A new "safe lease trust" program, under which tenants place their jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) deposits with a state agency to remove the risk of not getting them back while landlords collect monthly income, will make its debut at the end of this month. Committed funds have already passed 1 trillion won ($720 million) ahead of the launch, and the government is also pursuing a plan to cut taxes on rental income to single digits to ease the burden on tenants. Attention is on whether the program can restore confidence in the non-apartment rental market, which has been shaken by jeonse fraud, and steer a housing market that has shifted toward monthly rent back toward jeonse.
Korea Housing & Urban Guaranty Corporation (HUG) said on the 21st that it will launch a lease stabilization body on the 22nd and issue a public notice at the end of this month to recruit landlords and tenants for the trust. HUG President Choi In-ho said earlier that commitments to the trust business are estimated to have passed 1 trillion won, including units from Korea Land & Housing Corporation's purchased rental housing and asset management companies, with a potential 2 trillion to 3 trillion won secured. HUG has set an annual target of 15 trillion won in jeonse deposits held in trust, which it estimates would have the effect of supplying about 93,000 homes.
The new lease stabilization body is a dedicated unit that will manage jeonse deposits directly, playing a role similar to that of the National Pension Service's fund management arm. The plan is to use tenant deposits as a funding source for housing supply, easing cash shortages at small and midsize builders and, over the medium to long term, expanding public rental housing. Verification of jeonse prices and contract signings will begin in November, with balance payments held in escrow and move-ins starting in January. A housing supply revitalization fund is targeted for establishment and registration in February.
HUG says the trust benefits both landlords and tenants. In an example presented by HUG, converting a low-rise multi-unit home renting for 740,000 won a month with a 10 million won deposit into a 200 million won jeonse contract would require the tenant to put up 40 million won of their own money and borrow 160 million won. Assuming a 3.97% annual interest rate, monthly interest would be about 530,000 won. The tenant's own funds rise by 30 million won, but monthly housing costs fall by more than 200,000 won and they also save on deposit guarantee fees.
Applying a 4.35% annual return, the landlord would receive 725,000 won a month before tax. That is similar to existing monthly rent but carries no risk of missed payments, and income is guaranteed for up to two months even when a unit is vacant. Registered rental operators can also cut guarantee fees on rental deposits. A plan to apply a single-digit tax rate to rental income is being pursued as well.
Eligibility initially covers homes valued at up to 2 billion won, with no restrictions on housing type, income or assets. Homes with existing liens, as well as monthly-rent and part-jeonse contracts, can take part, but the full deposit must be placed in trust. Participation is voluntary, and tenants retain their right to request a contract renewal.
HUG is reviewing a plan to expand loan guarantees to ease the funding burden on rental operators who place deposits in the trust. Previously, operators used deposits for construction costs or home purchases, but once the money is in trust they cannot spend it directly. The idea is to raise the mortgage guarantee cap, currently about 60% of appraised value, to 70% to 75% so operators can borrow additional funds.
The risk of principal loss would be reduced by drawing on HUG guarantees. Cho Han-jun, head of HUG's safe lease trust planning office, said that if the fund starts out in the form of HUG-guaranteed loans, HUG bears responsibility for any principal loss on those loans.
Also under consideration is raising money in advance against future monthly rental income, by packaging up to four years of rent into bonds and selling them to investors. If rent from 10,000 households over four years came to 300 billion won, that could be used as a basis to raise funds and shore up operators' liquidity. For landlords without spare cash, HUG is also reviewing support for funds to repay departing tenants, on the condition that they join the jeonse trust. Choi said some ask whether this runs counter to efforts to manage the total volume of household lending, but argued that depositing jeonse money with HUG cannot be seen as gap investment — buying a home while a tenant's jeonse deposit covers most of the price. He said HUG is in talks with financial authorities on whether such loans can be exempted from household debt volume management.
For tenants, HUG plans to offer low-rate jeonse loans for use when moving into homes enrolled in the trust. Talks with the five major commercial banks on launching the product are largely complete, with final terms such as interest rates being worked out. The aim is to increase participation in the trust by lowering both the funding burden on landlords and interest costs for tenants.
Choi said the trust will play a "3S" role: a safe jeonse for tenants that lowers housing costs without fear of fraud, a stable monthly income for landlords without worries about missed payments, and housing supply to stabilize the market.
50,000 Apply for 300 Units of "Deundeun Jeonse"; Purchase Scope Widened
HUG is expanding supply of "Deundeun Jeonse" housing, in which it becomes the landlord itself. With demand surging because tenants face no risk of losing their deposits and rents are below market levels, the agency is broadening the range of properties it buys and its review system. Funds raised through the safe lease trust are also meant to be invested in public rental housing over the medium to long term, pointing to a larger role for HUG in the housing supply the government has been emphasizing.
HUG said on the 21st that the 12th round of Deundeun Jeonse applications will be held in the last week of September. Supply will total 900 units, 100 more than the 800 projected at the start of the year, after HUG raised its annual target to 3,600 units from 3,000. That is double last year's 1,800 units. HUG aims to increase supply to 5,000 units next year.
Under the program, HUG buys homes at auction and through other channels after repaying deposits to tenants on behalf of landlords, then leases them to non-homeowners. Homes tied to guarantee defaults are converted into public rentals, pursuing debt recovery and housing stability at the same time. Deposits run at about 90% of nearby market levels, and tenants can stay for up to eight years. There are no income, asset or age limits, and anyone who is a head of household or a member of a household that does not own a home as of the notice date can apply. Because contracts are signed directly with a public agency, there are no brokerage fees. From the first round in July 2024 through the 11th round, 4,050 units were supplied.
Competition has kept rising. In the 11th round, 49,640 people applied for 300 units, an average ratio of 165 to 1. Because it was a non-scheduled round, the number of units was less than half that of regular rounds of 700 to 800, yet the number of applicants set a record. In Seoul, 36,117 people applied for 118 units, a ratio of 306 to 1.
HUG has also widened the range of homes it buys to expand supply. Apartment complexes with 150 or more units were added to a list previously limited to low-rise multi-unit housing, officetels — studio units used as either a home or an office — and apartment complexes with fewer than 150 units. The move responds to demand that has favored apartments since the wave of jeonse fraud. Purchase channels are also being diversified beyond auctions to include properties from bankruptcy creditors and those referred for public sale.
This month, HUG introduced artificial intelligence automated analysis into its purchase reviews. The system extracts housing types and legal claims from property registry documents to create baseline material for preliminary screening. In a pilot run, the time needed to prepare documents per case fell to 10 seconds from about two minutes and 30 seconds. Cutting repetitive paperwork lets staff focus on reviewing legal claims. HUG plans to extend the analysis to appraisal reports and auction property descriptions.
HUG is also pushing to expand public rentals through the safe lease trust. The idea is to manage a fund built from tenant deposits and private investment, and use part of it to supply rental housing such as Deundeun Jeonse. Choi said that if the trust takes hold and gathers 100 trillion won, HUG could consider using 20 trillion won of that to buy homes and increase rental supply.
