real estate business | Cat Foreheads & Rabbit Hutches

Straight outta Tokyo

As we’ve written here numerous times, the cost of a new condominium in Tokyo has risen beyond the reach of most middle class households and even quite a few upper middle class ones. According to a recent article in the weekly magazine Aera, the average price of a new condo in the 23 wards now stands at ¥136.13 million, meaning that the average price has lingered above ¥100 million for three years in a row.

Still, middle class families are trying and usually require a break to get a deal they can afford. Aera interviewed a man in his late 40s named Kazuya (not real) who moved into a condo in the Harumi Flag complex on the waterfront last September after purchasing the unit in 2023. If you’ve read this blog for the past five years you’ll know that Harumi Flag was the athletes village for the most recent Tokyo Olympics, and that units were initially sold at prices considered below market value. Consequently, the demand was high and a strict lottery was used, with some of the more popular units attracting as many as 150 applications. However, because of the one-year delay of the Olympics due to the pandemic and other factors, the people who managed to get selected to purchase units had to wait a few years before moving in. Kazuya, his wife, and two children previously lived in a 67-square meter “maisonette-style” condo in Ebisu. The Harumi Flag unit is 82 square meters and reportedly has a spectacular view. The purchase price was ¥94.9 million, for which they took out a 35-year variable interest loan and pay ¥250,000 a month, not including management and repair fees. Since the family’s total income varies between ¥10 million and ¥15 million a year, they can afford it…for now.

However, according to Aera’s research, a comparable unit in Harumi Flag is now going for ¥190 million, an increase in value of ¥100 million since the Kazuyas purchased theirs. As Kazuya told Aera, the increase in value “has no meaning for us, since we plan to live here permanently,” though the statement sounds somewhat disingenuous. When you live in a property that has doubled in value in less than three years, it has to have some meaning.

The last time the average price of a new condo in Tokyo’s 23 wards was less than ¥100 million was 2022, when it was ¥82 million. By the following year it had risen to ¥114 million, a 39 percent increase. In the 3 years since 2022 the rise has been 65 percent.

Affordability for dummies

Posted on April 4 by catforehead

It says something that the big economic buzz word in Trumpworld—affordability—has entered the Japanese lexicon as a katakana term, though it seems to be restricted to real estate in Tokyo, which, as we’ve mentioned so many times, is the only real estate story that the Japanese media cares about. But while everybody knows that prices of residential properites in the capital are skyrocketing, less is said about rents, which are going up even more.

In February, the real estate portal site At Home announced that the average rent in Tokyo’s 23 wards had increased for 21 months in a row, a new record. Moreover, the average rent for a unit for one person, meaning a condo or apartment of 30 square meters or less, had exceeded ¥110,000 a month for the first time. In fact, the exact amount, ¥110,177, marked a 12 percent increase from the previous year, another record. One of the reasons for this massive increase is the replacement of old wooden apartment buildings with concrete ones, with the new units being made smaller so that more of them can be fit into the space the former ones once filled. But larger apartments also saw startling year-to-year increases: two-person units (30-50 square meters) averaged ¥124,378 a month, a 10.7 percent increase; and family units (50 square meters and larger) averaged ¥174,082 a month, an 8.2 percent increase. Tokyo apartments outside the 23 wards went up less, but still went up: ¥87,887 for a two-person unit, an increase of 5.7 percent.

The Tokyo Metropolitan Government anticipated these developments and, according to Asahi Shimbun, will start providing “affordable housing” in the prefecture starting this year. One of the related measures will be to levy a special tax on residential properties that remain vacant, though so far no details or timeline has been announced.

What has been rushed into realization is ¥10 billion in investments from Tokyo in new affordable housing in partnerships with four foundations set up by major real estate companies like Nomura Fudosan. These funds will be used to operate rental housing that on average will be about 20 percent cheaper than current market rates. This year 350 units throughout the city will be made available starting next month. All these units are existing apartments that have been renovated. In principle, Tokyo is not going to build any new housing for the project but rather use existing structures with the help of private partners and investors, who will earn dividends on the returns, though lower than other real estate investments since such investments are pegged as “social contributions.” Tokyo is currently studying a system that could create more rental units by easing capacity rates in order to encourage developers to build more affordable housing. (Though it should be noted that easing capacity rates was the scheme of the Koizumi administration to increase construction, which lead to the boom in high-rise condos.)

One affordable rental property has already opened. Neuvono Kikukawa, operated by Mitsui Real Estate, as a kind of model for the project. It is two buildings in Sumida Ward comprising about 100 units, each about 55 square meters in size. The target is families and all the units were quickly rented out. There is a licensed nursery school on the first floor that is always open.

Lease on life

Posted on March 26 by catforehead

*An image of the residence described in the Asahi article located in the Koishikawa area of Tokyo*

Though home prices in Tokyo occasionally drop temporarily, in general they now remain pretty much out of reach for most sentient humans, which isn’t to say that most sentient humans don’t try to buy a home in Tokyo when it suits their needs. Regardless of the effect of foreigners buying up properties as investments, it’s why Tokyo will always be very expensive while the rest of the country is pretty affordable, if not downright cheap. And by expensive, I don’t necessarily mean the prices themselves, but rather the conditions of owning a home, which include strictly enforced mortgage payments, high property taxes, and other ancillary expenses that come with owning a property, in particular a condo, in the capital.

So anything that makes owning such a property more “affordable,” to use the buzz word that even local media have katakanized, will draw attention. According to a March 20 article in Asahi Shimbun, the big trend right now among developers is constructing condos on rented land, a scheme that’s quite old and used to be more traditional but which more or less fell out of favor due to certain legal realities. Now the market is so hot that such restrictions seem like mere inconveniences, and the response has been very positive, since not having to pay full price for the land can reduce the price of a comparable condo by as much as 10 percent. According to the Asahi, last year 1,502 condo units were newly built and made available for sale on rented land. Previously, the number of new condos built on rented land peaked in 2008 at 1,281 before dropping continually year after year, so 2025’s number is a new record.

Asahi uses as its prime example a new condo building consisting of 522 units located in the neighborhood of Koishikawa, 12 minutes by foot from Korakuen Station on the Marunouchi subway line. The area is considered exclusive and very desirable. The average price for a 70-square-meter 3LDK apartment is ¥160 million, which is still very high but, as mentioned earlier, about 10 percent cheaper than a similarly sized apartment in the same area. In addition, the first floor of the new building will have a supermarket, a public library, and other common amenities. So far, more than half the people who have expressed interest in buying are couples in their 30s who either have children now or plan to have children.

The catch, if you want to call it that, is that the rented land beneath the building will have a 70-year lease. When the lease expires, the building will be demolished and the land returned to its owner to do what it wants with it. The owners of the units pay land rental fees on top of their management and repair fees, and they also pay into a “demolition fund” that will go toward the destruction of the building when the lease expires. So while the prices of the units themselves are cheaper than comparable condos in the area, the fees are higher. Another incentive is that property taxes are lower, since owners only have to pay taxes on the structure, not the land.

Real estate people say that rental land for condos in central Tokyo benefits buyers, developers, and land owners alike. For the developers, the advantage is obvious: it is less difficult for them to obtain land, whose value continues to increase over time. The reason it’s easier is that many land owners tend to not want to sell while the price is always increasing, so by renting the land they retain its value over time, at least theoretically.

In the case of the new condo cited, the land is owned by a printing company called Kyodo Insatsu, which used to have a factory on the plot. Some years ago, the company redeveloped the land by removing the factory and using a portion of it to house their headquarter offices, and part of the condo plan is to rebuild a new headquarters as part of the development project. Apparently, this sort of scenario is ideal for developers, which are often looking for land to rent, though it’s easier outside of Tokyo than inside. In the past, shrines and temples, which own a lot of land throughout Japan, would rent out tracts of land to developers of condos, especially as the numbers of their traditional followers dwindled, meaning they had less income. Renting out land to developers made up for this income loss.

Hazard payments

Posted on February 1 by catforehead

On Jan. 15, two people were stabbed in front of a rental apartment in Tokyo’s Suginami Ward allegedly by the man who lived in the apartment. The two victims were part of a ten-person group who visited the apartment after a civil court decided to evict the man after the apartment’s owner requested the court to have him forcibly removed. The 41-year-old suspect, whose name is Hiroshi Yamamoto, had been unemployed for a considerable length of time after he quit working for an IT company. Though he started collecting government assistance, the payments were stopped when local officials learned he was working part time as a delivery person. He had lived in the apartment since the fall of 2022, and eventually fell behind on his ¥55,000/month rent to the tune of almost ¥1 million. In Japan, it is difficult to evict a tenant who doesn’t want to leave, so the landlord has to file a suit and claim a “justifiable reason” for the eviction. The court in this case found in the landlord’s favor.

The ten-person group that showed up at Yamamoto’s door on the morning of the 15th included court appointed officials and representatives of a moving company that would remove Yamamoto’s belongings after he had been served with the eviction notice by a court bailiff. Somehow, Yamamoto knew they were coming and met them with what the weekly magazine Shincho described as a “black cardboard box with smoke coming out of it.” He then chased the group while wielding a kitchen knife and stabbed two of the men, one being the bailiff and the other a representative of the rental guarator company that had a contract with the tenant. It was the representative who died. After the stabbing, Yamamoto returned to the apartment and tried to set it on fire.

According to the Shincho article, in principle, the bailiff and the representative of the moving company are the only people required to carry out a court-ordered eviction. The former serves the eviction notice while the latter needs to talk to the tenant to arrange for the removal of the tenant’s belongings in order to “return the property to its original state.” However, sometimes a representative of the guarantor company comes along “to make the process smoother.”

Nevertheless, as one man who has participated in such procedures for 20 years told Shincho, there’s usually “some kind of problem” when carrying out an eviction. He himself has been threatened by a tenant with a knife. “Sometimes they’re drug addicts and other times they’re people with big debts,” said the man. “They can become quite violent.” Usually, the landlord will send multiple notices to the tenant after non-payment of rent. If no payment is made after more than 3 months, the landlord will start a civil action requesting that the tenant be evicted. A judge will usually decide the case in 6 months to a year and if the decision is in the landlord’s favor another notice is then sent to the tenant telling them when the eviction will be carried out, so the tenant knows when the bailiff will show up. If the tenant does become violent, the bailiff can call the police.

Fixed values

Posted on December 1 by catforehead

As anyone who regularly reads this blog knows, we have issues with the Japanese media’s coverage of real estate prices, since they almost exclusively cover Tokyo. For sure, Tokyo properties mean a lot in the scheme of things, but Tokyo real estate is exceptional in the sense that the city still charts growth while the rest of Japan doesn’t; or, at least, not at the exceptional rate that Tokyo does. Consequently, the huge increases in property values that Tokyo is now seeing don’t really represent Japan, something the media neglects to point out. What you get in the mainstream press when it comes to coverage of real estate is skyrocketing condo prices in Tokyo and akiya—vacant properties—everywhere else, and nothing much in between. So we were intrigued by a recent series in the Asahi Shimbun about how the government assesses property values, since they do it all over Japan. Though the articles don’t explain anything about national trends in property values, they imply that one of the reasons for the lopsided coverage mentioned above is that it’s difficult to trust any related statistics released by the government.

The series was prefaced by an article about an announcement from the municipal government of Chofu, Tokyo, that its assessments for property taxes and so-called city planning taxes were incorrect in 166 cases; specifically, for 88 properties the assessments overestimated their value while for 78 the assessments underestimated their value. The amount of refunds due for the overestimates comes to ¥80.95 million, while the additional imposition of taxes for the underestimated assessments add up to ¥52.61 million.

The mistakes mostly had to do with how land was categorized. For instance, property taxes for land categorized as residential can be reduced by five-sixths if it contains a structure of some kind. Other variables include additional structure, additions to the main structure, and demolition work, all of which would require that the land be reassessed. Apparently, Chofu has yet to determine exactly how they got it wrong, but in any case, according to the law if an assessment is found to be too low, the municipality can demand compensation no more than five years after the original assessment. But if an assessment is too big, then there is no time limit for compensating the property owner.

Obviously, land value assessment is a tricky business that’s open to a lot of subjective factors, so in its Keizai Plus section, Asahi followed up the Chofu item by looking into the broader “mystery” surrounding the land ministry’s public real estate assessments, which are carried out every year for 26,000 locations throughout the country. Two appraisers are assigned to each location, with each one making their own separate assessment, and if there are discrepancies, the ministry mediates. The “correct” valuations are then published on the ministry’s home page.

It sounds simple enough, but when Asahi checked the original valuations of the paired assessors using AI, they found that in 69 percent of the locations assessed, the two appraisals matched exactly, and in the remaining cases the difference was “within 1 percent.” The location with the highest assessment for residential land is Akasaka in Tokyo, and the assessors’ valuations have matched exactly for the last five years. The prefecture with the highest matching rate was Tokushima at 97 percent. Asahi’s initial reaction was that if the valuations are so predictable, then why do they cost so much? The ministry spends ¥4 billion a year on assessments.

Northern exposure

Posted on October 1 by catforehead

One of the topics being discussed by candidates for the Liberal Democratic Party presidency is foreigners in Japan, and an aspect of that discussion is foreigners buying property. Some years ago the issue came up with regard to security risks, such as land that was near Self-Defense Forces facilities, but now the net is being thrown wider because foreigners with money are buying up land and condominiums for investment purposes and driving up prices, especially in Tokyo where Japanese families are finding themselves priced out of the housing market.

One area that has been popular among foreigners is Niseko in Hokkaido, which is famous for its ski slopes and excellent powder conditions. According to an article that appeared last June in the Asahi Shimbun, if you go to Niseko, you will see a lot of for-sale signs and billboards in English hawking land. The Asahi reporter who went there in May says he saw many construction workers and dump trucks in the area, where there are subdivisions for vacation homes. However, many of the lots in these subdivisions remain vacant, and appear to have been vacant for some time. He found four that were recently put up for public auction due to foreclosure, but not because the owners failed to keep up their loan payments, but rather because they have not kept up with their property tax payments.

According to public records, the four plots were originally sold by a Tokyo realtor in 1988, meaning during the bubble period when everyone thought land prices in Japan would continue increasing forever. The realtor has since gone out of business. Two of the plots are in a vacation home subdivision 2 km south of the main ski area. Land registration records indicate that the subdivision was carved out of a tract of forested land in the 1980s. There is obviously still some demand for second houses, because the reporter saw construction taking place on some plots, but the two in question remain empty. One of the plots is 205 square meters and the market price is ¥3.444 million.

Two other vacant plots originally sold by the Tokyo realtor are located in a mostly forested subdivision 3 km north of the ski area. Though the plots are on prepared ground, they are still empty, and are cheaper than the plots in the south subdivision, ¥492,000 for 385 square meters.

Originally, the plots were bought by someone who lived in Sapporo between 1979 and 1983 as investments, but after the bubble ended there were few buyers, which is why development stalled and many plots remained vacant. However, starting about 20 years ago, the ski area became popular among foreigners, in particular Australians. But the reporter also found several plots that were registered to addresses in China, and still more registered to addresses in local towns but with names that were in katakana, thus indicating the owners weren’t Japanese.

A bulletin board in front of the town hall lists notifications of properties with unpaid property tax bills that includes the addresses of the delinquent owners, most of which live overseas. In almost all the cases, the reporter learned, notices of delinquent payments were sent to the addresses overseas and later returned because the notice was undeliverable for some reason. The number of unreachable owners exceeds 100.

A representative of the town’s tax division told the reporter that after a certain period of time, the town can foreclose on the land and put it up for sale. Last year, they did that for 11 plots. And it isn’t just individual plots earmarked for vacation homes. In 2022, the town foreclosed on a construction company that owned a hotel near the ski area due to unpaid property tax bills. The company is based in Tokyo, but the president’s name is, again, in katakana and the company is registered in the Cayman Islands, a famous tax haven.

It takes two

Posted on September 8 by catforehead

According to an article in the Sept. 3 edition of Asahi Shimbun, 40 percent of all recent housing loans are so-called pair loans, meaning they are taken out by married couples, with both spouses’ individual salaries taken into consideration. In the past, banks did not offer loans to married couples but rather to one or the other spouse. This policy necessarily changed when women with careers married and earned salaries comparable to their husbands’, but mainly it had to do with affordability. The cost of buying a house outstripped the ability of a single breadwinner to pay it in a comfortable manner, so banks adjusted.

But now, says Asahi, even pair loan seem insufficient to buy a new condo in Tokyo, whose prices have been increasing nonstop. The article uses as an example a couple in their mid-30s living in Meguro who want to buy a bigger place in a neighborhood that is more amenable to raising children. They have two strict criteria that made their search more difficult: they want to live within Tokyo’s 23 wards, and they want a property that will retain its value over time, which is why they insist on buying a new condominium. They had already abandoned one initial criterion—the condo should be within reasonable walking distance to a convenient train station, because all the realtors they talked to said that there are “waiting lists” for new condos with ready access to transportation.

But the couple lucked out. Last spring they entered a lottery for the chance to buy a new condo in Minato Ward and beat out five other prospective buyers. The unit in question is an 80-square-meter 4 LDK that is only 6 minutes from the nearest station. However, the price is pretty steep: ¥160 million. So in order to make the deal happen the couple sold the condominium where they were living (Asahi does not say how much they got, which would be helpful is assessing how much a used condo in pricey Meguro is going for in real terms) and took out a 40-year variable interest mortgage of ¥150 million as a couple whose combined income is ¥20 million a year.

The whole idea of a pair loan is to make it easier for a married couple to borrow money by taking into consideration their income as a household, and as indicated above, this borrowing method is slowly becoming the norm for buying a home. A survey by the company Recruit found that in 2024 pair loans accounted for 37 percent of all new mortgages in the Tokyo metropolitan area. In 2018, the rate was 27.7 percent. The use of pair loans has roughly followed the increase in prices of new properties. One real estate research lab found that, nationwide, the average price of a new condo increased by 27 percent between 2018 and 2024, while in Tokyo the increase was 56 percent over the same time period. As has been widely reported, the average price of a new condo in the 23 wards as of July was ¥135 million.

More signicantly, the Ministry of Justice says that in 2022, the average debt balance for a family of four for the first time exceeded the average family annual income, meaning that while housing prices have gone up, income has not, or, at least, not as much.

Point of entry

Posted on August 5 by catforehead

*A minpaku “mansion” in Ota Ward, Tokyo*

The perhaps not-so-surprising media dominance of the right-wing Sanseito in the recent general election is predicated on the party’s perceived prioritizing of Japanese citizens over foreigners. As others have already pointed out, this analysis is an over-simplification of certain Sanseito characteristics, the most obvious one being its motto, “Japanese people first,” which has given rise to a contrasting hashtag, #gaikokujinfirst, meaning “foreigners first,” or the idea that foreigners in Japan have privileges that Japanese don’t. This belief is based on a few loopholes that Sanseito has fixated on, in particular a means for some tourists to be able to exchange their home country drivers licenses for Japanese ones. The present administration, spooked by the popularity of Sanseito, has pledged to study whether foreigners are getting special breaks and tighten up rules accordingly.

So it will be interesting to see if the government does something with another loophole related to the private lodging (minpaku) law, which regulates short-term private accommodation transactions, like those handled by AirBnB. The law is fairly strict about how many days a year an owner can rent out their property, as well as where and how they can operate. But the government did allow for “special districts” throughout Japan where such regulations are more relaxed, and one of these places is Osaka.

According to a recent article in the weekly magazine Aera, Osaka was given this special status during the runup to the current Expo 2025, since it was believed that Osaka did not have enough hotel rooms and other short-term accommodations to handle the expected demand. Consequently, Osaka has become a veritable bastion of private lodgings, causing problems on various fronts. Prof. Yoshihisa Matsumura of Hannan University is doing field work on the subject in Japan, and told Aera that he sometimes walks around Osaka neighborhoods with an open map looking for private lodgings and is often approached by local residents who think he is looking for one of these lodgings as a customer. Or they think he is a “Chinese realtor,” because many private lodgings in Osaka are owned by Chinese, be they residents of Japan or China. The local residents are afraid that Matsumura is scouting out possible new properties to acquire for Chinese clients.

Obviously, these residents don’t like it that Chinese are buying up properties for short-term rentals, the ostensible reason being that guests who use these lodgings are loud and don’t follow local ordnances. But in truth the “trouble,” as it were, goes deeper. Most of the properties that Chinese are buying are rental apartments, which means the new owner will evict any present tenants. The Aera article cites several examples of tenants who refused to leave but were then forced out because the new owner increased their rent. After the tenant leaves, the new owner renovates the property in order to make it more appealing to travelers.

There are also more ambitious buyers, usually developers or real estate companies, who buy up entire buildings and either kick out all the tenants or tear the building down and make a new one that is completely made up of short-term private lodgings that are sold piecemeal to potential lodging landlords. In some cases, these developers and real estate companies have Chinese connections and they work directly with Chinese buyers in China who see the purchases as good investments.

A pox on your tax

Posted on April 28, 2025 by catforehead

The current income tax deduction on housing loans will expire at the end of this year, but, as in the past, it will probably be renewed in some form. The tax deduction was first implemented in 1972 and has been revised repeatedly ever since. The current deduction, revised in 2022, cut the rate from 1.0 to 0.7 percent of the balance of the loan in a given year for up to 13 years. Originally, the deduction was 1 percent of the entire price of the house for up to 3 years, and has fluctuated rather liberally over time, depending on how desperately the government wanted to use home sales as an economic stimulus measure.

That’s why the reason the deduction will likely be renewed again isn’t just that it’s become an expected feature of home ownership. On April 21, the welfare ministry announced the results of a survey of people who bought homes between 2022 and 2025. Twenty-one percent of the 8,400 respondents said that if there had been no tax deduction on housing loans they wouldn’t have purchased a home. Kyodo says that this survey will be used to decide on whether to extend the deduction after this year, with the implication that it will be. Among respondents, only 20 percent said that the housing loan tax deduction had “no influence” over their decision to buy a home.

Higher income buyers have lost something over time. Currently, anyone making more than ¥20 million a year is ineligible for the deduction, though the ceiling used to be ¥30 million. The carryover has also been decreased. If the amount of the tax deduction turns out to be more than the income tax owed the government, the excess can be applied to local taxes, but only up to ¥97,500. The maximum used to be ¥136,500.

The housing loan tax deduction has always been controversial, and not just in Japan, because it’s basically discriminatory. Why should people who can afford to buy a home get a special break on their taxes? The ostensible reason is to promote home ownership, which is generally assumed to be a good thing for society, but it ignores the situation of renters. Landlords in Japan do not get a deduction when they buy property because it only applies to people who purchase a home they will live in, but landlords undoubtedly pass the cost of all the taxes they pay on to their tenants, so landlords always have a means of handling tax issues. They don’t need a deduction. The only purpose of the deduction for homeowners is to encourage sales, which helps the real estate and construction industries, not to mention the banks that provide the housing loans.

Do you qualify?

Posted on February 3, 2025 by catforehead

Tax season is our least favorite time of the year, and probably yours, too, so we weren’t necessarily inclined to read an article about housing loan income tax deductions that appeared in the Jan. 26 Asahi Shimbun, and not just because we don’t want to be reminded of all the calculations we will have to make and the forms we still have to fill out, but also because we paid off our meager mortgage just a few years ago and so the article has nothing to say to us. But it may have something to say to others.

The article focuses on one particular qualification for a housing loan tax cut, which sounds fairly obvious. You qualify if you bought a residential property to live in and took out a loan to pay for it. The article mentions a realtor who received a phone call from someone who bought a house from them, complaining that they had been refused a tax deduction for their housing loan. As it turned out, the client, who is a salaried employee, had been transferred to another location by his company, and so he decided to rent out the house he bought through the realtor during the indefinite transfer period. The client’s whole family moved with him to his new location. After he submitted the proper form for the housing loan deduction with his tax return, he received a call from the tax office saying that he no longer qualified because he didn’t live in the house for which he took out the loan.

In principle, the deduction covers 0.7 percent of the housing loan balance for a given tax year up to 13 years, a maximum loan amount of ¥50 million, and a maximum tax deduction of ¥4.55 million. The deduction applies to both income tax and local tax, and if the income tax deduction is more than the tax that is actually paid, then the difference is applied to the local tax.

But as the tax office pointed out to the property owner in question, if the person who took out the housing loan is not living in or on the property for which they took out the loan then the deduction does not apply. A tax accountant told the Asahi that the tax office is very strict about this rule since the central government essentially forfeits ¥1 trillion a year in potential tax revenues because of the housing loan tax deduction.

In the case mentioned above, the borrower/owner should have reported rental income after deducting expenses, but apparently many people in the same situation neglect to do that. The client in this case was angry that the realtor did not inform him of this rule when he bought the property, but the realtor didn’t know that the client would be transferred so there was no reason to talk about such things. Nevertheless, there are a number of circumstances under which the housing loan tax deduction does not apply, and realtors should be clear about them. In many cases, homeowners who file for housing loan tax deductions who do not live in the homes themselves are breaking the law. The tax accountant says that in all likelihood, if the tax office finds out that someone is renting out a property that they own without reporting the rental income, the tax office will not only cite the owner for claiming a tax deduction they didn’t qualify for, but will charge a penalty on top of the taxes owed for the unclaimed rental income and the loss of the deduction.