"DSR Should Also Reflect Family Loans"... Experts Fiercely Debate Housing Finance Solutions

Jeonse Loans Should Be Limited to the Vulnerable, Expanded for the Houseless
Debate Continues Over Easing Relocation Expense Loan Rules
Consensus on Macroprudential Levy... Calls for Supplementing Shadow Banking Regulations

There have been calls to include not only loans from the financial sector but also private financing, such as loans between family members and workplace loans, in the calculation of the Debt Service Ratio (DSR). Regarding redevelopment and reconstruction relocation loans, opinions were divided: some argued they should be excluded from household loan regulations since these loans are primarily project costs needed to advance housing projects, while others expressed concern that such benefits could be concentrated in certain regions and among specific groups. Regarding the macroprudential levy, most participants agreed on the need for implementation. However, they also pointed out that policy design should take into account individual burdens and the issue of shadow banking.

On this day, the Financial Services Commission, led by Chairman Eokwon Lee, held a 'Public Debate on Real Estate Finance Policy' at the Bankers Hall in Jung-gu, Seoul, inviting academics and experts for a panel discussion. Participants offered various opinions on topics such as ▲loan regulations for young adults ▲the management direction of Jeonse loans ▲redevelopment and reconstruction relocation loans ▲overall loan volume regulations, and macroprudential management.

On the afternoon of the 15th, Eunok Lee, Chairman of the Financial Services Commission, held a national public debate on real estate policy at the Bankers Hall in Jung-gu, Seoul, attended by academics, experts, the finance, housing and construction industries, and the general public, to discuss overall real estate policies.

Jeonse Loans Only for Vulnerable Groups? "Support for Non-Homeowners Should Be Expanded"

Experts agreed that the ability of young people to buy homes increasingly depends on whether their parents can provide financial support, leading to a widening asset gap. Lee Daeyul, head of policy at the Korea Housing Association, said, "Whether or not young people can purchase homes is split by the availability of parental support," and added, "Since the loan limit was reduced under the June 27 measures, there is a need to restore it at least to some degree."

On the other hand, Sunyoung Park, professor of economics at Dongguk University, said, "Easing loan regulations for young people is like drinking salty water when thirsty;" She argued, "If financial support increases while housing supply remains limited, it could drive up prices, so housing stability for young adults should be approached with supply and fiscal policies such as special supply programs and expanding public rental housing."

On Jeonse loans, there were divergent views: Some supported expanding loans for non-homeowning households, while others insisted they should be limited to vulnerable groups. Miru Kim, research fellow at the Korea Development Institute (KDI), stated, "Jeonse demand arises because it offers a lower actual financial burden than monthly rent, but Jeonse loans can also contribute to price increases," she said. "If the goal is to prevent short-term price hikes, it makes sense to provide Jeonse-guaranteed loans only for vulnerable groups."

Seoyoungsoo, executive director at SK Securities, commented, "There is a need to increase Jeonse support for vulnerable groups in non-speculative areas, but expanding Jeonse loans in speculative regions is like pouring oil on the fire."

Kim Wonjang, Vice President of SamproTV, argued that Jeonse loans for non-homeowner households should be expanded. He noted, "There are no apartments in Seoul that you can rent with a Jeonse loan of 500 to 600 million KRW," adding, "Arranging for a slightly better Jeonse property by using one's own funds of 200 to 300 million KRW and a Jeonse loan is about housing welfare." He continued, "With rental housing accounting for only 6 to 7 percent of the market, restricting Jeonse loans for non-homeowners should not be considered; if anything, they should be expanded, not reduced," and stressed, "It is the responsibility of financial authorities to determine who qualifies as a non-homeowner."

In response, Choi Eunyoung, director of the Korea Urban Research Institute, argued, "Jeonse fraud occurs both in and outside the Seoul metropolitan area, but there are no fundamental prevention policies," and pointed out, "A reckless loan expansion policy is inappropriate."

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Relocation Loan Regulations Disrupt Housing Supply... Opinions Divided Over Benefit Concentration Among Some Union Members

Attendees were also divided over regulations on redevelopment and reconstruction relocation loans. Lee Daeyul, head of policy, said, "Relocation loans are essentially project costs for advancing housing projects," and requested, "Exclude them from household loans." He explained this is because such regulations disrupt housing supply, and the burden of relocation loans gets reflected in union member contributions and general sale prices. "If you borrow an additional 100 million KRW at an annual interest rate of six percent for four years, the interest alone amounts to about 24 million KRW, or around 500,000 KRW per month in payments," he noted. "Ultimately, the burden of relocation loans ends up being reflected in union member contributions and general sale prices," he reiterated.

In response, Director Choi Eunyoung pointed out that the benefits of increased relocation loans could be concentrated among union members of some redevelopment projects in Seoul. "It's not that relocation loans are denied now, but rather that there are demands for loans greater than 600 million KRW. These benefits end up being concentrated in specific regions where redevelopment and reconstruction happen in Seoul," he said. She continued, "In redevelopment and reconstruction zones, 20-30% of union members don't actually reside in the area. It's worth considering whether it is appropriate to provide policy support for these people's relocation."

Baemunseong, executive director at Life Asset Management, stated, "It may serve as a way to cover significantly increased additional contributions compared to the past with relocation loans," and argued, "Expanding relocation loans does not align with the initial intent of the system."

In response, Vice President Kim Wonjang said, "Redevelopment relocation loans are funds lent when work begins, after business approval and management disposition permission are obtained," adding, "It's unclear whether not providing this money would actually curb speculative or artificial demand."

On the afternoon of the 15th, Eokwon Lee, Chairman of the Financial Services Commission, discussed the overall real estate policy at a national public debate on real estate policy held at the Bankers Hall in Jung-gu, Seoul. The event was attended by academia, experts, the financial, housing, and construction industries, as well as the general public.

Limits of Loan Volume Cap... Private Finance Must Also Be Included in DSR

Concerning the total loan volume cap, there was a suggestion that private financing, such as loans between family members and workplace loans, should also be incorporated into the DSR calculation. Executive director Seo Youngsoo said, "Nowadays, not only official financing but also loans among family members and from workplaces are on the rise, making it difficult for aggregate loan regulations to stop this," he pointed out. "There should be discussions on reflecting private loans listed in funding plans, such as family loans, into DSR screening to determine loan limits," he added.

Executive director Baemunseong said, "If you only impose levies or regulations on mortgage loans, people can avoid them through parental or workplace borrowing," adding, "When calculating the DSR, it should cover not only mortgage loans but also unsecured loans and even shadow banking."

On the issue of the macroprudential levy, most participants agreed with its necessity but said design improvements were necessary. Seo Youngsoo commented, "I personally support the macroprudential levy, but instead of imposing it directly on individuals, perhaps banks could carry the burden, with the government preparing a certain portion of funds for contingencies."

Executive director Baemunseong said, "If levies are imposed only on mortgages, people can avoid them through parental or workplace borrowing," adding, "As this effectively incentivizes regulatory loopholes in shadow banking, the approach should consider not just fairness but also shadow banking itself."

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