Kim Yoon-deok, the Minister of Land, Infrastructure and Transport, expressed optimism that the government’s proposed ‘rental trust’ system will effectively curb gap investment using security deposits.
During a briefing on August 13 regarding measures to stabilize the rental and sales markets, Kim responded to a question about whether the rental trust was designed to suppress gap investment, stating, “We believe it can indirectly have a significant effect in preventing gap investment.”
The rental trust involves entrusting tenants' security deposits to a public entity, which manages the funds and pays the returns to landlords. This structure is expected to limit gap investment, where landlords use tenants' deposits to purchase additional properties.
Kim highlighted the advantages of the system, noting that it provides stable income for landlords while ensuring the safety of tenants' deposits. He explained, “After much consideration and discussion, we prepared this. For landlords, it offers a significant advantage of stable income, and for tenants, it alleviates concerns about rental fraud.”
According to Kim, a recent government survey indicated a certain level of demand for the system, with about 20% of landlords expressing interest. He remarked, “While this is not a large enough proportion to dominate the entire market, it represents a significant portion that could help stabilize the rental market.”
Meanwhile, the government plans to launch a pilot program for the rental trust by the end of this year. Officials expect the initiative to help block the recycling of security deposits into home purchase funds while reducing the risk of rental fraud. However, challenges remain in ensuring that the operational returns for landlords and the structure for returning deposits to tenants are effectively addressed.
* This article has been translated by AI.
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