At that point how is it better than the tenant investing the jeonse money and using the returns from the investment to pay rent?

The landlord tends to get better returns on their investment, because they likely own multiple houses and they can leverage the money to buy even more, which in turn go up in value. What this means for the tenant is that the amount they save on rent is significantly more than the returns they would get by investing the jeonse money themselves.

But this only works when interest rates are low and housing prices keep going up. Neither condition is true anymore, so now there's a sharp increase in rentals compared to jeonse.

The very existence of Jeonse affects monthly rents, making Jeonse a worthy candidate to consider to tenants.