The Korea Housing & Urban Guarantee Corporation (HUG) saw the amount of claims paid and subrogation payments for corporate rental deposits it guaranteed hit an all-time high last year.
According to HUG and the office of Kim Jong-yang of the People Power Party, a member of the National Assembly's Land Infrastructure and Transport Committee for Changwon Uichang District, on the 21st, last year HUG's corporate rental deposit claim amount and subrogation payment amounted to 679.5 billion won and 519.7 billion won, respectively. That is the highest level on an annual basis.
The rental deposit guarantee is a product in which HUG pays the deposit to the tenant (the guaranteed creditor) on behalf of an individual or corporate landlord if the landlord does not return the rental deposit. Unlike the jeonse deposit return guarantee (jeonse guarantee), which the tenant must enroll in, the landlord and the tenant share the guarantee fee at a ratio of 75% to 25%. Since Aug. 2020 under the Moon Jae-in administration, enrollment in the rental guarantee has been mandatory for registered landlords.
Over the past five years, the number and amount of claims for corporate rental deposit guarantees steadily increased from 40.9 billion won (524 households) in 2021 and 51.0 billion won (767 households) in 2022, then began to surge to 138.7 billion won (1,256 households) in 2023. In 2024, guarantee claims amounted to 330.8 billion won (2,668 households), and last year they jumped to 679.5 billion won (4,489 households).
Last year, 96% of corporate rental guarantee claims occurred outside the greater Seoul area. By region, the amounts were largest in Gwangju (221.9 billion won), South Jeolla (132.1 billion won), North Jeolla (73.6 billion won), Busan (71.5 billion won), South Chungcheong (48.2 billion won), Daegu (33.8 billion won), and North Gyeongsang (33.7 billion won).
As the downturn in regional real estate has prolonged, even corporate landlords with relatively stronger financing capacity have buckled, leading to last year's surge in guarantee claims. HUG assessed that if the slump in regional real estate continues, the increase in corporate landlords' rental deposit guarantee claims is likely to persist for the time being.
HUG's subrogation payments stemming from corporate rental guarantee claims also continued to rise: 46.3 billion won in 2021 and 2022, 80.2 billion won in 2023, 214.8 billion won in 2024, and 519.7 billion won last year.
In particular, HUG's corporate rental guarantee recovery rate (the share of subrogation payments recovered) fell from 75.6% in 2021, 44.7% in 2022, 19.3% in 2023, and 17.8% in 2024 to 5.2% last year. That is the lowest level on record by year. As HUG fails to recover the amounts it paid on behalf of landlords, the public burden is gradually increasing.