Disaster Danchi

New public housing apartments in the Tateyama area of Kesennuma

Further on from our April Home Truths column about temporary housing for evacuees in the Tohoku region, local governments in the area are also facing another related problem: an oversupply of permanent public housing built expressly for victims of the Great East Japan Earthquake. These are apartment buildings, not unlike public housing complexes erected in other parts of Japan, that accept people who were left homeless by the disaster and were either already living in public housing destroyed in the disaster or who were living in their own homes and, for whatever reason, do not plan to rebuild those homes due to financial limitations or age.

An article in the March 15 Asahi Shimbun describes three such buildings that are now completed in Kesennuma–two 6-story structures and one that’s 10 stories, altogether comprising 165 units. People started moving in in Jan. 2015, and at present more than half the residents are over 65. As the 51-year-old community leader of the complex told the newspaper, already ten residents have died in the past two years, among them three people who were living alone and whose bodies weren’t discovered for a few days. The leader is concerned because, while the vacancy rate for this particular complex is low right now, Kesennuma eventually will have 2,087 units of public disaster housing, to be completed this May, and it seems to be too much. Given that most of the victims who move in are elderly, the local government has now estimated that by 2025, 27 percent of the residents will have died or moved into nursing homes, and by 2035 51 percent will be gone. This is only to be expected, but there doesn’t seem to be anyone to replace them. The city has said that when vacancies arise it will solicit low income families to apply for units, but projections are that there won’t be many of those since so many young people moved away from the area after the disaster. As it stands, Kesennuma will have five times as many low-income public housing units as they had before the earthquake, but now they have much fewer residents overall and few prospects for any influx. The population now stands at about 64,000, or 13 percent less than a year ago. The trend is that after graduating high school, young people are leaving the city. Read More

Pity the landlord

cimg3718

These are the kinds of apartments subleasing companies build.

We’ve already talked about the sublease racket. The term has a special meaning in Japan that’s related to a specific real estate scheme designed to sell apartment buildings to people with extra money. Construction companies build small apartment buildings on unused land for the owners of that land and then manage the property for them through a sublease arrangement that requires them to pay a guaranteed “rent” every month. The logic is simple. The property owners have to pay higher taxes on land that is empty and so they build an apartment building for purposes of reducing those taxes and providing income. The construction company then does all the work of finding tenants and managing the property.

As we’ve mentioned in past posts about this scheme, it heavily favors the construction company, which gets out of its obligation for guaranteed payments to the landlord through various small print loopholes. The construction company, which usually has a real estate subsidiary, is only really interested in building, and understands that as Japan’s population declines it is going to be more and more difficult to find enough tenants to make even small apartment buildings profitable. Consequently, they make sure there is something in the management contract that allows them to get out of the deal if things go south, and invariably they do. Read More

Last resorts redux

file_6_18_1Several times on this blog we’ve written about the collapsed market for resort condominiums, which are conveniently called “rizoman” (for “resort mansions”) in Japanese. The majority of these apartments were built during the asset-inflated bubble period of the late 80s and the hangover from that period in the early 90s. Many, but not all, were attendant to the ski boom, and after the bubble burst and people’s interest in skiing deflated, more and more of these condos were abandoned by their owners, the result being thousands of empty units in vacation areas throughout Japan. More importantly, however, it also meant huge losses in property taxes for local governments and the deterioration of condo complexes that were no longer collecting management fees from absent owners, most of whom lived in major cities. These specific circumstances led to an unusual phenomenon. The units themselves dropped dramatically in price on the resale market and could be had for a song (or even a verse), but they could hardly be sold because even if the market price was only a million yen or cheaper, whoever bought them would also have to cover the back taxes owed, not to mention the unpaid management fees, and together these two debts could run into milions and millions of yen.

At the end of last month, Asahi Shimbun ran a series of articles about a turnaround in Yuzawa, Niigata Prefecture, which is the closest town to one of Japan’s most famous ski and hot spring resorts. (It’s also where the Fuji Rock Festival is held in July.) Yuzawa has been for years the poster child for the crippled rizoman market, a place that saw a huge amount of construction in the late 80s/early 90s and which later stood as a symbol of pointless extravagance. According to a realtor quoted in one article, there are some 15,000 empty condo units in Yuzawa, accounting for 20 percent of all the empty resort condos in Japan. During the bubble period, when these units were new, they were so popular they could be sold at auction, and many went for as much at ¥100 million. Now, many are going for less than ¥500,000, depending on the size. Management fees, however, are still high owing to the fact that many buildings have large communal baths, swimming pools, recreation rooms, and exercise facilities. Read More