Jeonse Deposit Repayments Reach 1.3 Trillion Won in First Half... HUG Guarantee Limit Expanded 70 Times

Expected Guarantee Multiple of 60.5 Times by Year-End
Limit Increase Measures to Prevent Suspension of Jeonse Guarantee Insurance Enrollment

The guarantee issuance limit of the Housing and Urban Guarantee Corporation (HUG) will be raised to 70 times its equity capital. This is due to an increase in cases where HUG repays the jeonse deposit on behalf of landlords who fail to return it, as well as a rise in new subscriptions to jeonse guarantee insurance amid concerns over expanding jeonse fraud.

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On the 11th, the Ministry of Land, Infrastructure and Transport announced the legislative notice of a revision to the Enforcement Decree of the Housing and Urban Fund Act, which increases the total guarantee limit that HUG can issue from 60 times to 70 times its equity capital. The expansion of HUG’s guarantee multiple is expected to take place in early September after the legislative notice period ends at the end of August.

The guarantee multiple refers to the ratio of the guarantee amount to equity capital. Currently, HUG’s guarantee multiple is 60 times. However, as cases of HUG repaying jeonse deposits on behalf of landlords have increased, HUG’s guarantee multiple rose from 49 times in 2021 to 54.4 times last year, and it is expected to reach 60.5 times by December this year.

Once the guarantee limit is reached, issuance of all guarantees handled by HUG becomes impossible. Therefore, it is necessary to increase the guarantee limit by the end of the year. Accordingly, the government pushed for an amendment to the Housing and Urban Fund Act to raise the guarantee multiple (the ratio of guarantee amount to equity capital) to 70 times, which passed the National Assembly in May.

The amount of jeonse deposits repaid by HUG on behalf of landlords exceeded 1 trillion won in the first half of this year alone. HUG’s subrogation payment reached 1.3349 trillion won in the first half, already surpassing last year’s total subrogation payment of 924.1 billion won. Last year, HUG repaid more than 900 billion won on behalf of landlords but recovered only 249 billion won (21%) from them. Meanwhile, new subscribers to jeonse guarantee insurance are rapidly increasing. In the first half of the year, there were 163,222 households, a 50% increase compared to 108,823 households in the first half of last year.

Since the beginning of this year, the reverse jeonse phenomenon, where jeonse prices decline, has continued, leading to an increase in landlords unable to return deposits. As a result, HUG’s financial capacity is also deteriorating. Currently, discussions are underway to expand capital by about 380 billion won through changes to the Housing and Urban Fund’s fund operation plan. HUG’s capital is 6.4362 trillion won.

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