a result, the appraised value is now estimated to be about 15 to 20 percent lower than before, raising concerns that tenants may not meet the loan-to-value (LTV) ratio requirement, which could make it impossible to renew guarantee insurance. This prompted the city to seek countermeasures.
On August 22, the renewal of HUG guarantee insurance for Housing Complex A was denied under the new standards. According to the revised method, 10 out of 14 Youth Safe Housing complexes in Seoul that are due for guarantee insurance renewal in the second half of this year may not meet the LTV ratio requirement, making renewal impossible.
Since April, the city has been visiting the Ministry of Land, Infrastructure and Transport to explain the issues and continuously propose supplementary measures. On September 3, the city requested a "grace period for implementation" and "rationalization of guarantee insurance evaluation criteria," emphasizing that it may become difficult for existing rental business operators to renew guarantee insurance under the new appraisal method. The city also highlighted the difficulty of obtaining guarantee insurance before project completion and called for improvements to the current, unreasonable guarantee insurance subscription process.
Going forward, the city plans to continue working closely with the Ministry of Land, Infrastructure and Transport to develop a balanced solution that upholds the intent of the policy while protecting the rights and interests of young tenants.
Choi Jinseok, Director of Housing at the Seoul Metropolitan Government, stated, "Our most urgent and important goal right now is to create an environment where Youth Safe Housing tenants can live with peace of mind. We will work closely with the Ministry of Land, Infrastructure and Transport until supplementary measures are in place, and we will focus all administrative resources to prevent similar cases from recurring in the future."
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