The National Housing Fund: Prey for Poorly-Performing Companies

It was reported that over the last 10 years, out of the 10 construction companies that lent the national housing fund for building low-price rental housings, six construction companies went into bankruptcy and didn’t refund half the amount of the loans.

According to “data on bankruptcies of the national housing pension” by Kim Tae-hwan, a lawmaker of the Construction and Transportation Committee of the National Assembly on March 13, among the construction companies that built rental housing under the support of the national housing fund after 1994 until the end of the last year, 466 construction companies filed for bankruptcy.

A total of 281 companies, 60.4 percent of the bankrupt companies declared bankruptcy less than three years after they received loans. And 89 out of 281, 19 percent, were reported to have become insolvent within one year after they borrowed loans.

Kim said that the national housing fund was abused as a means of deferring the companies’ bankruptcies, mentioning that a construction company in Chungcheong province had filed for bankruptcy only 27 days after it received the fund.

Out of the 2.95 trillion won of loans, 58 percent, 1.71 trillion won, is yet to be paid back from the companies.

If these statistics are translated into a ratio of bankrupt companies to money loaned, 46 companies file for bankruptcy for 300 billion won every year.

The Ministry of Construction and Transportation is currently considering renting insolvent companies’ rental housing for a period of 30 years after purchasing the rental housing.

The Ministry of Construction and Transportation decided to purchase 500 rental-housing units through the Korea National Housing Corporation as a matter of exemplary policy, and is in negotiations with the concerned department.

Sang-Rok Lee myzodan@donga.com