Housing has long been a pressing issue in Hong Kong. Sky-high property prices and rental costs have left many residents struggling to find affordable options. Meanwhile, South Korea offers an intriguing alternative known as jeonse, a rental arrangement that has gained attention for its innovative approach. While this practice may not perfectly suit Hong Kong’s real estate landscape, it provides valuable lessons for addressing housing challenges and exploring creative solutions.

Jeonse is a unique rental model in which tenants provide a substantial upfront deposit — typically 50 to 70 percent of the property’s value — replacing monthly rent. The deposit is fully refunded at the end of the lease, and tenants pay no ongoing rental fees. This model emerged in the mid-20th century when South Korea’s mortgage market was still developing. It became a popular alternative in cities like Seoul, offering a bridge between homeownership and conventional renting.

The model benefits both landlords and tenants. Landlords can invest the deposits for financial returns, while tenants avoid monthly rent payments, giving them an opportunity to save. For some, this has paved the way to eventual homeownership. However, jeonse’s success depends heavily on stable economic conditions and market dynamics.

The global financial crisis of 2008 marked a turning point for jeonse. Low interest rates reduced returns on deposit investments, prompting many landlords to shift to monthly rental agreements. This transition significantly decreased the availability of jeonse properties.

More recently, interest rate hikes by South Korea’s central bank have led to a modest resurgence in jeonse. Yet, rising deposit amounts have put immense pressure on middle- and lower-income households. Cases of fraud, where some landlords failed to refund deposits, have added to tenant vulnerabilities, highlighting structural challenges in the model.

While the South Korean government has introduced measures like the Special Act on the Protection of Jeonse Fraud Victims, these initiatives have not fully resolved the underlying issues. Jeonse remains a system heavily influenced by broader economic factors, demonstrating both its potential and its limitations.

For Hong Kong, the appeal of jeonse lies not in directly replicating the model but in drawing inspiration from its innovative approach. The city’s property market operates under distinct conditions. With high liquidity and a dynamic free-market economy, the feasibility of a long-term deposit model like jeonse may be limited. Additionally, Hong Kong’s existing rental framework lacks the structural support and safeguards needed for such a system to function effectively.

Ultimately, jeonse offers a valuable reminder that addressing housing challenges requires fresh perspectives and innovative strategies. Hong Kong has a chance to lead by example, crafting forward-thinking policies that meet the needs of its diverse and dynamic population. By doing so, the city can ensure a more sustainable and inclusive future for all

That said, jeonse’s core concept — that rental arrangements can go beyond traditional monthly payments — offers food for thought. In a complex and evolving housing market, introducing more diverse rental options could help address the varied needs of Hong Kong’s population.

One possibility is creating hybrid rental programs that combine elements of monthly rent and upfront deposits. For instance, tenants could pay a reduced monthly rent in exchange for a partial deposit. This approach could ease renters’ financial burdens while providing landlords with a stable income stream. Such a model could particularly benefit middle-income households seeking to save for homeownership while maintaining flexibility.

Implementing these solutions would require a robust legal and policy framework. Protections against fraud and clear contractual guidelines would be essential to foster trust between landlords and tenants. Moreover, any new rental model must align with Hong Kong’s economic environment, ensuring it supports market stability while addressing affordability challenges.

Jeonse underscores the importance of rethinking traditional rental arrangements. Hong Kong’s housing challenges are evolving alongside demographic changes, such as smaller households and an increasing number of young professionals delaying homeownership. Addressing these shifts calls for bold and adaptive strategies.

One potential avenue is leveraging public-private partnerships to introduce innovative rental solutions. Collaboration between the Hong Kong Special Administrative Region government and developers could help create housing options that strike a balance between affordability and market viability. Such initiatives would ensure a broader range of housing choices while catering to diverse needs.

The jeonse model’s evolution highlights both the complexities of housing policy and the value of innovative thinking. For Hong Kong, directly adopting jeonse may not be practical, but the underlying principles can inspire new approaches.

The focus should be on fostering flexibility and affordability in housing policies. By introducing creative solutions that cater to various income levels and life stages, Hong Kong can provide its residents with greater housing security and financial stability.

In reimagining its housing market, Hong Kong must also strike a balance between market forces and thoughtful policy interventions. While maintaining the vitality of a free-market economy, the city should explore ways to enhance protections and expand options for renters without disrupting market dynamics.

Ultimately, jeonse offers a valuable reminder that addressing housing challenges requires fresh perspectives and innovative strategies. Hong Kong has a chance to lead by example, crafting forward-thinking policies that meet the needs of its diverse and dynamic population. By doing so, the city can ensure a more sustainable and inclusive future for all.

The author is chairman of the Asia MarTech Society and sits on the advisory boards of several professional organizations, including two universities.

The views do not necessarily reflect those of China Daily.