📉 Government’s ‘Reassuring Jeonse Housing’ Policy Falters Due to Lack of Seller Participation 🏡

The South Korean government’s initiative to purchase houses facing auction due to jeonse crises and supply them as public rental housing is struggling, with very few homeowners willing to sell to the Housing & Urban Guarantee Corporation (HUG). Only 12 households participated last year. 😥

Key Points

• ‘Reassuring Jeonse Housing 2’ (Negotiated Purchase Type): Introduced to reduce jeonse fraud and increase the supply of non-apartment public rentals.
• Poor Performance: Only 12 units purchased in the Seoul Metropolitan Area last year, far short of the planned 2,000.
• Original ‘Reassuring Jeonse’: HUG directly bids on auctioned houses after jeonse accidents.
• New Approach: HUG buys back houses with repurchase conditions directly from homeowners.
• Criticism: The new approach is seen as providing excessive benefits to homeowners, allowing them to pay minimal interest on the remaining debt and potentially regain ownership.
• Benefit Limitations: HUG now assesses the repurchase price at the market rate to prevent excessive profits for homeowners.
• Reduced Participation: Restrictions on eligibility (only homeowners with two or fewer jeonse-backed houses) and profit prevention measures have led to fewer homeowners offering to sell.
• HUG’s Response: Strengthening the dedicated team and conducting information sessions to encourage more negotiated purchases.

What is Jeonse? 🤔

Jeonse is a unique South Korean housing lease system where tenants provide a large lump-sum deposit to the landlord instead of paying monthly rent. This deposit is returned at the end of the lease term. However, jeonse fraud has become a significant issue, with tenants losing their deposits due to landlords’ financial difficulties. 😥

Why the Policy Matters 🧐

The ‘Reassuring Jeonse Housing’ policy aimed to address the jeonse crisis by providing stable public rental options. However, its effectiveness is compromised by low participation rates. The government faces the challenge of balancing support for tenants and incentives for homeowners to ensure the policy’s success. ⚖️

It remains to be seen whether HUG’s efforts to boost negotiated purchases will improve the policy’s performance. 🤷‍♀️