Payments the Korea Housing Finance Corporation has made to tenants on behalf of landlords under its guarantee program for jeonse, a lump-sum deposit lease common in Korea, are rising quickly, but the money it recovers from those landlords is barely growing. As of July, claims the state-run lender had yet to collect under the program exceeded 450 billion won.
The unrecovered balance stood at 455.9 billion won at the end of July, according to data submitted by the corporation to the office of Rep. Park Sung-hoon of the People Power Party, a member of the National Assembly's National Policy Committee. Under the Jeonse Jikim guarantee, the corporation pays a tenant's deposit first when a landlord fails to return it, then seeks reimbursement from the landlord.
Recovery has been slow. The reimbursement recovery rate on principal was 10.19% last year and has stayed near 10% since 2022. It fell to 9.02% as of July. At the same point, 840 claims worth 144.8 billion won had gone uncollected for two years or more after payment. Of those, 130 claims worth 20.9 billion won had been outstanding for more than three years.
The growing collection burden largely reflects a sharp earlier increase in guarantee defaults and payouts. The corporation paid out just 6.1 billion won in 2022, rising to 84 billion won in 2023 and surging to 227.5 billion won in 2024 — roughly a 37-fold increase in two years. It paid another 167.6 billion won last year, and payouts through July this year reached 87.3 billion won.
Defaults on jeonse guarantees also remain higher than before. Cases jumped from 51 in 2022 to 486 in 2023 and 1,312 in 2024. The figure fell to 959 last year but was still about 19 times the 2022 level. Another 568 cases occurred through July this year.
Total guarantees supplied more than tripled from 3.065 trillion won in 2022 to 10.4977 trillion won last year. The ratio of defaulted amounts to outstanding guarantees climbed from 0.26% in 2022 to 1.64% in 2024 before easing to 0.84% last year.
"Since the product launched in 2020, the scale of guarantees has expanded and defaults have grown along with it," an official at the corporation said. "Defaults increased because of falling jeonse prices and jeonse fraud in 2022 and 2023, and the situation is more stable now than before."
"The Jeonse Jikim guarantee is the last safety net protecting tenants' deposits, but a recovery rate of just 9% on money paid out on landlords' behalf, and unrecovered claims exceeding 450 billion won, is not something to take lightly," Park said. "Rather than focusing only on expanding guarantee supply, the corporation should screen out default risks and delinquent landlords in advance and strengthen its system for pursuing claims to the end after payouts."
