Fearing fraud, young Koreans shun rental deposits

The increase in fraudulent housing schemes in Korea has led to a rise in fear and anxiety among young tenants, with more people opting for monthly rent instead of jeonse, a unique Korean housing deposit system.

Minister of Land, Infrastructure and Transport Won Hee-ryong speaks to a victim of jeonse fraud at the Jeonse Damage Support Center in Incheon on Monday. [YONHAP]

The increase in fraudulent housing schemes in Korea has led to a rise in fear and anxiety among young tenants, with more people opting for monthly rent instead of jeonse, a unique Korean housing deposit system.

Fraud involving jeonse — a lump-sum deposit given to a landlord by the tenant — has become a major controversy lately, involving landlords collecting large sums of money as deposits and failing to return them to their tenants.

Recent high-profile cases of jeonse fraud, such as the so-called "villa king" and "villa god" scammers, triggered a widespread fear of the Korean housing system itself, particularly among young people, even coining the term "jeonsephobia.” Young people who used to prefer the jeonse system because they didn't want to pay monthly rents but lacked the money to buy a home, now feel compelled to opt for monthly rent options that entail less risk, even if it means cutting back on expenses.

One victim, a 27-year-old surnamed Oh, recently moved to the Hwagok-dong in Gangseo District, western Seoul, an area which has seen a high number of jeonse fraud cases.

Oh expressed his terror and sense of helplessness, saying, "Even if you try to filter and screen [the landlords,] you can still become a victim of jeonse fraud."

“After seeing more and more cases of jeonse fraud being reported and victims coming out around me, I signed a contract with a deposit of 40 million won [$29,950] and monthly rent of 250,000 won,” Oh added.

Kim, a 21-year-old victim who contracted an officetel in Hwaseong, Gyeonggi, using a small business youth rental deposit loan program, said, "I feel my life is in despair with an unexpected debt of 90 million won.”

“I even considered jumping into the Han River,” Kim said.

Three young tenants — all in their 20s and 30s — took their own lives after falling victim to a case of jeonse fraud in Incheon’s Michuhol District.

The avoidance of rental housing with a jeonse deposit is reflected in official statistics.

According to data from the Supreme Court of Korea, out of 26.99 million rental contracts signed in Korea in 2022, only 12.99 million, or 48.1 percent, were jeonse rentals, while 13.99 million, or 51.9 percent, were monthly rent-based. This marks the first time since 2010 that monthly payment-based rentals accounted for a larger portion than jeonse-based rentals.

The government and the president’s People Power Party (PPP) said Sunday they will introduce a temporary special law that would allow tenants who are victims of jeonse fraud to be the first to purchase the apartments being auctioned. The special law also will allow such tenants to take out loans for an extensive period with low interest rates to buy the auctioned property. Tax exemptions or lower taxes will be applied.

The special law also includes the state-owned developer the Korea Land and Housing Corporation (LH) purchasing the auctioned property and then leasing it to the fraud victims for a maximum of 20 years.

The government and the PPP, however, stressed that they will not use tax money to reimburse the deposit money that the jeonse fraud victims lost.

While visiting a center established to support victims of jeonse fraud in Incheon on Monday, Minister of Land, Infrastructure and Transport Won Hee-ryong said, “We cannot cross the line,” adding, “It would not be appropriate for the government to take over fraud cases in general, as it would set a negative precedent for the country.”

The "Bad Landlord" website created by jeonse fraud victims, which publicly discloses the personal information of faux landlords. [SCREEN CAPTURE]

Some tenants have taken it upon themselves to create online platforms to publicly shame and blacklist "bad landlords”.

The website "Bad Landlords" shares personal information such as names, addresses and photos of landlords who have failed to return their deposit — including Kim, 43, commonly known as the “villa king” who is now dead, and Kwon, 51, who leased out 3,493 villas across the country. The practice is similar to the "Bad Fathers" website that publicly exposed fathers who fail to provide child support.

Exposing bad landlords may soon become legal.

On Feb. 27, the National Assembly passed an amendment to the Housing and Urban Fund Law that allows the public disclosure of information about landlords who have not returned deposit guarantees and have received more than two compulsory execution or preservation orders. It aims to prevent further harm to tenants.

BY SON SUNG-BAE, SEO JI-EUN [seo.jieun1@joongang.co.kr]