The Housing and Urban Guarantee Corporation (HUG) is moving to gradually lower the criteria for joining the jeonse deposit return guarantee from the current 90% to 80%. This measure aims to improve financial soundness and reduce the risk of guarantee incidents, although a specific implementation date has not been set.
On October 15, HUG President Choi In-ho stated during a National Assembly audit by the Land, Infrastructure and Transport Committee that he is developing a comprehensive financial management plan in response to calls from lawmaker Hwang Un-ha of the Justice Party for proactive measures regarding financial burdens.
Choi noted, "We have lowered the jeonse rate to 90%, and we plan to gradually reduce it to around 80% based on market conditions," adding, "I cannot specify a timeline."
The jeonse deposit return guarantee is a system where HUG pays the deposit to tenants if the landlord fails to return it after the contract ends. Currently, the deposit must be less than 90% of the housing price to qualify for the guarantee.
If the criteria are lowered to 80%, the limit for the jeonse deposit that can be guaranteed based on the same housing price will also decrease. As a result, some properties that were previously eligible for the guarantee may no longer qualify.
HUG cited a decrease in the guarantee incident rate following the strengthening of the jeonse rate criteria as a basis for considering the additional reduction.
Choi explained, "By lowering the jeonse rate to below 90%, the incident rate, which once exceeded 10%, has now normalized to around 1%."
HUG is also working on improving systems to prevent jeonse fraud. The corporation plans to introduce a pre-screening system for jeonse guarantees in the second half of this year, allowing tenants to verify their eligibility for the guarantee before signing a lease.
Choi stated, "Currently, the trend regarding jeonse incidents has returned to normal, and it is likely to be maintained in the future. We will continue to take precautions."
Regarding concerns about financial burdens due to the expansion of project financing (PF) guarantees, he pointed out that no incidents have occurred in related guarantees since 2003.
While the strengthening of the jeonse rate criteria is expected to reduce HUG's guarantee risks, it may also limit the number of properties eligible for guarantees, raising the challenge of balancing tenant protection with financial soundness improvements.
* This article has been translated by AI.
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