Cases have emerged in the metropolitan area and certain regions of Sejong City where individuals collected deposits from prospective renters under the pretext of gathering them for private rental housing. This is an exploitation of the lack of regulations that could impose penalties under relevant laws. The National Assembly has initiated a legislative amendment that will penalize those who receive money under agreements to supply private rental housing, even if they are not rental business operators or private rental cooperatives.
According to the National Assembly, Ministry of Land, Infrastructure and Transport, and construction industry sources on the 5th, there have been numerous cases of private rental housing cooperatives recruiting prospective renters in areas such as Yongin, Gwangju, and Goyang in Gyeonggi Province, as well as Seongnam and Seo-gu in Incheon. The business of private rental housing cooperatives involves securing local government approval to establish a cooperative and constructing and supplying more than 30 dwellings, including private rental housing. Procedures for securing land ownership and obtaining housing construction project approval are necessary.
However, there have been recent instances of groups arbitrarily established promoting such businesses and soliciting deposits. They received deposits by presenting conditions such as "conversion to sale at the initial occupancy price after 10 years of renting" and "guarantee by the Korea Housing and Urban Guarantee Corporation (HUG)." Additionally, the contract included a clause stating that "50% of the deposit can be used for promotional expenses." The related law, the "Special Act on Private Rental Housing," currently has no penalty provisions regarding the solicitation of investment funds prior to the establishment of a cooperative.
A National Assembly official noted, "It is estimated that around 4.7 billion won was raised in Incheon as deposits, half of which has already been used, and ownership of the land intended for development has not been secured." They added, "Due to concerns about damage, an investigation by the police was initiated, but they suspended the investigation citing it as a private contract between individuals and that the business is still ongoing. Many of the victims are young people and newlyweds."
The National Assembly has deemed the recruitment of prospective renters for private rental housing in this manner as fraud and has commenced efforts to amend the law to prevent this. A bill to partially amend the "Special Act on Private Rental Housing" was proposed by Democratic Party Congressman Park Yong-gap on the 26th of last month and by Congressman Kim Kyo-heung on the 3rd. The bill prohibits non-operators or non-private rental cooperatives from receiving money under agreements to supply private rental housing in the future and establishes penalties for violations.
The Ministry of Land, Infrastructure and Transport sent a recommendation to the Construction Association regarding "private rental housing guidelines." The Ministry stated, "False and exaggerated advertisements soliciting prospective renters and demanding deposits are occurring nationwide." They also stated, "In such cases, protections under the Private Rental Housing Act cannot be guaranteed, and deposits are not protected in instances of project delays or cancellations, which poses the risk of damage to renters. Moreover, recruiting renters without reporting it may violate the Private Rental Housing Act, so we urge proactive guidance and supervision regarding such actions."