Amount Unpaid and Unrecovered from 'Kkangtong Jeonse' Reaches 765.4 Billion Won in the Last 5 Years

[Asia Economy Reporter Yoo In-ho] The amount of unpaid subrogated repayments under the Jeonse Deposit Return Guarantee, where landlords fail to return the Jeonse deposit to tenants, has reached a total of 765.4 billion KRW over the past five years, raising concerns that the principal of Jeonse deposits should be included in the Debt Service Ratio (DSR) calculation.

According to data received on the 6th from the Housing and Urban Guarantee Corporation (HUG) and SGI Seoul Guarantee by Hong Ki-won, a member of the Democratic Party of Korea (Pyeongtaek City Gap, Land, Infrastructure and Transport Committee), the unpaid amount of subrogated repayments under the Jeonse Deposit Return Guarantee over the last five years (2016 to September 2020) totaled 765.4 billion KRW.

The amount has been increasing annually: 14.7 billion KRW in 2016, 33.6 billion KRW in 2017, 111.6 billion KRW in 2018, and 324.6 billion KRW in 2019. Concerns over "empty Jeonse" have grown this year as well, with the amount reaching 280.9 billion KRW as of September.

*Unpaid Amounts of Subrogated Repayments under Jeonse Deposit Return Guarantee in the Last 5 Years

(Unit: 100 million KRW)

Category	HUG Housing and Urban Guarantee Corporation	SGI Seoul Guarantee	Total
2016	12	135	147
2017	13	323	336
2018	301	815	1116
2019	1182	2064	3246
September 2020	1426	1383	2809
Total	2934	4720	7654

On the other hand, the amount recovered through legal actions such as auctions during the same period was only 35 billion KRW.

The Jeonse Deposit Return Guarantee is an insurance policy where tenants, concerned about not receiving their Jeonse deposit on time after the lease period ends, subscribe to a guarantee insurance with HUG or SGI. If the deposit is not returned, the guarantee institution pays the tenant on behalf of the landlord.

Subsequently, the institution must recover the repayment amount from the landlord on behalf of the tenant, but the unpaid amount has been increasing every year due to failure to recover on time. This is presumed to be due to an increasing number of cases where landlords, after taking over Jeonse deposits for gap investment, fail to repay the Jeonse deposit because they cannot sign contracts with new tenants.

The problem is that the principal of Jeonse deposits is currently not included in the DSR calculation, which regulates bank loans. The risk of so-called "empty Jeonse," maintained through bank loans and Jeonse deposit succession, is also increasing.

Household purchasing power is the sum of income, loans, and investment gains or losses, and since household credit is most closely correlated with housing prices, loan management is necessary. In particular, it has been pointed out that the total Jeonse amount should be included in the DSR principal and interest repayment when making gap investments involving Jeonse.

Representative Hong said, "Due to gap investments involving Jeonse deposit succession, landlords cannot return the Jeonse deposit to tenants on time, and HUG and SGI cannot recover the subrogated repayment amount from landlords, causing a vicious cycle to continue. Therefore, the principal of Jeonse deposits should be included in the scope of household loans across all financial sectors when calculating DSR, and Jeonse deposits should be considered debts that tenants must be repaid."

This content was produced with the assistance of AI translation services.