Occupy Kyoto

(Kyoto Shimbun)

Last week, the Kyoto city assembly passed a regulation to introduce a special tax on unoccupied properties or underutlized second homes for the purpose of opening up the used housing market. Kyoto is experiencing an acute housing shortage that is pushing up prices and, as a result, making the city unaffordable for young families, who are moving out to the surburbs. Before the regulation goes into effect it has to be approved by the internal affairs ministry, and when it does it will be the first such local tax system that targets vacant properties, or akiya, as they’ve come to be called.

The regulation, which wouldn’t be implemented until 2026, targets three categories of empty properties according to appraised value: properties that are less than ¥7 million, those between ¥7 million and ¥9 million, and those that are more than ¥9 million. Each category would entail a different rate of taxation, and if the appraised value is actually less than ¥1 million, no extra tax is imposed for the first five years after the new regulation goes into effect. There are probably very few, if any, properties worth less than ¥1 million in Kyoto, since the appraised value would be for both the structure and the land together. Unoccupied properties includes non-rental condominiums and apartments that are empty. Excluded from the new tax are “historically significant structures,” such as Kyoto’s famous machiya row houses; as well as properties used exclusively for business purposes, rental properties, and empty houses and apartments that the owner plans to put on sale. 

According to the Nippon Keizai Shimbun, during the press conference to announce the new tax, the mayor said that the purpose is not to raise revenue, but rather to “improve civic life and stimulate urban renewal.” Apparently, the idea for the tax originated in a proposal for a kind of vacation home property tax, but experts who studied the proposal told the city that it would be better if Kyoto’s large number of unoccupied properties, including vacation homes that seemingly no one was using, were either made available for others to occupy or torn down and replaced by new homes. 

In effect, the tax would be levied on any property deemed to be unoccupied or vacant. The special tax would increase the property tax on such a property by about 50 percent, the idea being that owners who didn’t live there or rent them out would be thus encouraged to either sell them or destroy them and build something new or sell the land. Empty land, it should be noted, is taxed at an even higher rate, as much as six times as land which contains a structure, whether vacant or not. It should also be noted that properties that are categorized as residences but which are being used only for storage are not exempt from the tax; as well as properties that are only occupied a few times a year—though exactly how few isn’t clear from media reports so far.

In its article about the new law, Kyodo news service said that it could act as a model for other local governments with the same problem, though Kyoto is fairly exceptional in this regard, since its property values are already high. A March 25 article in the Asahi Shimbun went into more detail about the reality behind vacant properties in other places in Japan. The Kyoto city government frames the new law in such a way that it comes across as a means of prodding owners to do something constructive with those vacant properties or sell them, but in truth a good portion of these kinds of property owners throughout Japan do want to unload their properties but can’t. In many cases, existing tax laws make it difficult for them to do that. Also, Kyoto wants to maximize its housing stock in order to make the city more affordable. In other municipalities, the problem with akiya has more to do with maintaining or boosting property values, since derelict housing makes neighbors a potential buyers in a particular neighborhood anxious, thus lowering property values. Rather than repurpose this housing, it might be better just to remove it. 

Asahi uses the example of a woman, 56, whose parents’ home in Kuki, Saitama Prefecture, was left vacant 4 years ago. The house is 50 years old and in bad condition. It can’t really be renovated, so she wanted to tear it down but couldn’t afford to due to the property tax system. In Kuki, she pays ¥28,000 a year in property taxes for the land the house sits on (the house itself, for all intents and purposes, is worth nothing). If she demolished the house and leveled the land, her property tax would increase to ¥90,000 a year. The prospect of demolition thus made little sense to her: On top of the sizable cost of demolishing the house, removing the waste, and leveling the land, she’d end up paying more than three times as much in property taxes for the land; that is, until she sold it, if, in fact, she could sell it.

This tax system is based on a law implemented in 1973 for the purpose of encouraging people to build new houses to deal with a housing shortage that didn’t really exist any more. Though there was an acute housing shortage after World War II, by 1973 the problem had mostly been solved, but still the government wanted to promote new building to spur the economy. In any case, the law effectively discourages people from tearing down superannuated houses. 

So in 2021, Kuki implemented a new system. If the owner of a vacant house demolishes it, the property tax for the empty land will be substantially reduced for up to three years, and, under certain conditions, the city will also subsidize part of the demolition and removal costs. In March 2022, the woman talked to an official in the local government who introduced her to various companies that demolish old buildings. She chose one that would do the entire job for ¥1.5 million. She now plans to try and sell the land.

Kobe and the city of Mitsuke in Niigata Prefecture have implemented similar regulations and services to encourage people to get rid of useless houses using local property taxes. However, according to Asahi, very few people have actually availed themselves of these new services. 

That may be because there are other land use regulations that discourage demolition. One of the most infamous is a law that prevents rebuilding on certain types of plots due to improper or outdated borders. This problem is especially prevalent in areas of Tokyo that were quickly rebuilt after the war with cheap wooden houses that were densely packed together. Formal surveys were not carried out and as a result, public roads are not wide enough to accommodate certain vehicles. If the owners of these plots decide to tear down the houses on them, they cannot rebuild until they redraw their borders, and in almost all cases the size of their plots will be smaller because they are effectively encroaching on public property that should be used for roads. Of course, this wouldn’t be a problem if the concept of eminent domain were more general in Japan. Once someone is living on property they own, the government is loathe to force them out, regardless of the greater public benefit. 

In order to alleviate at least some of this problem Tokyo’s Nerima Ward relaxed the law to allow roads that are adjacent to private residential properties to be at least 2.7 meters wide. Most local governments in Tokyo mandate roads to be at least 4 meters wide. Consequently, owners of properties in Nerima don’t have to give up as much or any land if they decide to rebuild. The ward will also subsidize survey work and the drawing up of land diagrams. 

Asahi says that local governments will need to work with private companies if they want to tackle the unoccupied housing problem in any meaningful way. The main obstacle is alleviating the cost burden for demolition and removal, which makes the problem of vacant housing different from what it is overseas. In recent years, for instance, many cities in the U.S. have revealed their own vacant housing issues, but since property values in those cities are high, the matter has more to do with reluctant or absentee owner/landlords who can likely afford to renovate or rebuild but don’t want to. In some cities, like Philadelphia, the local government is taking possesssion of these properties to house homeless and lower-income people. But even in New York City, where property values have skyrocketed in recent years, there are a lot of empty dwellings. That’s the situation in Kyoto, which makes it exceptional for Japan, because the vast majority of Japan’s 8 million-plus unoccupied properties are worth little or nothing, and not just because of their condition. They are not in desirable locations. Demolishing old houses is the way to go, but it doesn’t necessarily mean someone will want to build something on the newly vacant land. Unlike in the U.S., in Japan there are just too many houses and not enough people to occupy them as the population dwindles, and yet developers just keep building new ones. It’s often said that Japan has the best housing policy in the world because young families can purchase newly built homes with relative ease. But those homes will never be much of an asset—unless they are in the city of Kyoto. 


One comment

  1. Lee · April 16


    Well it’s a program that is trying to make an attempt to solve a problem, but I wonder how much difference it will actually make.

    Maybe it will just end up as another government program that increases employment for government employees, adds more paperwork, and makes little difference.

    Here in Australia we also have these types of “vacant property taxes”, but they are a little different in that they were initially aimed at mainly foreign owners of property. (You know blame the foreigner for high property prices and tax the crap out of them………….)

    There is a Federal government “vacancy fee” and here in Victoria we have what they call and absentee owner surcharge and a vacant residential land tax along with regular real estate taxes, and additional land tax if you own property other than your own home if the value exceeds some amount.

    The Federal vacancy fee is equal to the amount the foreign buyer paid to get a license to buy the property (the application fee).

    Victoria State taxes:

    1. The vacant residential land annual tax is set at 1% of the capital improved value (CIV) of taxable land. For example, if a vacant home has a CIV of $500,000, the tax will be $5000.

    (During the lock downs here in Victoria the state government waived this tax in 2021 as travel was restricted for a long period of time.)

    2. From the 2020 land tax year, an absentee owner surcharge of 2% applies to Victorian land owned by an absentee owner. The surcharge was 1.5% from 1 January 2017 and 0.5% for the 2016 land tax year. If your property is valued at less than A$300,000 then no tax applies. However, I doubt that there are any properties that would qualify for this type of exemption given the current market.

    If you are an absentee owner at 31 December, the surcharge applies in the following land tax year.

    The surcharge is calculated on the total taxable value of Victorian land you own and will be included on your Victorian land tax.

    Vacant generally mean not occupied or rented out for at least 183 days of the year.

    IMO these programs were just aimed at “getting the foreigner” and finding a scapegoat for the huge increase in property prices up to the date that they were initially implemented. Forget the fact that during the virus lock downs here ,when foreign travel in and out of Australia was basically curtailed, house prices soared even more.

    Just a program here for more high paying government jobs for do nothing bureaucrats that makes Australian property viewed less favorably than in other countries.


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