The Seoul Metropolitan Government on the 2nd announced improvement measures in connection with recent concerns about the non-return of deposits at some business sites of the Youth Reassurance Housing and a sharp drop in new permits and approvals.
Youth Reassurance Housing is a project the Seoul Metropolitan Government carried out in a public-private partnership (PPP) format to encourage private-sector participation. It eases various building standards for private operators, including upgrading zoning districts and relaxing floor area ratios, and provides incentives such as financial support. In return, private operators build rental housing that ensures public interest and supply it to young people at prices lower than market rates.
However, as the issue of jeonse fraud has continued to surface recently, controversy grew when tenants of Youth Reassurance Housing also faced situations where they could not get their deposits back. Among 73 Youth Reassurance Housing sites, four business sites that had not enrolled in deposit insurance failed to repay debts such as construction payments and were put up for auction or provisionally seized, putting 287 households at risk of losing their deposits. There are also claims that some business sites find it difficult to extend deposit insurance.
In response, the Seoul Metropolitan Government moved to take follow-up measures. Along with implementing a system to provide deposits in advance and expanding low-interest financial support to reduce operators' burdens and encourage the supply of youth housing, the city announced it would urge the central government to cooperate on institutional improvements to resolve the issue of unreturned deposits.
Earlier, in Aug., after concerns about deposit non-return were raised, the Seoul Metropolitan Government operated on-site counseling centers for tenants, held roundtables, provided legal advice, and, together with the National Assembly and the city council, held roundtables and forums.
On this day, the Seoul Metropolitan Government, in consultation with Shinhan Bank, decided to advance deposits to tenants of a total of 296 households across four complexes. Senior-ranking tenants will begin receiving payments starting in Nov., and junior-ranking tenants will begin in Dec. after being recognized as victims of jeonse fraud. Those who wish to vacate after transferring the right of first refusal to Seoul Housing and Communities Corporation (SH) will receive their deposits under the same procedure.
It will also push for restructuring to ensure the sustainability of Youth Reassurance Housing. First, to expand supply, it will significantly increase interest subsidies on construction funds. Through the Seoul Housing Promotion Fund, it will improve the current system that provided a 2% interest subsidy on up to 24 billion won of construction costs to a 2% interest subsidy on up to 48 billion won, removing financial instability factors caused by external variables such as interest rate fluctuations.
It will also support loans for land costs for new projects. It will provide loans at about 2% interest for up to 10 billion won within 20% of land costs. It will newly allow for-sale housing—previously unavailable—up to 30% of total dwelling units to increase the flexibility of the Youth Reassurance Housing project.
It will verify financial soundness in four stages throughout the entire project cycle to prevent in advance the recent problems with enrolling in deposit insurance and to maintain stable rental operations.
The Seoul Metropolitan Government also urged the central government to cooperate on improving laws and systems, including the Special Act on Private Rental Housing. The requests are: ▲ strengthening registration standards for rental business operators ▲ adjusting the timing of deposit insurance enrollment ▲ granting the city authority to manage deposit insurance ▲ stable enrollment and renewal of deposit insurance ▲ reflecting realistic costs for public rental purchases ▲ developing products suitable for 10-year mandatory rentals.
Choi Jin-seok, head of the housing bureau at the Seoul Metropolitan Government, said, "This announcement is a measure to provide immediate relief to affected tenants and fundamentally address institutional limits. We will do our best to stabilize youth housing by establishing the institutional foundation for Youth Reassurance Housing," and added, "As there are limits to financial support and tenant protection at the city level alone, we strongly ask the central government to cooperate swiftly on institutional improvements."