With regard to the current steep hike in jeonse (apartment lease deposit fees) and wolse (monthly rent), we at Seoul Metropolitan Government are doing what we can to attain the goal of constructing 80,000 apartments as what I promised to mitigate the situation.
We are also striving to help people living in rented houses by providing information as to which is more advantageous to them jeonse or wolse on a quarterly basis as the first step ever taken by a local government.
It appears that, at present, there are households paying wolse that is more than two times higher than the interest rate they would pay for the loan to be used for jeonse lease money.
According to the jeonse/wolse transactions reported to Seoul Metropolitan Government, the share of wolse has increased from 30% in 2011 to 35% by 2013.
Under the Housing Lease Protection Act, a landlord shall not raise jeonse or wolse by more than 14% a year, but there are no other stipulations purported for the lessees based on actual jeonse/wolse transactions. Under such circumstances, the level of jeonse/wolse is fixed arbitrarily by landlords.
Currently, most of the transactions are carried out based on a wolse rate of 100,000 won in lieu of jeonse lease payment of 10 million won, which was fixed during the period when interest rates were high. The Korea Appraisal Board provides the relevant information on a monthly basis, but the information is said to fail to reflect specific local situations.
Looking at the rate of conversion from jeonse to wolse in Q3 of 2013, downtown areas (i.e., Jongno-gu, Jung-gu, and Yongsan-gu) record the highest rate (9.4%), and Southeast Sections (i.e., Seocho-gu, Gangnam-gu, Songpa-gu, Gangdong-gu) appear to be at the opposite end of the spectrum (6.3%). Households with lower income are apparently hit the hardest, since most of the landlords of houses with low jeonse lease amount ask for conversion to wolse.
We at Seoul Metropolitan Government expect the information provided by us on a quarterly basis to work to protect the lessees from unfairly steep hike in wolse. We also plan to recommend to the relevant ministries that more specific stipulations be included in the Housing Lease Protection Act as a reflection of the prevalent market situation to protect the lessees.
We also intend to study more advanced jeonse/wolse systems that will work to protect the rights of the lessees.