Seoul's interest-free jeonse loan program falls short by 1,000 units despite expanded support

Seoul's deposit-support long-term safe housing program, which lends jeonse deposits interest-free, fell short by more than 1,000 households in its first recruitment round this year. The city had expanded both the support amount and supply compared to last year, but soaring jeonse prices have made it increasingly difficult for applicants to find eligible housing.

According to Seoul Housing & Communities Corp. (SH), the first round of applications held in April resulted in more than 1,000 unfilled units out of approximately 4,550 special supply slots. The general supply category drew 6,450 applications for 1,450 units, a competition ratio of 4.4 to 1, but most special supply categories saw application rates at or below 1 to 1. By category, shortfalls were 1,136 units in the newlywed couple (pre-home linked) category, 33 units in the youth category, and 15 units in the multigenerational household category.

<style ref="s1">The program lends tenants living in homes with an exclusive use area of 85 square meters or less and a jeonse deposit of up to 490 million won (about $323,000) a maximum of 70 million won ($46,000) interest-free for up to 10 years.</style> Winners must find a suitable home within one year of the announcement and enter into a three-way contract among the landlord, tenant and SH.

Earlier this year, the Seoul Metropolitan Government increased the program's budget from 65.5 billion won to 70 billion won and expanded the total supply from 10,000 to 12,000 units. A new youth special supply category of 3,000 units was created as a result, and the maximum support amount rose from 60 million won to 70 million won.

Industry observers say the large shortfall in the newlywed couple category stems from a shrinking pool of eligible jeonse listings and rising prices. <style ref="s2">A tightening rental market has made it harder to find qualifying homes.</style> The city had lowered the income threshold by introducing a separate income standard for dual-income households — capping combined monthly income at 11.14 million won for two-person households — but the rental market has shifted significantly since then.

A combination of government policies favoring owner-occupancy and a shortage of new housing supply has steadily reduced available jeonse listings while pushing prices higher. <style ref="s3">According to real estate data app Asil, Seoul apartment jeonse listings stood at 18,947 as of Wednesday, down 25.3 percent from 25,333 a year earlier.</style>

At the same time, <style ref="s4">the average jeonse price for Seoul apartments surpassed 600 million won in March</style>, according to Korea Real Estate Board data — more than 100 million won above the program's eligible price ceiling.

Applicants using a partial wolse arrangement must also meet additional conditions, as total annual wolse payments cannot exceed the tenant's own contribution after subtracting the support amount. For example, a tenant seeking to move in with a 20 million won deposit and 1 million won in monthly rent would be ineligible because the monthly payments exceed the 10 million won in support available under the program's terms, which apply 50 percent of the deposit up to a jeonse value of 150 million won.

The Seoul Metropolitan Government has acknowledged that the current jeonse shortage is hampering the program's effectiveness and said it is reviewing ways to improve it.

<style ref="s5">"With jeonse listings shrinking and prices rising, we feel the need to reset the income and housing eligibility criteria,"</style> a Seoul city official said, adding that the city is also looking at simplifying the three-way contract structure involving SH, landlords and tenants. An SH official said unfilled units will not be carried over, and a second recruitment round for 6,000 units is planned for late September.

Separate data released Wednesday by real estate information app Jipoom, based on Ministry of Land, Infrastructure and Transport actual transaction price records, showed that jeonse and wolse renewal contracts for Seoul officetel units rose 14.8 percent in the January–April period this year compared with 7,536 cases in the same period last year, with a similar trend spreading to villas.

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