Crisis in Social Housing
Ministry of the Interior and Safety’s Ruling Contradicts Seoul City’s Stance… Relief for Victims Remains Difficult

[비즈한국] It has already been 10 years since the introduction of "Social Housing," a business model where public institutions provide land and private companies manage operations. Although it began as an alternative to solve housing issues, critics point out that it has become even more vulnerable to damages such as jeonse (lump-sum deposit) fraud. While social housing appears to be operated by public entities like the Seoul Metropolitan Government, the Seoul Housing & Communities Corporation (SH), and the Korea Land and Housing Corporation (LH), private operators are actually in charge of the management. This often leads to a cycle of parties shifting blame whenever problems arise. Bizhankook intends to examine the problems and institutional limitations of social housing as it reaches its 10th anniversary and seek potential solutions.

As Seoul’s land-lease social housing—a policy promoted by the city for housing stability—becomes embroiled in a "jeonse fraud" scandal, critics argue that the passive administrative approach of the SH Corporation has exacerbated the damage. Until now, the Seoul Metropolitan Government and SH Corporation refused to provide "purchase commitment letters" (an agreement to buy the building in the event of a deposit default), citing concerns over "breach of trust" under the Local Public Enterprises Act. As a result, social housing operators who only owned the buildings were unable to enroll in guarantee insurance.

However, it has been confirmed that the Ministry of the Interior and Safety (MOIS) has issued a legal interpretation stating that the SH Corporation providing a "purchase commitment" for social housing does not constitute a breach of trust under the Local Public Enterprises Act. This result came after a social housing working group, which includes the Seoul Metropolitan Government and SH Corporation, requested a formal interpretation from the ministry following recent jeonse fraud cases in Seoul’s social housing projects.

The Ministry of the Interior and Safety interpreted that "while there may be grounds for breach of trust under criminal law if liabilities exceed the building's value, posing a risk of financial loss, the SH Corporation’s purchase commitment does not violate the Local Public Enterprises Act." This directly contradicts the stance of the Seoul Metropolitan Government. Unlike LH (Korea Land and Housing Corporation), the Seoul government has maintained that the SH Corporation must follow the Local Public Enterprises Act, and that a purchase commitment itself constitutes professional misconduct.

Attention is now focused on what conclusions the social housing working group will reach following the ministry's interpretation. However, the SH Corporation maintains that a review under criminal law is still required. An SH Corporation official stated, "While the Ministry of the Interior and Safety ruled that a purchase commitment does not violate the Local Public Enterprises Act, we are currently reviewing measures with related agencies, such as the Seoul Metropolitan Government and the Korea Housing & Urban Guarantee Corporation (HUG), to resolve concerns regarding professional breach of trust under criminal law."

Following the jeonse fraud cases in Seoul’s social housing, the issue has recently emerged as a key point of contention at the Seoul Metropolitan Council. On June 20, during the 331st regular session of the Seoul Metropolitan Council's Housing and Spatial Planning Committee, Council Member Choi Ki-chan (Democratic Party of Korea) pointed out, "There have been cases where tenants failed to recover their deposits in land-lease social housing that opened under the name of the Seoul Metropolitan Government." He added, "Isn't this effectively 'jeonse fraud' endorsed by the city? Because the landowner and the building owner/operator are different, residents are unable to enroll in guarantee insurance, leaving them unprotected."

Council Member Choi noted that the "Social Housing Restructuring Implementation Plan" established by the SH Corporation in 2023 explicitly stated that "tenants are vulnerable to deposit risks and protective measures are needed." He argued that even though the Seoul government and SH were aware of the issues, their lack of a proactive response system led to these damages.

Tenants of "A Social Housing," where jeonse fraud occurred, are demanding that the Seoul Metropolitan Government take proactive measures (Related article: [Exclusive] Seoul Social Housing Fails to Return Deposits, Faced with Seizure Due to Tax Arrears). Tenant B remarked, "We were told at the time of move-in that guarantee insurance was available, but that was a lie. Even though a working group was formed, they have never collected opinions from affected tenants, and they are not sharing the content of their discussions. To restore trust in the social housing project led by Seoul and to protect tenants, the SH Corporation must provide purchase commitments or similar alternatives."

However, even if the SH Corporation were to retroactively apply purchase commitments to existing social housing, problems would persist. If jeonse fraud has already occurred or the building has been seized, it is impossible to enroll in guarantee insurance. Separate measures must be prepared for tenants who have already failed to recover their deposits.

A representative from the Social Housing Association noted, "If purchase commitments had been made early on, the likelihood of enrolling in guarantee insurance would have been high, but now the conditions have become strict. Considering the possibility of worsening debt-to-asset ratios and declining appraisal values, it seems it won't be easy to enroll in guarantee insurance even if purchase commitments are made now."