Seoul villa jeonse crunch deepens as renewal-right use hits record high

A jeonse crunch that erupted in Seoul's apartment market — driven by tightened owner-occupancy requirements, stricter jeonse loan regulations and shrinking supply — is now spreading to the non-apartment sector. As soaring jeonse prices push more tenants to invoke their contract renewal right to stay in their current homes, a two-tier pricing gap between new contracts and renewal contracts is emerging in the villa market as well. In response, Land Minister Kim Yun-deok, who oversees housing supply policy, plans to aggressively push what she calls "Kim Yun-deok-style supply" — a drive to expand rental housing by converting vacant shops, offices and other commercial spaces into non-apartment residential units.

According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, there were 9,851 jeonse renewal contracts for Seoul villas — a category covering row houses and multi-family homes — in the first half of this year (January–June), of which 3,516, or 35.7 percent, involved the use of the contract renewal right. The share of renewals invoking that right has been rising steadily for years.

After hovering in the 20-percent range — 24.03 percent in the first half of 2024 (2,565 of 10,674 contracts), 25.11 percent in the second half of 2024 (2,288 of 9,112) and 28.9 percent in the first half of 2025 (2,963 of 10,257) — the rate crossed the 30-percent threshold in the second half of last year at 34.3 percent (3,306 of 9,631) and has continued to climb. In absolute terms, the number of renewal-right invocations in the first half of this year rose 18.7 percent, or 553 cases, from the same period a year earlier.

The growing number of tenants willing to invoke the renewal right just to stay in their current homes reflects a broader trend: as the apartment jeonse crunch and tighter deposit guarantees reduce the availability of villa jeonse listings and push prices higher, more renters are turning to the renewal right — which caps rent increases at 5 percent — to ease their housing costs. That tendency has spread markedly. Seoul's villa jeonse supply-demand index stood at 113.0 last month, according to Korea Real Estate Board data, the highest reading since November 2016. A reading above 100 indicates that demand for homes exceeds available supply.

With supply-demand imbalances in the non-apartment sector — a key rung on the housing ladder for young people, newlyweds and middle-income households — worsening and jeonse prices surging, the government is shifting its supply strategy beyond apartments to focus on revitalizing the non-apartment market and identifying short-term supply measures. In addition to reviewing proposals from three rounds of policy forums — including excluding non-apartment units from housing-count calculations, extending tax benefits to registered rental operators, and expanding loan and guarantee support — the government is also examining plans to convert vacant urban shops and offices into rental housing.

At a national real estate policy forum hosted by the prime minister on Monday, Land Minister Kim said converting vacant commercial and office spaces into housing for young people and newlyweds "is highly effective and can show results in the short term," adding that she plans to "push Kim Yun-deok-style supply hard."

Ha Jun-kyung, the presidential chief of staff for economic growth at Cheong Wa Dae, also said in an interview on Monday that "to bring jeonse and monthly rent under control, supply fundamentally needs to increase significantly, and we have also prepared measures for areas where supply can be delivered quickly in the short term." His remarks signal that a short-term supply package aimed at easing the non-apartment supply-demand imbalance is likely to be announced soon.

Experts, however, caution that converting vacant commercial and office spaces into rental housing will only work if property owners are offered meaningful incentives.

Ko Jun-seok, a professor at Yonsei University's Sangnam School of Management, said areas with high commercial vacancy rates — such as Garosugil — could be candidates for the program, but noted that budget constraints may limit the government's ability to acquire such properties outright. "It would have to be done through negotiations with the owners, and without clear incentives, it would be hard for owners to readily agree," he said.

He added that "while new approaches deserve consideration, easing loan and tax regulations on rental operators to bring more existing supply onto the market may prove more effective in practice."