One of the main themes, if not the central theme, of this blog is that Japanese homes don’t hold their value over time the way they usually do in other developed countries, and while this situation does have a silver lining in that homes are affordable to a larger cross section of people, including young families, in the long run it makes it difficult for retired people to expect much in the way of a return on the investment they made in their home, which is usually the most expensive thing they own by a huge margin. But this feature of Japanese economic life has even broader effects on the quality of life for seniors, as revealed in a June 5 article in the Nihon Keizai Shimbun.
Certainly the main advantage of owning one’s home anywhere is that once the mortgage is paid off no one can kick you out. Regardless of income, a person who owns their home will always have a roof over their head. In Japan, this notion is usually conveyed by referring to the house or condominium as the person’s “final home” in that the person can live there until they die. The theme of the Nikkei article is that even this concept is no longer guaranteed or, at least, not assured in the way that most seniors thought it would be. The main reason is that the cost of renovations for homes has increased by 20 percent over the past ten years on average. This increase, combined with the fact that Japanese people are living longer, makes the possession of homes in Japan more difficult for people on fixed incomes.
According to a survey conducted by the justice ministry, the home ownership rate of households with two or more members and whose head of household is over 60 is above 90 percent, which is quite an impressive portion and speaks to the success of Japanese housing policy in how it has promoted home ownership over the years. In practical terms, it means the people who live in these households have a “final home” that should remove any economic anxiety from their twilight years, but Nikkei says that isn’t the case. For one thing, standalone houses in Japan tend to need extensive renovation work done on exteriors and roofs every 15 to 30 years, depending on when the house was built—the older the house, the more frequent such renovations are needed, and each time they are carried out they require at least ¥9 million. In the past year alone, costs for renovation have gone up substantially owing to inflation and the world distribution crisis. These costs are not expected to go down.
Condominiums are not exempt from this problem. In fact, renovation work for condominiums has gone up 40 percent in the last ten years, or double what it is for houses. According to a Tokyo research laboratory quoted by Nikkei, in the metropolitan area the monthly long-term repair contribution (shuzenhi) required of condo buyers for new units still lags behind the amount recommended by the construction ministry to provide sufficient funds for long-term repairs in the future; which means that when those repairs come due, condo owners will have to pay additional money to cover those repairs, and often it amounts to millions of yen. If the owner is on a fixed income at the time this bill comes due, they may not have the money to pay for such repairs.
So while having a home still guarantees a roof over one’s head after retiring, it doesn’t necessarily guarantee a roof that doesn’t leak—or, for that matter, plumbing that works properly or, especially in older homes, insulation that keeps utility costs within reasonable limits. Older houses also tend to be less reliable in terms of quake-proofing, which means any renovations will likely be even more expensive.
Another demographic change that has exacerbated the problem is the steep increase in single-person households. In 1980, the portion of households inhabited by one person was 19.8 percent. Now it is more than 30 percent. Conversely, the portion of households containing two or three generations has dropped substantially, which means the cost of renovations can’t be passed down to a child or grandchild, and many elderly people say they don’t have enough savings to pay for such repairs.
The Nikkei article also mentions rentals, presumably as an alternative for seniors who would prefer not to bother with repairs of a house that may be too big for their needs, but in another government survey 70 percent of landlords said they do not want to rent to elderly tenants, for obvious reasons. One professor of urban design told the newspaper that many of these landlords are getting older themselves, and don’t want to spend a lot of money for the kind of renovations needed to rent properties to elderly people. As Japan’s premiere financial daily, Nikkei, of course, talks to businesses that are trying to take advantage of this situation, but the only one they come up with is a company in Kyoto that buys empty properties and fixes them up as rental “share houses” where a range of generations live together, but while the idea is certainly attractive and seemingly sustainable—elderly residents can have younger people around to attend to emergencies, while the younger tenants can enjoy lower monthly rents—it seems unlikely to catch on as a business model without concerted public investment.
What Nikkei doesn’t mention is that renovations of older homes would not be as much of a problem if the owners had more equity in those homes. In the U.S., homeowners of all ages can take out loans on their properties to pay for renovations, which are encouraged by the market itself since every homeowner wants to maintain if not increase the value of their home over time for resale purposes. Such a concept is less meaningful—if not totally meaningless—in Japan, where regular maintenance on houses is not encouraged since most homeowners don’t think seriously about making any money on their homes. For those whose homes are in certain suburbs or the countryside, they may consider themselves lucky if they can sell their old house for any money at all. In any case, banks are going to look very carefully into an applicant’s income situation before lending money for home improvements since the house itself doesn’t have much value unless it’s relatively new; and even then they’ll probably charge a good deal of interest.
Consequently, a “final home” becomes more of a burden if the owner cannot carry out the kind of renovations that are deemed necessary to keep the home livable. At the moment, thanks to COVID and an exodus of workers out of the main urban centers, there’s been a spike in sales of used homes in Japan that is encouraging. But there seems little likelihood of a reverse of the population decline, which means more empty homes in the future with no one to buy them. Moreover, it means an increase in older, still occupied homes that are falling apart at an accelerating rate.