Seoul's interest-free jeonse loan program falls short by more than 1,000 units in first round

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

According to the Seoul Housing and Communities Corp. (SH), the first-round recruitment for the deposit-support long-term safe housing program, held in April, saw more than 1,000 units go unfilled out of roughly 4,550 units set aside for special supply. General supply drew 6,450 applications for 1,450 units, a competition ratio of 4.4 to 1, but most special supply categories saw ratios at or below 1 to 1. By category, shortfalls were recorded in newlywed households (Mirinae Home-linked type) at 1,136 units, youth at 33 units, and intergenerational households at 15 units.

The program lends up to 70 million won ($50,700) interest-free for up to 10 years to 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 ($354,000). Winners have one year from the announcement date to find a home on their own and enter into a three-way contract among the landlord, tenant and SH.

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

Industry observers say the large shortfall in the newlywed category stems from a tightening jeonse market, where shrinking inventory and rising prices have made it harder to find eligible properties. The city had lowered the bar for dual-income households — previously disqualified under a single-income standard — by introducing a separate income threshold of 11.14 million won in monthly average household income for two-person households. But the rental market has shifted faster than the policy adjustments.

A combination of government real estate policies favoring owner-occupancy and a shortage of new housing supply has steadily reduced jeonse inventory while pushing prices higher. As of Wednesday, jeonse listings for Seoul apartments stood at 18,947, down 25.3 percent from 25,333 a year earlier, according to real estate data platform Asil.

At the same time, the average jeonse price for Seoul apartments surpassed 600 million won in March, according to Korea Real Estate Board statistics — more than 100 million won above the program's eligible housing price ceiling.

Applicants using a "half-jeonse" arrangement — a mix of deposit and monthly rent known as wolse — must also meet additional conditions. The total annual rent 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 rent exceeds the applicable support amount of 10 million won — calculated at 50 percent of the deposit under the condition that the jeonse value is 150 million won or less.

The Seoul Metropolitan Government has acknowledged that the recent jeonse crunch has made the program harder to use and is reviewing ways to improve it.

"With apartment jeonse inventory shrinking and prices rising, we feel the need to reset the income and housing criteria," a Seoul Metropolitan Government official said. "We are also looking at ways to simplify the three-way contract structure involving SH, the landlord and the tenant." An SH official said unfilled units would not be carried over, adding that a second-round recruitment for 6,000 units is planned for late September.