Officetel and Multi-family Housing: Residential Types Vulnerable to Guarantee Accidents
Assemblyman Heo Jong-sik "Need for Housing Supply Management and Customized Policies Focused on Actual Demand"
Over the past three years, the scale of insurance claims for guarantee insurance taken out to secure jeonse rental homes and purchase houses in Incheon has increased approximately 20-fold, from 39.4 billion KRW to 770 billion KRW.
According to data submitted by the Housing and Urban Guarantee Corporation to Heo Jong-sik, a member of the Democratic Party of Korea representing Incheon Dong-gu and Michuhol-gu Gap, as of August this year, the guarantee subscription scale was recorded at 4.751 trillion KRW for jeonse (24,450 cases) and 1.6404 trillion KRW for interim payments (self-owned) (7,181 cases). Compared to four years ago in 2020, when jeonse was 4.8182 trillion KRW (25,621 cases) and interim payments were 5.3214 trillion KRW (26,534 cases), the jeonse scale remained similar, but the self-owned interim payments decreased by about 70%.
Analyzing the scale of guarantee insurance claims during this period, jeonse claims surged nearly 20 times from 39.3 billion KRW (224 cases) in 2020 to 752.8 billion KRW (4,049 cases) as of August this year. Although the number of subscriptions and amounts decreased for interim payment loan guarantees, the claim amount increased 137-fold from 100 million KRW (1 case) in 2020 to 13.7 billion KRW (66 cases) in August 2023.
Heo’s office explained that these guarantee claim statistics confirm that the housing market in Incheon has been quite unstable over the past three years, including the jeonse fraud cases that surfaced last year. In particular, the number and amount of jeonse claims exploded. Guarantee claims, which were 224 cases (39.3 billion KRW) in 2020, increased to 1,556 cases (277.3 billion KRW) last year, and surged to 4,049 cases (752.8 billion KRW) in just eight months this year.
By age group, guarantee claims among people in their 20s and 30s increased noticeably this year. Claims among those in their 30s accounted for 54.5% of all claims with 2,210 cases (402.7 billion KRW), followed by those in their 20s with 795 cases (130.4 billion KRW), or 19.6%. As claims increased, the amounts for subrogation payments and unrecovered balances also rose to 558.6 billion KRW and 533.4 billion KRW, respectively, which are 15 times and 66 times higher than in 2020 (35.2 billion KRW and 8 billion KRW).
By housing type, the scale of subrogation payments and unrecovered balances for officetels and multi-family houses were identified as 244 billion KRW / 240.1 billion KRW and 183 billion KRW / 182.1 billion KRW, respectively, indicating these housing types are vulnerable to guarantee claims.
Heo said, "If damages not covered by the Housing and Urban Guarantee Corporation’s guarantees are included, the scale of claims is expected to be even larger. Since the housing situation in Incheon presents significant difficulties not only for jeonse but also for home ownership, it is necessary to implement housing welfare policies, manage supply volumes according to demand by housing type, and develop customized policies centered on actual users."
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