South Korea’s rental housing market is facing a new wave of uncertainty as regulatory changes and persistent deposit return issues converge, leaving both landlords and tenants on edge. With the government set to implement stricter requirements for rental deposit return guarantees starting July 1, 2026, and applications for legal protection by tenants surging this spring, the country’s unique jeonse system is under renewed scrutiny.
The jeonse system, in which tenants pay a large lump-sum deposit in lieu of monthly rent, has long been a cornerstone of South Korean housing. But recent developments have put this tradition to the test. According to the Ministry of Land, Infrastructure and Transport, beginning this July, all existing registered rental business owners—not just new ones—will face tougher standards for enrolling in rental deposit return guarantees. This move, which was confirmed on April 28, 2026, is designed to reduce financial risk but has sent ripples through the market, especially among owners of villas and other non-apartment housing.
The heart of the change lies in the recalculated ratio of allowable rental deposit to public housing price. For homes valued under 9 billion KRW, the ratio drops from 150% to 130.5%. To put this into perspective, for a villa with a public price of 300 million KRW, the maximum combined deposit and senior liens permitted for guarantee eligibility will fall from 450 million KRW to just 391.5 million KRW. This means landlords must either lower deposits by millions of KRW or pony up cash collateral to meet the new requirements.
"I’m stuck between lowering the deposit or providing cash collateral, and both options are a burden," said one landlord in Eunpyeong District, Seoul, who rents out a multi-family house with a public price of 76.4 million KRW and a current deposit of 114 million KRW. He explained that to comply with the new rules, he’d need to reduce the deposit to under 99.7 million KRW or provide additional cash as security—neither of which is easy for landlords with tight liquidity.
Experts warn that these rules could exacerbate a phenomenon known as reverse jeonse, where deposit amounts exceed the actual market value of the property. This situation often leads to disputes when tenants seek to recover their deposits at the end of their contracts—especially if property values have dropped or if landlords are unable to return the full sum. According to Asia Economy, the new rules are expected to fuel more conflicts over deposit returns and drive landlords to convert jeonse contracts to monthly rent arrangements, further shrinking the pool of available jeonse homes.
Housing and Urban Guarantee Corporation (HUG), the state entity responsible for providing deposit return guarantees, has acknowledged the potential for increased strain on landlords. HUG stated that they will "monitor the rental market and consider additional improvements to the system," suggesting that further adjustments could be on the horizon if market instability worsens.
Meanwhile, tenants are taking matters into their own hands. As reported by Newsis, March 2026 saw a dramatic spike in applications for leasehold registration orders—a legal mechanism that allows tenants to maintain their priority rights to deposits even after moving out if their funds aren’t returned. Nationwide, 2,785 such applications were filed in March, up nearly 50% from around 1,900 in both January and February. The trend was especially pronounced in Seoul, where applications jumped from 291 in February to 446 in March, and in Gyeonggi Province, which saw a rise from 459 to 643.
This surge isn’t limited to the capital region. Other areas such as Chungnam, Gyeongbuk, Incheon, Busan, and Daejeon also posted significant increases. In fact, only two out of South Korea’s 17 major regions—Gyeongnam and Chungbuk—recorded a decrease in applications. The leasehold registration order system, while providing some measure of security, is widely seen as a symptom of deeper anxieties in the market.
"Recently, more tenants are sending formal notices to landlords months before their contracts expire to pressure them to prepare for deposit returns," said Professor Shin Bo-yeon of Sejong University’s Real Estate AI Convergence Department. She noted that this preemptive action is intended to create psychological pressure on landlords, hoping to avoid the all-too-common scenario of delayed or defaulted returns.
The anxiety isn’t unwarranted. In 2024, when deposit fraud cases peaked, the number of leasehold registration order applications reached a record 47,353. While the figure declined to 28,044 in 2025, it remains well above pre-crisis levels—thousands of tenants each month are still resorting to legal protections to safeguard their deposits.
Legislative efforts have focused on after-the-fact remedies. On April 23, 2026, the National Assembly passed a special law aimed at supporting victims of jeonse fraud, introducing measures like minimum guarantee schemes and advance payouts with later settlements. However, critics argue that such policies are too reactive. As the National Countermeasures Committee for Jeonse Fraud Victims stated in a press conference, "Because the core causes of jeonse fraud have not been addressed, new victims continue to emerge." The group is calling for fundamental reforms, including amendments to the Housing Lease Protection Act, to prevent fraud before it occurs.
The government, for its part, did unveil a set of preventive measures in March, such as expanded disclosure of risk information before contracts, immediate establishment of tenant rights upon moving in, and stronger requirements for real estate agents to explain potential risks. Still, observers note that legislative progress on these fronts has been slow, leaving many tenants feeling exposed.
The vulnerability of villa and multi-family unit landlords is especially acute because public prices for these properties are typically lower than for apartments, making it more difficult to meet the new guarantee thresholds. According to Asia Economy, the official public price for such properties is only about 69% of real market value on average, widening the gap between guarantee requirements and actual property worth. For landlords unable to reduce deposits or provide collateral, the only alternative is to switch to partial or full monthly rent—a shift that experts like Ham Young-jin of Woori Bank’s Real Estate Research Lab say will reduce the supply of jeonse units even further.
All these factors are converging to create a tense environment for both sides of the rental equation. Landlords face new financial pressures and regulatory hurdles, while tenants remain wary of losing their life savings to deposit defaults or fraud. As the July implementation date for the new guarantee rules approaches, all eyes are on policymakers and market players to see whether further adjustments or more robust preventive measures will emerge.
For now, the jeonse system—once a symbol of stability and trust in Korean housing—finds itself at a crossroads, with both landlords and tenants searching for security in an increasingly unpredictable market.