[Editorial] No more victims of jeonse fraud

The government must come up with more practical relief measures for the victims.

Young lives are being wasted from jeonse-related fraud. A man in his 20s died by suicide last week after losing all the money he had put into jeonse — a refundable upfront deposit for rent-free occupancy for a fixed period — from a fraudulent landlord being tried for scheming with 12.5 billion won ($9.5 million) in jeonse deposits. A woman in her 30s, a victim of the same case, also killed herself Monday. It is the third death related to jeonse fraud so far this year.

The government trotted out one measure after another over the last few months upon the surge in jeonse scams targeting mostly young people in their 20s and 30s. Victims who lost their deposit and living space are offered a temporary place to live for six months at a rent fee amounting to 30 percent of the market prices. They are also eligible for emergency loans or rollovers. Consulting services to victims also have been provided since September last year.

The Democratic Party has proposed a more aggressive relief measure by having the state first compensate the victims for their lost deposits and later claim damages from the landlords by tracking down their assets. The group of victims has been asking for similar rescue actions. But that is easier said than done.

The state already has a rescue program. The Korea Housing and Urban Guarantee Corporation (HUG) backs the return of jeonse deposits. Under the terms, the deposits should be remunerated within a month. But it had taken an average of 56 days for tenants to get their money back. In some cases, it took more than three months, hardening the lives of tenants whose sole savings had been put into the deposit for their housing.

The delay has been caused by the surge in claims. Claims for deposit returns with the state agency on behalf of their delinquent landlords increased to nearly 1.2 trillion won last year. Worse, the compensation program is running out of money. HUG can offer a guarantee of up to 60 times its net worth, and its backing has already reached 54 times. Authorities must hurry with countermeasures to ensure the return of rent deposits for citizens.

Preventive actions also are necessary. Rent schemes were fed by the fall in jeonse prices and value of “villas,” which refers to low-rise apartments in Korea, that allowed schemers to buy multiple villas based on jeonse deposits as they were enough to cover for villa cost. Real estate agents and appraisal evaluators colluded to inflate the value of villas. Tenants to newly-built villas easily fell into the trap because the information on villas is often less transparent than on apartments.

Rent fraud affected as many as 3,000 households in a district in Incheon. The government must come up with more practical relief measures for the victims.