“Tin-can lease” and Insurance for security deposit

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Have you ever been heard about “Tin-can lease”? The term looks funny at a glance. Many people in Korea are reported to live in a Tin-can rent house, and this has become a serious problem. So what is Tin-can lease? Do they actually live in houses made of tin-can?

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Tin-can lease refers to a house of which the sum of housing mortgage loan and rental deposit is larger than 70% of market price. As real estate market has been going down and price of real estate went lower than usual, house owners are having problem paying back housing mortgage loan. A research shows that a quarter of house holders who are having trouble with their debt, “house poors”, are trying to solve their problem by raising rental deposit. As the result, house tenants are suffering from sky-rocketing rental deposit. Besides, if a house owner couldn’t afford mortgage loan and the house is put for auction, the house tenants cannot get their rental deposit back. This is the so called Tin-can lease problem.

However, there is a solution to this problem as well. That is “Insurance for security deposit”. Insurance for security deposit guarantees return of rental deposits even though the house owner cannot repay house mortgage loan and goes bankrupted. Two institutions provide guarantee to the insurance: Seoul Guarantee Insurance and Daehan Housing Guarantee. Both companies had eased the conditions for application as tin-can lease problem has been a big social issue. Experts expect the insurance program to prevent transfer of debt from house owners to tenants by lifting the burden of raising rental deposit and risk of losing deposit.

Although the insurance seems as a perfect solution for Tin-can lease problem, some experts point out that this can’t be a ‘fundamental’ solution. The insurance for security deposit prevents shift of debt burden between social stratums, but it is important to recognize what actually lies under the problem. They point out that the fundamental cause of Tin-can lease is the long depression of real estate market. Without fundamental solution for the depressed real estate market, people will keep on suffering from devaluation of assets and rising rental deposit in the long term. The government’s attempts to save the real estate market through easing regulation and stimulating revitalization of market are highly expected.

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