South Korea’s “3+3+3 Lease Act” Debate: Could It Mark the Extinction of the Jeonse System?

Stronger tenant protections intensify concerns
Fears of another rent spike emerge
Critics warn of a de facto shift toward public leasing

South Korea’s ruling bloc has begun promoting a “3+3+3 lease renewal” bill that could reshape the nation’s rental market. While lawmakers frame it as a move to strengthen tenant protections, market sentiment has turned sharply negative amid fears of a rapid decline in jeonse supply and an accelerated shift toward monthly rents. Jeonse—a lump-sum deposit lease system unique to South Korea in which tenants pay a large upfront sum instead of monthly rent—has long served as the backbone of the country’s housing market.

Many recall that when the earlier “2+2” system was introduced, lease transactions plunged and new contract prices soared by double digits. Despite its stated goal of curbing speculation and fraud, experts warn the proposed law could undermine the very foundation of South Korea’s traditional jeonse structure.

Possible supply contraction ahead

According to political sources on the 24th, ten members of South Korea’s National Assembly who submitted the “Tenant Protection Act Amendment” earlier this month are set to hold a press conference on November 5 to defend the bill’s rationale. Although criticism has mounted since details were disclosed, the lawmakers appear determined to push forward. The bill, spearheaded by Socialist Democratic Party lawmaker Han Chang-min, would extend standard lease terms from two years to three and expand tenants’ renewal rights from one to two, effectively guaranteeing up to nine years of occupancy. While billed as a tenant stability measure, the market views it largely as a recipe for tighter supply and further rent escalation.

 The key concern is that long-term leases of up to nine years will erode incentives for landlords to offer jeonse contracts. With owners’ flexibility for occupancy or sale constrained, more properties are expected to shift to monthly rent or be withdrawn from the market entirely. According to data from the Ministry of Land, Infrastructure, and Transport, Seoul recorded 32,838 jeonse apartment contracts between July and September, of which 14,585—or 44 percent—were renewals, up 14 percentage points from the same period last year. The new “3+3+3” rule could reduce available units even further while driving initial deposits higher.

 As a result, industry analysts warn the amendment could create rigidity rather than stability in the housing market. After successive real-estate measures tightened mortgage rules amid supply shortages and interest-rate cuts, mandating long-term leases would further suppress liquidity. Additional provisions—such as limits on jeonse-to-value ratios and stricter landlord disclosures—intended to prevent fraud could instead increase administrative burdens. The prevailing industry view is that “the bill prioritizes political symbolism over practical tenant protection.”

Lessons forgotten from the “2+2” fallout

Such side effects were already evident after the 2020 “2+2 Lease Law” took effect. According to the Korea Institute of Public Finance, nationwide lease transactions dropped by an average of 25 percent, while new jeonse prices climbed 9 to 11 percent. As supply tightened and renewals increased, liquidity rapidly dried up, triggering simultaneous shortages and deposit spikes. The policy backfired—raising rents and even influencing home-sale prices despite its tenant-protection intent.

 Experts warn of a repeat pattern of market distortion. As jeonse prices rise, landlords seek higher initial deposits, while tenants—facing unaffordable lump sums—are forced to forgo renewal rights. Meanwhile, falling transaction volumes reduce inflows of genuine homebuyers, leaving the market locked in a high-price, low-activity gridlock. In effect, the policy risks paralyzing natural price correction mechanisms. This explains why the broader public reaction to the “3+3+3” bill has been cool.

 If policy continues to ignore market dynamics and instead serves as political rhetoric, the burden will ultimately fall on tenants. “Even now, jeonse listings are scarce. If nine-year renewals are introduced, supply will collapse completely,” one Seoul realtor warned. Reports already indicate growing cases of landlords evicting tenants early under “self-occupancy” claims to bypass renewal rules. Advocates argue that true housing stability should come from tangible financial measures, such as expanding tax credits for rent payments, rather than inflexible mandates.

Unintended consequences of anti-speculation rules

Some analysts interpret the bill as signaling the potential end of the jeonse system itself. While its stated purpose is to curb speculative multi-home purchases, “gap investing” (buying with tenant deposits), and fraud, the actual market impact may differ. Though tenants would gain longer stability, the scarcity of jeonse supply could intensify, accelerating the shift to monthly rent and locking in higher deposits.

 The scale of leveraged jeonse investment amplifies the risks. Ministry data show that between 2018 and June 2024, the top 1,000 property buyers collectively purchased 44,260 homes, valued at about $4.35 billion. Many of these were small units financed through tenant deposits—a clear sign of widespread small-scale gap investing. The problem, experts note, is that extending lease durations and tightening guarantees could abruptly halt such leveraged acquisitions and limit exit options like re-leasing or resale. While the intent is to suppress speculation, the result could be an entrenched reluctance to offer jeonse units.

 Moreover, stricter rules tend to spawn loopholes. After previous crackdowns—such as banning mortgage-backed jeonse loans tied to ownership transfers—investors turned to “lease succession sales,” where buyers assume existing tenant contracts to reduce upfront payments. If the “3+3+3” rule passes, buyers could face up to nine years of delayed occupancy, making such loopholes even more appealing. Tighter regulation may thus drive more opaque transactions and inadvertently expand fraud exposure.

 Experts emphasize that genuine fraud prevention requires stronger systemic safeguards, such as mandatory lease-deposit insurance and enhanced public guarantees. They also call for calibrated tax policies—balancing ownership and transaction taxes—to discourage speculative holding while keeping listings flowing. Standardizing data on lease successions and other workaround transactions could also improve transparency. Without understanding and managing the market mechanism—where tighter supply drives faster monthly conversions and higher deposits—the “end of jeonse” debate will likely materialize as real price inflation and market distortion.