A group of tenants who fell prey to housing rental scams stage a protest in Incheon Friday. (Yonhap)
The fallout from a housing rental scam affecting thousands of South Koreans is likely to persist at least until next year, signaling a need for prompt action to prevent a spillover, Land Minister Won Hee-ryong said Friday.
"The government forecasts more problematic (multiyear) housing rental contracts made during the previous administration to be uncovered throughout this year and also into the first half of next year, so the ministries are working to jointly set out countermeasures," Won told reporters at the Korean Bar Association headquarters in Seoul.
Won's remarks lay the blame on the former Moon Jae-in administration, during which an overheated housing market triggered an imbalance between the actual price of houses and the lump sum of money needed for a "jeonse" housing contract for at least two years -- which is supposed to be lower than the property price. His successor Yoon Suk Yeol took office in May 2022.
This comes as nearly 2,500 tenants in Incheon and at least 500 in Guri, Gyeonggi Province, are at risk of losing the entire lump sum used to rent their homes.
Jeonse has allowed Korean tenants to pay a lump sum of money -- which many tenants could spend a lifetime to save -- to their landlords to rent a house for at least two years. Tenants then get the exact amount of money back when moving out. This was often regarded as being more affordable in the long term than paying regular monthly rent.
The alleged scammers in the recent revelations became landlords of multiple houses and duped tenants into renting homes in what appeared to be a normal contract. However, the scammers had borrowed money from banking institutions to buy the houses.
Eventually, such landlords would default without returning the lump sum of deposit money to the tenants, regardless of their actual ability to repay the loans.
In such a case, the house of the tenant is then to be auctioned off, which means those who buy the house through the auction pay the money to the banks who offered loans to the scammers, not the tenant who might effectively have lost their life savings. Under Korean law, such banks hold priority over tenants in such debt claims. The victimized tenant would be forced to leave the house by the new landlord.
The government has recently defined such scammers as constituting organized crime, and ordered the suspension of such auctions after three tenant victims took their own lives.
Won Hee-ryong, minister of land, infrastructure and transport (Yonhap)
Won reiterated his stance that plans to urge government-backed institutions to buy homes where tenants who have fallen victim to such a scam are on the verge of eviction cannot salvage the victims, because the purchase money cannot go to the victims under current Korean rules.
As to a plan floated for such institutions to buy jeonse deposit guarantees that have become nearly worthless, Won said such a decision could not be made without public approval as it would involve using significant sums of taxpayers' money for the de facto rescue scheme. The plan would involve the institutions fully or partially guaranteeing tenants' jeonse deposits, with the hope to recover the funds later from the scammers.
Won's remarks came in a meeting with attorneys licensed in Korea at the Korean Bar Association headquarters on Friday. The meeting revolved around plans to provide affordable legal assistance to the housing rental scam victims.
Meanwhile, the National Assembly on Friday reached a bipartisan agreement to pass special bills to give victimized tenants preferential rights to buy the house they are living in after its price has been determined at auction. Won said the government is considering the introduction of eased banking regulations for such victims to take out loans to buy their house in this manner.
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