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
Here’s this month’s housing column in the newly designed Japan Times. This one’s about emergency housing, which we’ve talked about before but we never really got into the legal aspects, which are quite interesting.
In our latest housing column for the Japan Times we talk about a new book by Chie Nozawa that explains in simple, clear terms why more and more abandoned homes, both houses and condos, will litter the landscape in coming years. She gives a lot of good examples of the kind of city planning, or, more precisely, lack of city planning, that has given rise to over-production of housing even as the population in general is shrinking and homes are left vacant.
Last week, she published an article in Gendai Business that summarizes and elaborates on the book. (Gendai is published by Kodansha, which also published her book) Her main thesis is that housing is “no longer” a financial asset, though we would probably argue that it never really has been. She points out that by 2033 one out of every three homes in Japan will be vacant, and that if nothing is done–either through demolition or some program to make more effective use of existing housing–there will be 21.5 million vacant homes in Japan. She give two reasons based on the fact that the huge boomer generation will be dying out in large numbers: 1) the homes the boomers have inherited from their own parents will be empty; 2) the homes the boomers built themselves will be empty because their own children built their own homes and thus have no reason to take those homes over. It seems almost redundant for her to mention that these homes, unless they are located in major cities on desirable land, have no value whatsoever. The homes that boomers now live in are old, and so their heirs cannot possibly move in or sell or rent them without extensive renovations, which is not liely to happen given the nature of the housing market, which is all about new things, as we pointed out in our column.
Thus, these properties have “negative value,” meaning regardless of whether the heirs tear them down or improve them, they will have to spend money that they will never see again because it will become increasingly difficult to sell or otherwise liquidate these properties, most of which are in the suburbs. And the more there are, the worse this problem gets.
This vacant house problem brings about what Nozawa calls the “sponge phenomenon.” In English parlance we might refer to it as the Swiss cheese effect: The suburbs of major cities, and even the cities themselves, become pocked with holes of vacancies that further erode surrounding property values and scare off younger potential homeowners, who gravitate instead to the nearest brand new ultra-cheap, ultra-cramped subdivision. Nozawa gives examples of regional capitals where this effect is already in full swing: 20.8 percent of the homes in Kofu, Yamanashi Prefecture, are vacant.
Vacant housing comes in four types: rental housing that is presently uninhabited, vacant houses on sale, secondary housing (vacation homes, etc.) that is unoccupied almost all of the time, and abandoned housing, meaning not for rent or sale, merely empty. Nozawa provides statistics showing that of these four type, the last, abandoned housing, is increasing at the fastest rate. She also shows the direct relationship between the amount of new housing being built in a town or city, and that locality’s portion of vacant housing. In most cases the more building that’s happening, the higher the number of vacant homes. A few enterprising spirits are trying to address this problem. One local real estate company in Higashi Matsuyama, about 50 kilomters north of Tokyo, is actively buying up small lots in these sponge-like neighborhoods and combining adjacent ones to make larger lots that can accommodate larger houses, but in order to do that effectively the realtor has to locate the owners of land that in many cases has been abandoned for a long time, and often that means negotiating with more than one reluctant heir.
Because Japan as a country didn’t make housing starts an integral part of its economy until after World War II, we’ve tended to believe that housing developments didn’t exist before the war, but, of course, that isn’t true. Recently we came across a 2009 article by a professor named Ken Shibata who teaches at Kyushu University’s graduate school. In it he describes several prewar housing developments.
Shibata writes from the standpoint that “suburbs in Japan are in trouble,” meaning that they are increasingly filled with vacant properties and are losing value along with residents. He blames the policy–which we’ve mentioned many times in our own blog–of focusing on new developments rather than maintaining existing ones, and he cites three prewar housing developments that today have good value even though they are quite old.
One is Denenchofu in Ota Ward, Tokyo, which sounds like a ringer. Denenchofu is famously upscale, with large, extremely expensive properties. Celebrities and rich executives live there. Though it’s not exactly Beverly Hills, it is as close to a Japanese cognate as you’re going to get. Another, more down-to-earth housing development is Tokiwadai in Itabashi Ward, which was first developed more than 80 years ago. Both these neighborhoods are in Tokyo proper, and even though they were relatively rural areas at the time they were first built, right now they have high property values simply because of their location and not so much because of the quality of their housing stock. Read More
The Feb. 21 Media Mix column in the Japan Times, which we also write, is about the money scandal surrounding Liberal Democratic Party member Akira Amari that forced him to resign his cabinet position. The scandal involved a construction company in Shiroi, Chiba Prefecture, which wanted to shake down the Urban Renaissance Agency for a large amount of compensation, since part of the company’s “offices” had to move due to a road construction project that UR was carrying out with the Chiba Prefecture authorities. Takeshi Isshiki, ostensibly an official with the construction company, told various media how he had paid money to Amari and his secretaries so that they would use their influence to get as much money as possible out of UR. One of the themes of the column is that UR, which is called a “semi-private” or “semi-public” organization, depending on which angle you look at if from, is an entrenched bureacratic entity beholden to the government for its very existence. It started out as the Japan Housing Corporation, a clearly entrenched bureaucratic entity, which built lots of housing developments in the years after World War II with government money. Since the end of the bubble era, it hasn’t done much of that and has sunken deeper into debt. Without much purpose in life except collecting rent on UR apartments, UR is seen as a pointless enterprise now and several administrations have tried to privatize it, but UR has resisted because being in the government guarantees incomes. Thrown on the mercy of the market, most of its employees would lose their jobs, or make less money.
The information we used to make these points in the column was taken from an article in Gendai Business written by Yoichi Takahashi, a former finance ministry economist who knows a thing or two about how bureaucracies work and bureaucrats think. His point is that the scandal would never have happened if UR weren’t involved. Had the road construction project been carried out by a genuine private concern, or even by the Chiba Prefecture government by itself, it would have been more difficult for the construction company to extort money, and, in any case, Amari wouldn’t have had as much pull in any related negotiations. But because UR occupies a shaky position vis-a-vis the government, it easily bends to pressure from that government, especially a cabinet member. Read More
Last week the media reported that the Ministry of Land, Infrastructure, Transport and Tourism was devising a plan to limit the number of abandoned houses and apartments in Japan to no more than 4 million by fiscal 2025. As of 2013, the year the results of the last ministry 5-year survey were released, the number of vacant homes in Japan was estimated to be 8.19 million, about 40 percent of which–3.18 million–were not on sale or for rent. At the present rate, the number of abandoned abodes would rise to 5 million by 2025, so the ministry has decided to put into effect measures to bring down that number. They will announce these measures in March.
According to reports, the plan would involve “putting some abandoned houses and apartments back on the market and removing others,” as well as “offering such houses and apartments to low-income earners and families with children.” In addition, the government would also promote “the replacement of aging condominiums.” Any of these measures would require a much larger existing home market, which was worth about ¥4 trillion in 2013. The ministry thinks it can boost it to ¥8 trillion by 2025 and increase the remodeling and renewal market from ¥7 to ¥12 trillion. Since there would be no attendant increase in the population, the new home market would probably have to decrease in order for these targets to make sense; that and salaries would have to see a boost.
Since new housing starts has always been a chief economic motivator in Japan, it’s difficult to imagine that the government would do anything to discourage new home construction, and as long as it’s a priority it will be difficult to reduce the vacant home problem. For one thing, only new home buyers get tax breaks. More to the point, while the problem of abandoned single-family homes can be addressed in a relatively direct fashion–either fix them up to make them sellable or tear them down–the problem of abandoned units of collective housing is not so simple. For one thing, in order for a building to be rebuilt or “replaced,” four-fifths of the owners of the building’s units must approve, and that’s a hard portion to reach, especially given the fact that a lot of condo owners do not live in their units but rather rent them out. According to Yomiuri Shimbun, the government is thinking of changing the law so that absentee owners of condo units can be ignored if for whatever reason they do not participate in the vote for rebuilding. Read More
The central government is supposedly working on new measures to deal with the ballooning vacant home problem, and it’s no secret they would prefer local governments handle the matter, even though most local governments don’t have any extra money to throw at it. Recent media reports, however, indicate that Maebashi, the capital of Gunma Prefecture, is working on a very ambitious program for not only addressing the vacant home problem, but increasing the city population at the same time.
According to a 2013 survey, the vacancy rate in Maebashi is 15.9 percent, which is higher than the national average of 13.5 percent. Officials decided they had to do something about it and boldly earmarked a ¥200 million budget program. The idea is that the owner or purchaser of a vacated property receives subsidies for renovating an existing structure. Under such circumstances, the owner would receive either ¥1 million from the city or one-third of the cost of renovation, whichever is higher.
Other local governments have similar programs, but what makes Maebashi’s different is the “special cases” that offer even more money. For instance, the city will pay a resident of Maebashi ¥200,000 toward the renovation of a vacant home if it is within one kilometer of the person’s parents’ home, thus encouraging the children of elderly or soon-to-be-elderly city residents to be in close proximity so as to be able to take care of them. In the same spirit, ¥200,000 extra will also be given to people who renovate a vacant property into a two-generation abode as well as to extended families who tear down a vacant house and replace it with a new two-generation home. Read More