[2021 National Audit] During Moon Administration, Bank Debt of Homeless Low-Income People Increased by 107 Trillion Won

Assemblyman Song Eon-seok "Abolish the Lease Law and Take Drastic Measures"

[Asia Economy Reporter Kwangho Lee] During the Moon Jae-in administration, soaring jeonse prices led to a rapid increase in bank-funded jeonse loans compared to government-supported Housing and Urban Fund resources, significantly increasing the loan interest burden on low-income households without homes.

According to data submitted by the Financial Supervisory Service to Song Eon-seok, a member of the National Assembly Land, Infrastructure and Transport Committee from the People Power Party, the balance of jeonse loans from fund resources was 16.9 trillion KRW at the end of June 2017, shortly after the Moon Jae-in administration took office, and increased by 9.8 trillion KRW (58%) to 26.7 trillion KRW by the end of June 2021. Meanwhile, the balance of bank-funded jeonse loans rose from 40.6 trillion KRW to 147.9 trillion KRW, an increase of 107.3 trillion KRW (264.3%). The growth rate of bank-funded jeonse loans was more than four times faster than that of fund resources.

As a result, the proportion of bank-funded loans in the total jeonse loan portfolio increased by 14.1 percentage points, from 70.6% to 84.7%.

The reason for the sharp increase in bank-funded jeonse loans is the discrepancy caused by the government-supported jeonse loan products’ tenant deposit limits remaining unchanged despite soaring jeonse prices. For example, the 'Butimok Jeonse Loan' supported by the Housing and Urban Fund requires the tenant deposit to be 300 million KRW or less in the Seoul metropolitan area to qualify for the loan. However, as of August 2021, the average jeonse price in the metropolitan area was 360.6 million KRW, significantly exceeding the tenant deposit limit.

According to data submitted by the Housing and Urban Guarantee Corporation to Song, the number of Butimok Jeonse Loan cases aimed at stabilizing housing for low-income households decreased by 64,596 cases (56.4%), from 114,532 cases in 2017 when the Moon administration began, to 49,936 cases in 2020. In particular, the average monthly loan performance until the end of August this year was 3,237 cases, a decrease of 924 cases compared to 4,161 cases last year.

For the newlywed couple exclusive Butimok Jeonse Loan, the number of loans decreased by 6,397 cases (17.9%), from 35,697 cases in 2018 when the loan started, to 29,300 cases in 2020.

Meanwhile, in June 2017, the average annual interest rates for jeonse loans from the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?and the Housing and Urban Fund were 3.04% and 2.57%, respectively, showing a difference of 0.47 percentage points. By June 2021, this gap had widened to 0.68 percentage points. The interest burden difference between fund resources and bank resources for jeonse loans has thus increased further.

Song stated, "Due to the government's repeated failures in real estate policies and the ruling party's enforcement of the Lease Protection Act, jeonse prices have skyrocketed, turning even policy loans that provide low-interest jeonse funds for low-income households into an unattainable dream." He urged, "The Lease Protection Act should be repealed, and urgent, extraordinary measures must be taken to stabilize jeonse prices and secure housing stability for low-income households without homes."