"Tax Breaks and 4.35% Annual Returns"... HUG Recruits Landlords for Safe Trust Program for Jeonse and Monthly Rentals

First Call for Landlords Opens Nov. 4
50% Tax Reduction and Exemption from Special Tax for Rural and Fishing Communities
Landlords to Receive Annual Return of 4.35%

The Ministry of Land, Infrastructure and Transport said on Nov. 4 that it is recruiting landlords to participate in the “Safe Trust Program for Jeonse and Monthly Rentals,” under which it manages tenants’ jeonse deposits and pays landlords a fixed return.

The recruitment is a follow-up measure to the “Plan for the Rapid Supply of Housing” announced in August. Move-ins are scheduled to begin in phases starting in January next year. From Nov. 4, landlords can apply to participate through the Safe Jeonse Portal or at any branch of the Korea Housing and Urban Guarantee Corporation (HUG), regardless of whether they have recruited tenants.

The Safe Trust Program for Jeonse and Monthly Rentals operates through a three-party lease agreement among HUG, the landlord and the tenant. Instead of paying the deposit to the landlord, the tenant places it with HUG, which invests it in the Housing Supply Promotion Fund. HUG then lends the fund’s money to project financing (PF) sites and pays the landlord an agreed annual return of 4.35%. The agreed return rate remains unchanged until the contract is renewed, but may vary with market interest rates each time the program is announced. In effect, the landlord and tenant enter into a monthly rental agreement with no deposit.

When the contract ends, HUG returns the deposit to the tenant. If the landlord files an objection at the time of the refund over repairs or maintenance to the home, HUG may withhold part of the deposit. When signing the contract, tenants must pay 10% of the deposit as an initial payment and the remaining 90% at move-in to an account designated by HUG.

Eligible homes must be valued at no more than KRW 2 billion and have existing senior debt of no more than 80% of the home’s value. There are no restrictions on housing type or on the income and assets of landlords or tenants. However, participation may be restricted if there is a concern that it could undermine tenants’ housing stability, such as in cases of unpaid national or local taxes.

The deposit amount is capped at the appropriate market rate for jeonse. To accommodate tenants’ circumstances, homes with a deposit-backed monthly rental arrangement are also eligible. For these rentals, however, the converted jeonse price is checked against the market rate for jeonse, taking into account the jeonse-to-monthly-rent conversion rate for the relevant region and housing type.

Structure of the Safe Trust Program for Jeonse and Monthly Rentals. Provided by HUG.

Landlords participating in the program will receive tax benefits. The government plans to provide a 50% reduction in income and corporate taxes on the monthly returns paid by HUG, as well as an exemption from the special tax for rural and fishing communities. In addition, eligible subscribers to the reverse mortgage program who participate in this program and move to a provincial area will be exempt from the owner-occupancy requirement. The plan is to help them secure a stable retirement income through reverse mortgages and the Safe Trust Program for Jeonse and Monthly Rentals.

In addition, even if a home becomes vacant after an existing contract ends, the landlord will receive up to two months’ worth of monthly returns, provided they meet the conditions for participating in a subsequent program.

A dedicated jeonse loan for tenants will also be made available. The government will support loans guaranteed by HUG and the Korea Housing Finance Corporation (HF), and plans to complete the relevant procedures within the year so that tenants who meet the income and asset requirements can also use the Housing and Urban Fund’s Bus Teamok loan.

Kim Itak, First Vice Minister of Land, Infrastructure and Transport, said, “As this is the early stage of introducing the system, we will carefully monitor whether any problems arise during its operation and provide benefits to landlords and tenants who participate, so that the Safe Trust Program for Jeonse and Monthly Rentals can take root as another type of contract in the rental market.”

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