The "conversion of jeonse to monthly rent" has become an unstoppable trend. Six out of 10 lease contracts signed last year were monthly rent transactions. The problem is that the current administration's across-the-board regulations on multiple-home owners and registered landlords, who are private rental housing suppliers, are accelerating this shift.
Experts say the first step to minimizing the side effects of the rapid change in housing arrangements is to prepare housing stabilization measures for vulnerable groups. They also said that, because public rental housing supply alone has limits, deregulation is needed to encourage participation by private corporations.
◇ "Expand monthly rent support for young people and low-income groups"
The jeonse system has served as a kind of "housing ladder" for ordinary people to buy a home. With less money than buying, people could live stably for a set period, while the large lump-sum deposit acted as a form of forced savings, so many added the money saved while on jeonse to buy a home. In fact, living on jeonse is relatively easier for asset formation than living on monthly rent. According to the latest household trend survey (2023) by the Ministry of Data and Statistics (MODS), the share of housing costs in total expenditure was 8.5% for owner-occupied and jeonse households, compared with 21.5% for monthly rent households. If the rental housing market is reorganized into a monthly rent system, this ladder will collapse and housing polarization will intensify, observers have repeatedly warned.
Those hit hardest by the shift from jeonse to monthly rent are young people and housing-vulnerable groups. Experts argue that the central and local governments need to expand support to ease their monthly rent burden. Ko Jun-seok, a professor at Yonsei University's Sangnam Institute of Management, said, "If the shift to monthly rent increases housing costs, it becomes harder for young people to save a lump sum, and housing-vulnerable groups may see their housing stability threatened," adding, "There is a need to strengthen voucher (housing benefit) support that subsidizes part of the rent in the form of coupons."
Currently, the Seoul city government provides 120,000 won to as much as 170,000 won per month to households living in private monthly rent dwellings and gosiwon whose income is at or below 60% of the median (about 1.54 million won for a single-person household) to ease housing cost burdens. However, considering that as of late last year the average monthly rent for a low-rise apartment/rowhouse studio of 33 square meters or less in Seoul was about 700,000 won with a 10 million won deposit, the support is seen as insufficient. As a result, some argue the scheme should shift from a flat amount to a proportional rate.
Park Jeong-heum, an associate research fellow at the Korea Institute of Public Finance(KIPF), argues that the housing expense support system, designed around jeonse loan and guarantee programs, should be improved. In a recent report, Park said, "There is a need to shift the policy focus from jeonse finance-centered support to strengthening direct support for monthly rent households, improving the quality of public rental dwellings, and supporting home purchases."
◇ "Encourage corporate-style housing supply"
The government is pursuing policies focused on reorganizing the rental market around the public sector. The Ministry of Land, Infrastructure and Transport plans to supply a total of 1.1 million public rentals and supported dwellings over five years tailored to the needs of groups such as young people, newlyweds, and older adults. Even so, expanding public rental dwelling supply alone is unlikely to meet all demand. Data from the Ministry of Data and Statistics (MODS) show that as of 2023, of 22.62 million total dwelling units, public rental dwellings numbered 1.92 million, just 8.5%.
With tighter capital gains tax rules sharply reducing the number of individual landlords—once a pillar of the private rental market—some argue that corporate-style rental dwellings should fill the gap. Corporate-style rental dwellings are homes built and operated for long-term rental by large construction firms, real estate developers, or professional rental management companies. In countries where monthly rent is more common than jeonse and the rental business is advanced, such as the United States and Japan, corporate-style rentals are widespread.
Choi Won-cheol, academic director of the Advanced Program in Future Real Estate Development at Yonsei University, said, "We need incentives so corporate-style rental housing can take off as in advanced economies," adding, "Even MGRV, a domestic corporate-style rental operator, has attracted several hundred billion won in foreign capital. The government should provide support so that, reading Korea's shift toward monthly rent, many corporations seeking to invest in the private rental market can flow in."
He also said spaces with high vacancy rates, such as Knowledge Industry Complex facilities, should be swiftly converted for residential use to speed up supply. According to a recent report on reviewing use conversions for Knowledge Industry Complexes published by the Korea Developer Association's Korea Research Institute for Real Estate Development Industry, the average unsold rate for all Knowledge Industry Complexes is 55%. In the greater Seoul area, it is in the 40% range. Choi said, "It costs a lot of expense to reconfigure Knowledge Industry Complexes and aging small buildings into typical studio layouts," adding, "We should convert them into 'shared dwellings,' where common areas are used together but bedrooms are independent, to quickly supply affordable, high-quality private rental dwellings."