My coworker and I were discussing the apartments near our school when she dropped a bomb on me. She told me that in order to lease one of those apartments I would typically have to put down a hefty deposit. Out of curiosity I asked, “What’s hefty? Like 6,000,000 KRW ($6,000 USD)?” She snickered at my naivete and told me the price would likely be somewhere around 200,000,000 KRW ($200,000 USD). Oh, it gets better. This is part of a Korean practice called jeonse (전세). Instead of paying monthly rent, the renter pays a large deposit to the landlord to lease the property for a period of, typically, 2 years. What does the landlord do with that money? Why, (s)he can do whatever the hell they want with it. That’s right, folks. You work your ass off to put a large deposit on something that you do not own and someone else gets to make investments, collect interest, and generally enjoy the fruit of your labor.
I broke down the math to her from my perspective. I would pay $200,000 to live somewhere for 24 months? That’s like spending the equivalent of over $8,000 a month in rent. A price that I think is quite ridiculous for an apartment that is pretty, but isn’t that big, doesn’t have many amenities, and isn’t in a prime location/neighborhood. Nah, patna! Something about this system doesn’t sit well with my soul as a renter. After I expressed my complete shock and dismay at this concept, she then told me, “Don’t worry. You get all of that money back at the end of the lease agreement.” So, I suppose that is a bit of a positive spin? If you save up for that hefty apartment deposit, you can then live rent-free for 2 years. That means more of your income can be allocated to other things because your living expenses would be reduced to only utilities – and if they’re anything like mine may not cost more than $100 – $150 a month.
I guess I get it, but I have even more questions now. Clearly, it can be done as there are many people who live in these apartments. How can people afford this? How long does it typically take someone, like a full-time (non-contract) teacher, to afford something like this? Does this contribute to the reason why many older, single children live at home with their parents? Do people get loans for this deposit? If so, are they paying the bank back at premium interest rates as well? If so, it sounds like a low-income renter is getting screwed in this system. What are the advantages of doing this versus a rental system like weolse where a smaller deposit is made upfront along with monthly rental payments? What if the landlord is in extreme (but hidden) debt and squanders away your money before the rental agreement is over?
I’ll ask around and try to get some more answers before reporting back to you, but I think it’s fairly safe to say that I won’t be living in any of those big apartments any time soon.