The massive rental fraud case in Incheon has taken a new turn as the government has opposed a proposal calling for direct state intervention, while a special revision bill related to the scam will be put to a vote in the National Assembly this week.
At the heart of the dispute is whether the government should extend direct financial support to the victims of home rental scams by offering them security deposits first through taxpayer money and then recoup the deposits later.
The proposal was made by the main opposition Democratic Party of Korea, the minor Justice Party and the victims of the large-scale scam in Incheon. Many of the tenants deceived by swindler landlords are now unable to recoup their security deposits -- often the entirety of their assets -- when their rented homes are put up for auction, and face eviction.
As the fallout from the massive fraud case in Incheon and other similar scams elsewhere began to spread, the government is now taking steps to address the problem by extending indirect support measures.
“The government cannot cross the line,” Land Minister Won Hee-ryong said Monday when he visited the support center for the rental scam victims.
“We cannot set a precedent in which the government bears the (financial) burden for criminal scam cases in general.”
The ruling People Power Party, siding with the government, has said that taxpayer money should not be used to pay back the victims' security deposits, calling it a “populist measure.”
Won said it is realistically impossible for the government to provide financial support for all jeonse contracts, the total of which is estimated at around 8 million across the nation.
On Tuesday, Won reaffirmed his earlier position that losses stemming from scams should not be imposed on the government, as he claims it will only encourage scammers to commit crimes.
Instead, both the ruling and opposition parties will work together to pass the special revision bill, Won said. The revision bill is aimed at helping victims of jeonse scams to recoup their security deposits before the regional government collects overdue local taxes.
The bill passed on the parliamentary public administration committee Tuesday and is set to be floated during the plenary session of the National Assembly as early as Thursday.
The bill also includes a measure in which Korea Land and Housing Corp. (LH) will rent the homes at a low rate -- 20 to 30 percent of market value -- to the tenants who were victims of the scams after purchasing the homes in question. The rental home purchase budget of LH is set at 5.5 trillion won ($4.1 billion), and the government is ready to increase the related budget to help the tenants in trouble, if necessary, in cooperation with related state agencies.
The financial authorities are also trying to help defuse the crisis by asking those involved in the auction of the homes rented by the victims for more than six months not to evict tenants before they get back their deposits.
As jeonse scams have turned into a serious social problem, the government is facing mounting public pressure to offer support measures. Providing direct support is impossible for various reasons, the government claims. Offering indirect support is no easy task, either. Given that there are a wide variety of jeonse scams, the central government must work with regional governments to map out support plans in detail.
Experts warn that a big wave of rental home disruptions may hit the nation in the coming months due to the continued slowdown of the real estate market, which will make it hard for some landlords to find new tenants and pay back security deposits. The government must take proactive steps against such potentially massive disruptions in the jeonse market.