509 former homeowners are house poor no more

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509 former homeowners are house poor no more

The government has purchased 509 residences from the so-called “house poor,” people who can barely afford their mortgage payments but can’t sell their homes because the price has gone down.

The Ministry of Land, Infrastructure and Transport said yesterday that an asset management company under the government-run Land & Housing Corporation spent 145.1 billion won ($132 million) to buy the houses -- 285 million won per unit.

The action was part of the April 1 real estate policy package to write off about 92 billion won in debt and put the houses back in the public rental market.

Most of the houses are apartments of 60-85 square meters (648-915 square feet) in the Seoul metropolitan area priced between 200 million won and 400 million won.

Of the total, 422 owners decided to live in the houses they sold to the government as tenants for the next five years. They will pay rent of 550,000 won per month.

“Although a small number of households could benefit from the first-time effort, it was successful in that the government actually gave help to them,” a ministry official said.

The government saved some households at risk of foreclosure and lowered the ratio of soured bonds at financial institutions.

“Now I can breathe after selling the house,” said a former homeowner surnamed Park.

“I have been using all of my wages to afford 1.1 million won a month to pay back the interest and principal after buying the 278 million won house.”

He was living on 2 million won worth of loans. Now Park’s monthly disposable income has climbed up by about 590,000 won.

The government plans to carry out the second round of the project this year.

But critics say such stopgap measures won’t revive the housing market.

“When the government steps into the market with its own money to reduce household debt, there are possibilities of inflation or more tax burdens on other taxpayers,” said Kim Kwan-ki, a professor at Sogang University. “The normal way is to let lenders and borrowers resolve the issue.”

“We are aware of the principle, but the current household debt situation among the house poor is so serious that the government can’t leave it to the market,” said a real estate industry official at the ministry.

BY SONG SU-HYUN [ssh@joongang.co.kr]
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