As Seoul Mayor Oh Se-hoon harshly criticized the deposit eligibility standard for the Butimok jeonse loan, a debate has erupted over the "standard for policy fund loans." The eligibility standard for the Butimok jeonse loan is 400 million won or less in Seoul, a level lower than the average jeonse price. However, opinions are divided on whether policy funds should support jeonse prices above that level. The government's principle for providing policy funds is "housing stability for ordinary people."
On the 25th, according to the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government, Mayor Oh Se-hoon wrote on his social networking service (SNS) Facebook on the 18th, referring to the Butimok jeonse loan standard, "Regulations that crush even newlyweds' dreams are gyogaksalwoo (矯角殺牛)," adding, "Seoul has requested system improvements several times, but the Ministry of Land, Infrastructure and Transport remains unmoved." Early this year, the city asked the ministry to raise the maximum deposit condition for the Butimok jeonse loan to 600 million won and increase the maximum loan amount to 300 million won, but the request was rejected.
The reason Mayor Oh issued such criticism is that a sizable share of demand for Mirinae House (Long-term Jeonse Housing 2), a housing stability policy for newlyweds he is promoting, cannot benefit from the Butimok jeonse loan. Nearly 70% of the Mirinae House units offered this year exceeded the Butimok jeonse loan standard. So far this year, a total of 852 Mirinae House units (excluding non-apartment types) have been announced for supply, and among them, 588 units have jeonse prices exceeding 400 million won.
The request by the Seoul Metropolitan Government, including Mayor Oh, to raise the deposit standard for the Butimok jeonse loan seems reasonable at first glance. That is because apartment jeonse prices in Seoul have risen accordingly. According to the Korea Real Estate Board (REB), in the third week of this month (15th), the weekly apartment jeonse price index rose 0.07%, marking 33 consecutive weeks of increases since the third week of January (flat).
The fact that Mirinae House supply comes from project sites where reconstruction is proceeding smoothly also supports the city's request to raise the standard. The higher the proportional rate, the faster the reconstruction progresses, and most such areas have good locations. The proportional rate is an indicator in redevelopment and reconstruction projects showing how much a member's previous asset increases after the project. The higher this figure, the greater the members' profits and the lower their contributions. Also, Mirinae House unit sizes range from exclusive 42 to 84 square meters, and surrounding market prices are quite high. Because long-term jeonse housing is supplied at 80% of surrounding market prices, many cases exceed 400 million won.
A senior Seoul Metropolitan Government official said, "In the case of long-term jeonse housing, many exceed 600 million won, so the current deposit standard for the Butimok jeonse loan feels quite low," adding, "If we want newlyweds to live stably over the long term, there is a need to raise the current 400 million won standard."
Nam Hyuk-woo, a real estate researcher at Woori Bank's WM Sales Strategy Department, said, "If demand shifts downward in the apartment lease market, it could ultimately lead to price increases not only in apartments but also in non-apartment monthly and jeonse markets," adding, "However, discussions on raising the deposit standard seem necessary only to the extent that there are no concerns about the soundness of the housing & urban fund, the source of policy funds."
The Ministry of Land, Infrastructure and Transport is sticking to a hard-line stance against the Seoul Metropolitan Government's request. Housing loans using the housing & urban fund are fundamentally for low-income groups, and a raised standard cannot be applied only to a specific region like Seoul, it says. The government's recent stance of scaling back jeonse loans also underpins this position.
Jeong Su-ho, head of the Housing Fund Division at the ministry, said, "Fund loans should be used supplementally only for low-income groups," adding, "If policy funds are provided for jeonse transactions in Seoul amounting to 600 million won, that in itself would be problematic."
Lee Chang-moo, a professor in the Department of Urban Engineering at Hanyang University, said, "Regulating jeonse loans using funds can certainly be a burden on tenant households," but added, "At the city level, long-term jeonse rentals are also a fairly burdensome system, and for young households, once they enter long-term jeonse, it can be difficult to get out." He went on to say, "I support the basic direction of the government's regulatory policy on jeonse loans."