Seoul weighs income-linked deposits for long-term jeonse housing

Seoul Metropolitan Government is reviewing a plan to link deposits for its long-term jeonse housing program to tenants' income levels, moving away from the current system that sets deposits uniformly based on surrounding market rates. The shift is being considered after criticism that a growing gap has emerged between policy and reality — public rental units in high-end areas such as Gangnam now carry deposits exceeding 1 billion won ($747,000), while the asset ceiling for eligibility falls far short of that threshold.

The city is preparing a reform package for its long-term jeonse housing program that includes revising the deposit calculation framework. It is currently gathering input from research institutions, experts and professors, and plans to finalize the direction of reform by year-end.

The long-term jeonse housing program supports housing stability for residents without homes of their own by offering leases of up to 20 years at deposits set at around 80 percent of the prevailing market rate. As jeonse prices for Seoul apartments have risen in recent years, deposits exceeding 1 billion won have become increasingly common in some areas, particularly Gangnam.

A recent recruitment notice illustrates the trend. In the eighth round of the Mirinaezip (long-term jeonse housing 2) program that Seoul Housing & Communities Corporation launched last month, deposits exceeded 1 billion won across roughly 90 units in seven complexes — including Cheongdam Le El (59 square meters exclusive use area, 1.17 billion won), Raemian Daechi Palace (59 square meters, 1.17 billion won) and Raemian One Pentas (59 square meters, 1.15 billion won). The deposit for an 84-square-meter unit at Raemian Firstige reached 1.39 billion won ($1.04 million).

While deposits continue to climb, the asset thresholds that determine eligibility have remained unchanged. To apply for a Mirinaezip unit of 60 square meters or smaller, an applicant — based on a two-person household without children earning up to 120 percent of the monthly average income — must have a monthly income of no more than 7.04 million won and total assets of no more than 662 million won.

Given the gap between deposit levels and eligibility thresholds, applicants would need to take out loans or arrange separate financing — but that has become increasingly difficult as lending regulations have tightened recently.

As long-term jeonse units are expected to continue entering the market through redevelopment projects, public rental housing in high-priced neighborhoods is likely to keep appearing. "Currently, deposits are set according to surrounding market rates, but we could consider having those with relatively stronger income or asset capacity shoulder a bit more," a Seoul city official said. "Particularly as long-term jeonse supply continues to come out of areas like Gangnam, the intent is to bring deposit levels and asset thresholds in line with reality."

The specific method of implementation and the scope of applicability will be determined through further discussion. Seoul's position is to maintain the basic principle of setting deposits within 80 percent of the surrounding market rate, while exploring ways to reflect tenants' ability to pay within that framework.

The city also plans to examine how public rental housing deposit systems work in other countries. However, the prevailing view is that direct application of foreign models would be difficult given the significant differences in housing markets and public rental regimes across countries.

"We are reviewing practically applicable measures through various simulations and expert consultations," a Seoul city official said. "If the deposit calculation method changes, we also need to examine the impact on actual supply prices and the surrounding jeonse market."