Deposits Only! No Monthly Rent Payment. Jeonse: A Housing Option commonly available in South Korea

In South Korea, one form of housing lease contract is called 'Jeonse,' where the deposits a lump-sum deposit to the landlord as a condition for leasing the property. At the end of the lease term, the tenant receives back the entire deposit and vacates the property.

When we look back the human history, this type of leasing system was quite common. In the 15th-century Mesopotamia region, there was a system called Antichresis, which is a contract in which the creditor occupies the debtor's real estate and receives income generated from the real estate in lieu of interest.'

Jeonse originated during a time when housing finance was inadequate in 20th-century South Korea, based on high-interest rates. Until the 1970s, South Korea's commercial bank savings rates were around 12%, and bank loan rates were about 20%. With such high interest rates becoming standard, landlords would lease out their properties and deposit the Jeonse deposit into banks or invest it, while tenants settled into the practice of residing in the house

Over the past decades, the Jeonse system had its obvious advantages. It played a significant role in the “housing ladder” of Korea, forming a kind of bridge between monthly rent and home ownership. Many young adults would start with monthly rent, saving some lump sum money. After they had saved the money, they went ahead with the “Jeonse” contract where they didn’t have to pay monthly rent anymore.

However, it also has a critical disadvantage. Jeonse is a form of loan. From the tenant's perspective, there is naturally a risk of not getting the deposit back or delayed return of the deposit. Since there is no means to confirm whether the landlord has the money or not during the contract period, tenants are psychologically troubled with anxiety throughout the contract period.

Due to a large amount of deposit money (typically from $100,000), Jeonse contracts typically run for a minimum of two years, which reduces the flexibility of moving compared to monthly rent. The tenant must secure insurance for this (which means additional payment).