The Asahi Shimbun recently reported that the government finished auditing its accounts for fiscal 2011. The board that conducted the investigation found 513 separate cases of “waste” comprising ¥529.16 billion, the largest amount since records have been compiled. In the wake of media reports that have government organs inappropriately using tax money earmarked for reconstruction of the disaster-hit Tohoku region, it is natural to assume that this waste would be doubly scrutinized, but we won’t hold our breath. One of the areas that will probably invite less concern is assets held by dokuritsu gyosei hojin–independent administrative agencies–that remain unused. In 2010, the cabinet issued a directive that such assets should be returned to the government, but apparently that’s not happening as the auditors found lots of unused assets lying around–literally, in many cases, since the assets that seem to be the most problematic are real estate-related. The National Hospital Organization, for instance, owns 217,000 square meters of land valued at ¥6.7 billion that remains undeveloped and with no plans for development. According to the cabinet directive this land should be handed over to the national government.
Another independent administrative agency with lots of unused assets is Toshi Saisei Kiko, more popularly known as UR (Urban Renaissance), the semi-public housing corporation that the government would like to make completely private because it’s such a sinkhole for money. Since UR’s business is the sale, development, and management of real estate, its unused asset problem is also a business problem, and the auditors found that the company controlled 223 hectares of land valued at ¥89.7 billion that was unused, which many not sound like much, but apparently the audit board was only talking about assets that were supposed to be “processed” during FY2011. As almost everyone knows, UR has lots and lots of land that remains undeveloped, and since all of UR’s debts are covered by the government the auditors insist that UR can cover at least some of its deficits by liquidating land assets.
The Mainichi Shimbun reports that the land in question remains on UR’s books because it was unable to sell it according to plan. As long ago as 2001, the government decided to get out of the housing development business, which used to be carried out by Toshi Seibi Kodan, an organ set up after the war to alleviate the country’s housing shortage. UR was established in 2004, partly to make the Koizumi-led privatization of all Kodan’s holdings smoother. At the time, the company had about 5,900 hectares of undeveloped land. By 2007, this amount was reduced to 3,600 hectares, but after the meltdown of 2007-08, liquidation of these assets slowed considerably. Last year, UR only succeeded in selling half the land it wanted to sell. By the end of the current fiscal year in March, it’s estimated that UR will still have 2,600 hectares on its books. Some of the land has been developed over the last decade, but mainly for projects that were planned before the turn of the millennium. After 2013, UR says it has no more development plans, and by 2018 the company will theoretically have “sold” all its land.
The problem comes down to demand. The auditors looked carefully at UR land that hasn’t been sold yet and found that much of it, whether earmarked for residential use or commercial use, is “unusable and thus unsellable.” They advised UR to make the land sellable by doing things such as converting hilly terrain to “level” terrain, presumably by shipping in soil from other locations, an extremently costly undertaking and a risky one in light of subsidence issues that became obvious after the March 2011 earthquake. Some of the unused land is simply on the outskirts of large tracts of land that were developed years ago but which have not grown economically the way the company envisioned. One of the reasons UR held on to so much land for so long is that the company bought it at a high price during the inflated-asset bubble period of the 80s and thus would have to sell it for a loss. But nowadays it is difficult to sell some of this land simply because no one wants it.
The example the Mainichi uses to illustrate UR’s dillemma is Chiba New Town, which is where we happen to live. Composed of parts of Inzai, Funabashi, and Shiroi cities in northern Chiba Prefecture, CNT was one of the ambitious new town projects formulated in the 1960s to build large residential-commercial centers in the suburbs. Tama New Town in Western Tokyo is probably the most famous example. Toshi Seibi Kodan started buying land for CNT in 1967. According to the original plan, the project would house 340,000 people on 2,912 hectares of land. A train and highway network would be built to service these brave new residents, but they didn’t arrive in the numbers projected. By the end of 2011, CNT was home to only 91,484, and the government has so far spent ¥1.2 trillion on the project. The low population has made development not only incomplete but expensive. The Hokuso train line, connecting Takasago in eastern Tokyo to Narita airport via the Keisei Railway, was built explicitly for CNT, and it is generally thought to be the most expensive line in Japan. The reason CNT failed, according to the Mainichi, was mainly due to poor planning with regard to land purchases. Plots were bought in a hodgepodge manner over many years, thus making it difficult to develop the whole region at the same time. Consequently, you get roads that go nowhere or terminate in puzzling dead ends. You have housing developments that are isolated from city centers and services by hills or large tracts of farmland. And the Hokuso Line was not completed until 1991, by which time any early momentum to attract people to the area had been lost. A 73-year-old man who moved to CNT from nearby Matsudo during the earliest phase of the project told the Mainichi that in the beginning everyone was excited and developers had to set up lotteries to sell plots. Now, he says, everyone is disappointed. UR gave retail and service businesses breaks on rent to attract more to the area and they came, but later when those breaks expired and rents were jacked up many left or closed shop. And while the areas surrounding the two main train stations are bustling commercially, elsewhere within the New Town bailiwick you see lots of “temporary” retail complexes all shuttered up. On an aesthetic level, CNT has much going for it–wide streets and sidewalks, abundant parks and beautiful landscaping and scenery, not to mention some of the nicest collective housing we’ve seen anywhere in Japan. But there is no future for UR, and when UR finally leaves after next year (it will continue managing whatever rental units it owns) it’s assumed the CNT project is finished in terms of coordinated development. As the 73-year-old pioneer sees it, CNT was merely a “task for bureaucrats” who had no grasp of reality and even less foresight. CNT contains 351 hectares of UR land deemed “unsellable,” land the Mainichi describes with the term shiozuke, or “pickled cabbage,” the idea being that it’s being preserved for future consumption; but even that flippant image is overly optimistic.
Love the pun in the title. As I said before in a previous posting, I lived in an 11-storey UR apartment in Osaka which was designed with the side entrance and flow-through windows facing East-West in my case. It was nice, airy, bright and private.
Access was by elevator but only to the 1F, 4F, 7F and 10F. As I lived on the 11th I walked up the last flight of stairs to my private eyrie.
Keep up the blog. I love reading about property in Japan .. in English.
Thanks for the comment. If you lived in a UR apartment this might interest you.
Have UR properties always been for sale or was it a case of people who lived in them for say, 10 years, were offered the chance to purchase? I always thought that they were just rented out.
UR didn’t actually come into being until 2004, and at that point it wasn’t constructing condos for sale any more. In its previous incarnation as the government housing organ Nihon Jutaku Kodan it built collective housing both for sale and for rent. In this blog post we’re mainly talking about land that Kodan bought in the 1980s for development at a future date as “new towns.” UR basically inherited this land and is stuck with it. UR still manages a large number of rental properties throughout Japan, but the condos that Kodan built and sold are mostly other people’s business now. Still, a lot of the conditions and rules that were put in place by Kodan when the condos were sold are still in effect, so people tend to think of them in that way.
Just found out about your blog and it’s been really informative!
I lived in a UR kodan in Kobe and it was wonderful. The rent was half what my friends were paying for places less than half my total. I lucked out, got the top unit on the front most block on top of the hill and had the most wonderful view of Awaji-shima, and basically all of Kobe.
I’ve sinced move on from Kobe but I dream of going back and building my own home there in the coming years. I wonder if there’re any UR plots available there.