[Second-Half Growth Strategy] Jeonse Deposits to Be Managed by HUG...‘Safe Jeonse Trust’ Extended to Private Landlords

Safe Jeonse Trust Program to Include Private Landlords
HUG Considers Establishing Jeonse Stabilization Organization
Concerns Grow Over Impact on Jeonse and Monthly Rent Market

The government has decided to push forward with the "Safe Trust" project in the second half of this year, under which a separate public institution, rather than the landlord, will hold and manage tenants' jeonse deposits. This move comes in response to growing concerns about jeonse fraud and the return of deposits, as such incidents have continued despite increased awareness. The government justifies this policy as a way to better protect tenants' security deposits.

Initially, until earlier this year, the government had considered selectively introducing this arrangement only to registered rental business operators. However, it has now chosen to include private landlords regardless of registration status. This shift is interpreted as an attempt to bring jeonse contracts further into the public domain, spurred by President Lee Jaemyung’s remarks equating jeonse to private lending. There is significant interest in how this will impact the rental market.

According to the 2026 second-half Economic Growth Strategy, released by the government on July 14, the Safe Trust project is set to be implemented in the second half of the year. Under this system, a Rent Stability Organization will manage the jeonse deposits paid by tenants, distributing the investment returns monthly to landlords.

Based on the reporting by The Asia Business Daily, the government plans to operate the Safe Jeonse Trust as an optional program for both registered rental business operators (who are already required to have guarantee insurance) and unregistered private landlords. To facilitate this, the Korea Housing & Urban Guarantee Corporation (HUG) is considering establishing a separate Rent Stability Organization within its structure to manage jeonse deposits.

The rationale for this measure is to prevent jeonse fraud. Depositing jeonse funds with a guarantee institution allows tenants to receive their deposits back immediately in the event of a guarantee accident, without requiring a separate subrogation procedure. Originally, the Ministry of Land, Infrastructure and Transport had proposed, as a supplementary jeonse measure in its early-year economic strategy, that if registered rental operators wished to subscribe to the jeonse deposit return guarantee, a portion of the deposit could be placed with HUG. However, in the newly announced economic strategy for the second half of the year, the term "landlord" has been broadened to cover all rental business operators. This effectively expands the coverage of the jeonse trust program.

Although the government has not disclosed details of the project, industry experts expect it will be difficult to attract voluntary participation from landlords. From the landlord’s perspective, being unable to freely use the deposit during the lease term reduces their incentive to participate. Some argue this could further contract the jeonse market, which is already shrinking due to the shift toward monthly rental arrangements. Although initially the program will be optional for landlords, there is concern it may become mandatory in the future. Professor Ko Junseok of Yonsei University's Sangnam Institute of Management stated, "Given the ongoing consideration of reducing tax benefits for registered rental operators, there is unlikely to be demand for placing jeonse deposits with institutions. The effectiveness of the system will rely on providing additional tax incentives to all private landlords."

Meanwhile, the economic strategy for the second half of the year, announced on this day, also included measures to reduce lending across the real estate market. This is in line with President Lee’s emphasis on the "decoupling of real estate and finance." Measures include increasing the burden on high-risk mortgage loans, requiring banks to accumulate additional capital, and imposing extra social costs.

Policy loans will also be tightened. For government housing loan programs such as the Didimdol and Bogeumjari funds, income requirements—currently based on a fixed amount—will be revamped to reflect the median income adjusted for inflation and household size. Although specifics were not released, it is highly likely that income thresholds for policy loan eligibility will be lowered. Policy loan interest rates will also be more closely tied to market mortgage rates, with less delay in reflection. The measures also include plans to gradually lower the guarantee ratio for jeonse loans, and to ease the requirements for enrolling in jeonse deposit return guarantees, except for young people without homes and vulnerable groups. To encourage urban housing supply, the government will also consider easing financial support and regulations for reconstruction and redevelopment projects during the second half of the year.

This content was produced with the assistance of AI translation services.