[Exclusive] Youth Safe Housing Unpaid Deposits to Be Returned via Shinhan Bank [Real Estate AtoZ]

Banks to Pay Deposits Using Seoul City Funds
Financial Services Commission Deems It "Legitimate Banking Operation"
Positive Review for Acquisition of Deposit Return Claims
Four Complexes Expected to Be Eligible for Claim Acquisition

A plan is being developed for commercial banks to play a central role in resolving the issue of unpaid deposits in Seoul’s Youth Safe Housing program. Under this plan, Seoul Metropolitan Government will return the deposits to affected young tenants through banks. The banks, in turn, will acquire the tenants’ deposit return claims and recover the funds for the city through court auctions or other legal procedures. This solution is expected to allow affected young tenants to recover their deposits more quickly and easily.

Aerial view of Jamsil Central Park in Songpa-gu. Screenshot from the Youth Safe Housing website.

According to Seoul Metropolitan Government and the banking sector on September 17, the Financial Services Commission recently issued an official interpretation stating that “the acquisition of deposit return claims from Youth Safe Housing lease victims by commercial banks falls within the scope of their core business.” This means that banks are permitted to acquire and process these claims, providing a breakthrough in resolving the issue of unpaid deposits in youth rental housing.

Based on this interpretation, Shinhan Bank has confirmed plans to acquire such claims. Last month, when the issue of unpaid deposits surfaced, Seoul Metropolitan Government sent official requests for cooperation in tenant protection to ten banks, including the five major commercial banks: Shinhan Bank, Hana Bank, Woori Bank, NH Nonghyup Bank, and KB Kookmin Bank. The notice stated, “If you are willing to acquire the deposit return claims of tenants who have secured priority repayment rights through resident registration and fixed dates, please respond.”

Once Shinhan Bank acquires the claims, tenants will be able to receive their deposits from the bank. The funds for these deposits will be provided by Seoul Metropolitan Government. The bank will receive the tenants’ deposit return claims on behalf of the city, and will then recover the funds by selling the claims, pursuing litigation, or conducting court auctions. The recovered funds will be returned to the city. Although Seoul Metropolitan Government and Shinhan Bank initially considered having the bank pay out the deposits directly, they ultimately agreed that only the claims would be acquired.

This process is expected to be implemented for tenants of four youth rental housing complexes-Jamsil Central Park, Gugi Oksan Green, Sadang Cove, and Ssangmun Edgar Ssangmun-where provisional seizure or auction proceedings have been initiated due to the absence of deposit insurance.

With this measure, affected tenants are expected to be able to recover their deposits more easily through bank branches. An industry insider stated, “Unlike public institutions, banks are more accessible, which will greatly improve convenience in the deposit return process.”

This is the first time that commercial banks are considering acquiring tenants’ deposit return claims. In the past, a special law amendment was proposed to allow Korea Housing & Urban Guarantee Corporation (HUG) to purchase these claims and succeed the priority repayment rights, but it was rejected due to concerns over tax burdens.

The industry believes that Shinhan Bank’s move is influenced by its interest in being selected as Seoul’s next main treasury bank. Shinhan Bank was designated as Seoul’s treasury bank, responsible for handling the city’s cash and securities, in 2022. The current treasury agreement will expire in the second half of 2026.

Youth Safe Housing is a rental housing program supplied by Seoul Metropolitan Government and private operators to ease the housing burden for young people and newlyweds. Recently, however, a private operator of the Jamsil Central Park Youth Safe Housing failed to pay construction costs, resulting in a court-ordered auction. As a result, 134 tenant households are at risk of losing deposits totaling 23.8 billion won. In Sadang-dong, Dongjak-gu, the “Cove” Youth Safe Housing has also seen deposit insurance delayed for nearly a year, and more than 50 households have had their units provisionally seized due to the private operator’s debt problems, leaving tenants anxious about losing their deposits. To date, four Youth Safe Housing projects-totaling 287 households-have been subject to provisional seizure or auction proceedings.