South Korea Strengthens Rental Deposit Protection Laws to Combat Housing Fraud

In September 2025, South Korea has significantly strengthened its rental deposit return guarantee system as part of comprehensive measures to prevent jeonse fraud and protect tenants. For American readers unfamiliar with Korea's unique housing market, jeonse is a rental system where tenants pay a large lump-sum deposit (typically $200,000-$500,000) instead of monthly rent, with the deposit returned at the end of the lease term.

Korean residential buildings showcasing traditional architecture with modern apartment complexes

The Financial Services Commission reports that rental deposit guarantee claims have reached nearly $1.5 billion (2 trillion won) through July 2025, marking a record high. This surge represents a 142% increase in fraud-related transactions compared to the previous year, particularly concentrated in the Seoul metropolitan area. To put this in American context, imagine if landlords in major U.S. cities were systematically defrauding tenants of deposits equivalent to the median home price.

Stricter Qualification Requirements for Deposit Protection

Since May 2025, the government has tightened eligibility criteria for rental deposit return guarantees. The key change reduced the maximum loan-to-value ratio from 100% to 90%, meaning properties where the jeonse deposit exceeds 90% of the property's value are no longer eligible for government-backed guarantees. For American readers, this is similar to how U.S. mortgage lenders typically require at least 10% down payment to avoid private mortgage insurance.

Additional lending regulations now prohibit jeonse loans when the landlord listed on the lease contract differs from the actual property owner. In the Seoul metropolitan area and regulated regions, the maximum loan limit for home purchases has been capped at approximately $450,000 (600 million won). These measures aim to prevent excessive leverage that could lead to housing market instability.

The Korea Housing Finance Corporation and Korea Housing & Urban Guarantee Corporation provide deposit return guarantees for contracts up to $525,000 (700 million won) in the metropolitan area and $375,000 (500 million won) in other regions. The government subsidizes guarantee premiums up to $300 (400,000 won) for eligible tenants, with income limits set at $37,500 for youth, $45,000 for general applicants, and $56,250 for newlyweds.

Expanded Victim Support Programs

Korea Land & Housing Corporation (LH) has dramatically expanded support for jeonse fraud victims following special legislation enacted in November 2024. The program allows LH to purchase fraud-affected properties through auction and provide victims with up to 10 years of free housing using auction proceeds. For American readers, this would be equivalent to the federal government buying foreclosed properties and allowing fraud victims to live there rent-free while they rebuild their lives.

Financial support includes new jeonse loan assistance and refinancing options for existing loans at preferential rates. The income eligibility thresholds have been raised to $37,500 for youth, $45,000 for general applicants, and $56,250 for newlyweds. This comprehensive support system aims to prevent the sudden housing instability that fraud victims face.

The government has also expanded an information inquiry system that allows prospective tenants to check landlords' multiple property ownership status and history of deposit guarantee claims before signing contracts. This transparency measure helps tenants identify potentially risky landlords before committing to lease agreements.

Tenant Protection Law Amendments Show Continued Impact

Korea's "Three Lease Laws," amendments to the Housing Lease Protection Act, continue to strengthen tenant rights. These laws grant tenants the right to renew their lease once for an additional two years, with renewal requests possible between six and two months before contract expiration. For American readers familiar with at-will tenancy in many U.S. states, Korea's system provides significantly more tenant security.

Rent increase limitations cap annual increases at 5%, preventing sudden spikes in housing costs. Starting September 29, 2025, tenants can access rental information for their previous residences for up to two years after moving out, further enhancing market transparency. This level of rent control and information access exceeds what's available in most U.S. markets.

Market data shows a significant shift in Seoul's rental market, with monthly rent contracts now comprising nearly 65% of apartment and multi-family housing leases in the first quarter of 2025, a record high. This trend reflects tenants' growing preference for the perceived safety of monthly rent over the large upfront deposits required in the jeonse system, similar to how American renters typically prefer monthly payments over large security deposits.

Long-term Structural Reforms Under Consideration

Housing experts recommend long-term reforms to make guarantee premium rates more realistic and differentiated based on risk levels. They also suggest exploring hybrid guarantee systems that combine traditional guarantees with escrow arrangements. For American readers, this would be similar to combining security deposit protection with escrow services that hold funds in neutral accounts until lease completion.

The fundamental goal is creating a safer housing environment for both tenants and landlords through systematic improvements to the jeonse system. Unlike the American rental market, which relies primarily on monthly payments and smaller security deposits, Korea's unique high-deposit system requires specialized protections against fraud and market manipulation.

Industry analysts view the government's comprehensive approach as a multi-layered strategy for fraud prevention and victim protection. The combination of institutional strengthening, enhanced transparency, and expanded financial support demonstrates the government's commitment to stabilizing the rental market. The effectiveness of these policies in actually preventing jeonse fraud and protecting tenants remains to be seen as implementation continues.

For American readers, Korea's experience highlights how different housing finance systems create unique vulnerabilities requiring tailored regulatory responses. While the U.S. rental market faces its own challenges with security deposits and tenant protection, Korea's jeonse system presents distinct risks that require specialized government intervention and consumer protection measures.

Source: Korean Original Article - 전세보증금 반환보증제도 강화, 임차인 보호 확대로 전세사기 예방