Korea will hold your jeonse deposit for you — and lend it to builders

From November, a tenant in Korea will be able to sign a jeonse lease without ever handing the deposit to the landlord. The Ministry of Land, Infrastructure and Transport said on 20 August that the state guarantor HUG will hold the money instead, invest it in housing construction loans, and pay the landlord the return each month in place of rent.

The scheme is called the jeonse-and-monthly-rent safe trust, and it is the most interesting thing the government has done to the rental market in years — partly because of what it fixes, and partly because of where the money goes.

Why the ministry is inventing a new kind of lease

Jeonse is disappearing, and the numbers are not subtle. Monthly-rent contracts made up 68.6% of all rental deals nationwide in the first quarter of 2026, up 7.9 percentage points from 60.7% a year earlier. The same share was 48.0% in 2022. In Seoul it reached 70.5%, and for the first time since the series began, more than half of Seoul apartment leases — 50.8% — were signed as monthly rent rather than jeonse.

In March alone, 192,913 monthly-rent contracts were registered, up 36.3% year on year, while jeonse contracts fell 11.0% to 86,775.

The ministry’s own framing of the problem is a mismatch. Tenants still want jeonse, because paying interest on a loan is cheaper than paying rent. Landlords no longer want to hold other people’s money after the fraud wave of 2022–24, and would rather collect a monthly cheque. Neither side can get what it wants from the other, so the government is proposing to stand between them.

What the three-way contract actually does

HUG, the landlord and the tenant sign together. The tenant pays the jeonse sum into an account HUG designates. HUG pays the landlord a contracted monthly return. At the end of the lease, HUG — not the landlord — returns the deposit.

Because HUG holds the money, the tenant does not need a deposit-return guarantee or a jeonse-loan guarantee, which the ministry puts at roughly ₩340,000 a year in saved fees. Landlords who are registered rental businesses are released from their obligation to carry deposit-return insurance.

Here is the ministry’s own worked example, on a home valued at ₩300m with a jeonse figure of ₩200m.

There is an additional sweetener aimed squarely at the capital’s older landlords. A Seoul homeowner who joins the scheme and moves to a provincial region can draw a reverse mortgage on top: for a couple aged 65 and 55 with a ₩300m home on a lifetime fixed plan, the ministry calculates about ₩470,000 a month, taking the total to roughly ₩1.2m.

Where the money actually goes

This is the part worth slowing down for. The deposit is not sitting in escrow earning nothing.

HUG pools the deposits into a housing supply activation fund, which lends to residential construction sites through HUG-guaranteed project-finance loans. The target yield is in the 4% range, and that yield is what pays the landlord. So the tenant’s deposit becomes construction credit, and the landlord’s “rent” is a slice of a PF lending margin.

Read the programme that way and it stops looking purely like tenant protection. It is also a funding mechanism: the 13 August housing supply plan needs capital to reach building sites, and Korean households happen to be sitting on an enormous, idle, privately held pool of exactly that — jeonse deposits. The safe trust routes it.

HUG has been the counterparty in a housing crisis before

Recent enough to matter. HUG’s jeonse deposit-return guarantee claims ran to ₩4.49tn across 20,941 cases in 2024, the peak of the fraud and negative-equity wave, and the corporation subrogated ₩3.99tn to tenants that year. It posted a net loss of more than ₩2.5tn.

The recovery since has been fast. Claims fell to ₩1.24tn in 2025, and to ₩269.3bn in January–April 2026, down 53.1% year on year, as rising jeonse prices eased negative equity and a 2023 rule change cut the maximum eligible jeonse-to-value ratio from 100% to 90%. Recovery on bad debt improved from 29.7% in 2024 to 84.8% in 2025, and reached 156% in the first four months of 2026 — the first time since 2015 that HUG recovered more than it paid out in a period. It returned to profit in 2025, at ₩1,574.9bn.

So the institution about to hold strangers’ deposits and lend them to builders has had a repaired balance sheet for about one year. That is not an argument against the scheme. It is the reason to read the September notice closely.

Who can use it, and when

No income or asset test. Homes valued at ₩2bn or less to start, with checks for building-code violations and for a jeonse figure out of line with market value. Deposit-secured monthly leases can convert too, if the combined deposit and rent translate into a reasonable jeonse equivalent. The custody period tracks the lease — a two-year jeonse means a two-year deposit — and extends on renewal.

Separately, LH will supply about 500 of its purchased rental homes through the same body this year, aimed at young non-homeowners.

Applications open in October, three-way contracts and deposits follow in November, move-ins from December. For a country where the standard tenant-protection advice has been to file a move-in report, get a fixed-date stamp and buy a guarantee, a lease where none of that is necessary would be a real change. Whether it stays voluntary and small, or becomes the way the state finances housing, is the question the pilot will answer.

Figures current as of 28 August 2026, sourced to the ministries, corporations and outlets listed below.