regulations & policy

Community first

Posted on by catforehead

The inability to sell or rent out vacant houses and condominiums is not just a concern for the owners. In many places it’s something that the community as a whole worries about, especially now with all the talk about the erosion of “kizuna” (bonds) and the attendant loss of community-mindedness, which may have been over-stated in Japan, but in any case the atomization of urban life is definitely on the increase. A neighborhood in Chiba Prefecture is actually doing something about the problem in an unusually proactive way.

In a section of Chiba City’s Mihama Ward near Kaihin Makuhari Station, residents have put together a non-profit organization called Chiba Regional Renovation Research, whose job is to rent out vacant properties at less than their market value as a means of “reinforcing communication.” The idea is not simply to find tenants, but to make the neighborhood more viable as a community. A recent article in the Tokyo Shimbun explained that collective housing in the area in question was developed by the prefectural and municipal governments in the 1960s, and now the apartments are superannuated and mostly occupied by elderly people. After last year’s earthquake, even more people moved out of the area over fears of liquefaction, which affected many coastal areas Chiba along Tokyo Bay. The NPO is made up of 107 condominium associations in the area. Their research found that out of 800 units, about 300 were empty. (The vacancy rate for all of Chiba Prefecture is about 15 percent) In most cases, the owners of the units didn’t live there and/or were unable to rent them out, but in some cases, the owners of the units could not be identified or located. Of those empty units whose owners were interviewed–245 in all–30 percent said they wanted to rent or sell but couldn’t, and in the meantime they have to pay monthly management fees and repair fund contributions, not to mention property taxes. Since many are retired, this is a big burden for them.

The condo associations formed the NPO because their membership is so diluted it has become difficult to formulate disaster and anti-crime countermeasures. The purpose of the organization is to act as a bridge between owners and potential tenants. For instance, by offering units for less than market prices they hope to attract students. They also think that some units could be used by younger families as collective daycare centers or leisure facilities for seniors. At the same time, they will promote renovations in terms of both safety and comfort, working with prefectural authorities and the construction ministry.

Home Truths: property taxes

Posted on by catforehead

Our Home Truths column this month, which appears in the Japan Times today, is about property taxes, a fact of economic life that is taken for granted. As we imply in the article, most first-time home buyers don’t really take taxes into consideration when they embark on the biggest purchase of their lives, presumably because, like death and…well, taxes, it’s something you can’t avoid so there’s no reason to worry about it. And maybe it isn’t, depending on where you buy property. Outside of large cities and productive suburbs, property taxes can be minimal. What we found troubling, and the reason we decided to write about it, was the frequent looks of bewilderment we received from real estate agents when asked how much a particular property would run a buyer in terms of annual taxes. Some knew approximately, but some said they didn’t know at all and would check at the office (and then never called back because they sensed–rightly, in most cases–that we weren’t that interested in buying in the first place). This was odd in more ways than one. In the most significant way, property tax should be something a realtor knows by heart, since it has a direct bearing on the financial ability of the buyer to maintain whatever loan repayment schedule he or she will be responsible for. In a less signficant but more bizarre way, many real estate companies actually print the annual property tax levy in the ads for properties, so for their agents to profess ignorance is just downright laziness, and also indicates that none of them are ever asked such questions by potential buyers. In other words, the inevitability of property taxes has rendered them a moot concern; maybe people just prefer not knowing. Read More

Put out

Posted on by catforehead

We recently received a DVD screener of “Sayonara UR,” a video documentary by Yumiko Hayakawa. The doc chronicles the situation of a group of residents of Bldg. 73 of the Takahamadai apartment complex in Hino, Tokyo, which is run by the semi-public housing concern UR. The structure was built in 1971 and Bldg. 73 did not meet earthquake standards that were made mandatory in 1981. The company was going to carry out reinforcement work, but in 2007 it announced that the work would cost too much and everyone was asked to move out. The company would help residents relocate to other UR apartments if they needed it. They would also compensate them in part if they agreed to move out within two years of the announcement. Nevertheless, some residents refused to move, saying that they were simply being made victims of UR’s well-publicized move toward privatization. Bldg. 73 was not profitable and so UR planned to tear it down and sell the land to a developer. The quake-proofing story, according to these tenants, was merely an excuse, and not a particularly believable one since there was no inspection made by third parties, even though the tenants asked for it.

It was a classic eviction tale, and Hayakawa clearly sided with the tenants. As advocacy journalism goes, “Sayonara UR” has its good points. Throughout the doc, she refers to UR as representing “social housing,” something she believes is essential to the well-being of a well-ordered and responsible society. UR, as noted thoroughly in our blog, is semi-public, which means their obligations as a public housing provider are limited, and Hayakawa is careful about this point. She shows how UR still uses a lot of tax money in its operations, and interviews an outspoken professor who describes how UR is a money sink, more than ¥1 trillion in the red. The government has been trying to find ways of setting the company free. One of the main reasons they can’t, as evidenced by this documentary, is that people who rent UR apartments, especially those who have lived there a long time, don’t want the company to be made 100 percent private. There are many reasons for this, including the fact that UR does not follow the extortionary practices private landlords are known for, such as charging extra fees–gift money and contract renewal fees–that have no purpose. Hayakawa doesn’t address these reasons or the lack of laws that would protect tenants, but she does an excellent job of interviewing all sides of the story and giving equal weight to each. However, viewers not familiar with Japan’s housing situation may mistakenly equate social housing with low-income housing, which it is not. It’s a difference Hayakawa neglects to clarify, and because she doesn’t specify how much rent these people pay some will think they are poor, when actually they are quite middle class. In fact, given their economic status and the superannuated state of their abodes (most public apartments built in the 1970s for families are less than 60 square meters), many viewers may wonder why these holdouts aren’t jumping at the chance to move to newer, cleaner apartments that will cost proportionately about the same. She also doesn’t clarify that only ten of the 250 households asked to leave refused to do so by June of 2010, when the topic was covered by TBS. By April of the next year, the number was down to 7. Read More

Dying to get in

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Who died here?

Further on the subject of the property values of places where people died, which was started in the comments section of the previous post, there was actually a book titled “Tokyo Laundering” published last year about a fictional occupation: people who are hired by landlords or realtors to live for one month in houses or apartments where people just died. By having somebody occupy the place legally, the owner can rent or sell the property at its listed value rather than the cut-rate price that most owners are compelled to advertise for such a property since, according to law, they have to tell prospective buyers/renters that a person died there. If someone lives there for a month, they’re no longer obliged to reveal that information. It’s such a clever subterfuge, we’re surprised no one has actually put it into practice.

As far as we know, the only outfit that openly advertises such properties is UR, which lists rental apartments where people have died for something like half the normal price for up to two years. Supposedly, within their system 300 units become vacant each year because someone died. We’ve also heard of realtors soliciting doctors, people in the funeral business, and foreigners for such properties since such people usually aren’t grossed out by the idea of someone having died in the place they just moved into. There’s also a website that lists properties where “incidents” occurred, and though they detail the incident that took place (with the help of inadvertently humorous illustrations) and even show you the location on a map, you’ll need to do a bit of detective work to find out about renting or buying, since all they give as contact is the name of the realtor or owner. It’s a great site, however, for those into ghoulish walking tours.

And lastly, some insurance companies offer coverage to landlords for apartment deaths. If a tenant dies in one of their properties, they can receive up to ¥1 million, which should cover the money lost as a result of an extended vacancy or decreased rent.

Whose view?

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Most place names in Japan are derived from geographical or topographical traits, and one of the most common names in the Kanto area is Fujimi, which indicates that the place has a view of Mount Fuji. The Japanese place a lot of spiritual stock in mountains. Traditionally they were the objects of worship, and Fuji, of course, is practically a religion unto itself. It’s probably no coincidence that “fuji” itself is a homonym for a word that means “live forever.”

Nowadays, any address with the name Fujimi attached is highly valued–if, in fact, it still affords a view of the sacred mountain. Tokyo, in particular, is so built up that, according to Tokyo Shimbun, there are only three locations left in the city named Fujimi from which Mt. Fuji can still be seen from the ground. The most famous of these is in Nishi Nippori, a place called Fujimi-zaka, or Fujimi Slope. In early November and late January, photographers and tourists converge at the top of the slope to wonder at the Fuji Diamond, when the sun happens to set behind the mountain’s summit. This year, rubberneckers almost lost their chance, since the weather was cloudy for two of the three days when the diamond view is possible. As it happens, it may be the last time.

That’s because Sumitomo is building three tower condominiums that will forever block the view of Mt. Fuji from the vantage point of Fujimi-zaka. This almost happened before. Back in 1999, another developer announced a plan to build a tall condo within the neighborhood that threatened the view, and local residents formed a committee to protest construction. Naturally, the developer paid no attention, but as it turned out, the building only blocked a small portion of the foot of the mountain. The new Sumitomo project will definitely block the whole thing, so the committee has asked the mayor of Arakawa Ward to lodge a formal complaint with the developer, which reportedly was quite “annoyed” by the request owing to the fact that the buildings under construction happen to be in Okubo, all the way on the other side of the Yamanote Line. Sumitomo bought the land five years ago and says it has complied with all relevant prefectural and ward regulations in planning the housing project, and the ward in question isn’t Arakawa, it’s Shinjuku.

Where there’s smoke

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Last Sunday morning at about 7 o’clock, a fire broke out at the Rose House Higashi apartment building in the Okubo section of Shinjuku, Tokyo. More than half of the two-story structure was destroyed. Four residents died and two remain in critical condition. Of the 26 units in the building, 22 were occupied by 23 residents. That means one unit had two people, which is sort of remarkable since each apartment is only 4.5 tatami mats in size, or about 8 square meters.

Rose House is fifty years old. Each room has a cold water faucet and a gas burner. The toilets are communal. There is no bath, which is characteristic of these kind of wooden apartment buildings. Rents were between ¥51,000 and ¥53,000 a month, which is cheap for Shinjuku but quite expensive for this kind of residence. For ¥10,000 more you can probably find a six-mat apartment not far away with its own private bathroom, but as media have reported 17 of Rose House’s residents were on welfare, and most of them were “very old.” The Shinjuku welfare office told reporters that they did not “recommend” Rose House to any of the people they administer, but it’s common for welfare recipients to “live in the same building.” That’s because their incomes are extremely limited and most landlords will not rent to welfare recipients. As it happens, welfare recipients in Tokyo tend to receive a higher housing allowance than people in other cities in Japan, the maximum being ¥53,000. Rose House apparently catered to welfare cases, which makes sense. Landlords usually can’t demand that much money for such old, cramped apartments, even in Shinjuku, and public housing is usually off-limits to single people; but since welfare recipients don’t have a lot of choices the Rose House landlord could ask them to pay that much. Also, Rose House didn’t demand a guarantor. Even at less than full capacity the place makes more than a million yen a month.

So far the police have not isolated the cause of the fire. Some media initially suspected it had something to do with “old wiring,” since there was a small electrical fire in one of the apartments several months ago, but the Asahi Shimbun has reported that theory has been discounted. Though the building was situated on the edge of a parking lot, Rose House is what is called a saikenchikufuka, a structure that “can’t be rebuilt” because it was erected in the middle of block, thus making it very difficult for firemen to gain access. Nobody will be moving back in, which means the surviving residents now have to find some other hovel to accept them.

Does ownership = entitlement?

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Damages: Worse for some

There was a very interesting letter in today’s Tokyo Shimbun. A 51-year-old company executive from Kodaira, Tokyo, wrote that he recently visited his sales department in Sendai, and one of the employees told him that the residents of the condominium where he lived until the earthquake of Mar. 11 all received “charity donations,” presumably from the Red Cross, totaling ¥450 million, or ¥3 million for each of 150 households. Since the building was declared “zenkai,” or uninhabitable due to the extent of the damage, all the condo owners have had to move. Obviously, thought the executive, ¥3 million is not enough money to replace their apartments.

But what really bothered the letter writer was that he soon learned that other, presumably less deserving victims of the disaster also received donated funds. Another “acquaintance” was given ¥2.5 million. His apartment was also condemned, but it was a rental. The executive said that the person hardly needed that much money, because all he required was “maybe ¥200-300,000 to move to a new rental apartment.” Even more outrageous was the intelligence that someone who lived in a public apartment (koei, meaning that the amount of rent is pegged to the tenant’s income) also received “a lot of money” from the fund. The executive couldn’t understand why, since all that person had to do was “move to another public apartment.” In the end, the letter writer said, “I have doubts that this donated money was spent meaningfully on victims who really needed it, and a lot of people I know in Sendai feel the same way.”

Most of those people are probably home owners themselves, and the letter brings up a matter that has simmered under the surface of disaster coverage for months now: Do home owners deserve more help than other people? Obviously, they think so, but one of the basic tenets of “ownership” is that the thing owned is the owner’s responsibility. He has dominion over that thing and no one can take that away from him. This belief forms the sacred core of capitalism and free enterprise: You can do anything you want with your property, and the unavoidable corollary is that you and only you are responsible for what happens to it.

But ever since the disaster home owners in the affected areas have demanded that the authorities (including TEPCO) help them rebuild, and not just with loans, but with direct payments. In response to the Great Hanshin Earthquake, the government passed the Disaster Relief Act, which provided funds for people affected by natural disasters. Owners of homes assessed to be zenkai can receive up to ¥3 million toward rebuilding. Many homeowners say this is not enough, and there is even a plan for the government to buy up private land along the coast that has become uninhabitable due to changes in the shoreline.

The magnitude of the disaster has, however, obscured an important point. Japan is a capitalist democracy, so why should the government give any free money to home owners? By using tax money to help them, even people who don’t own homes pay to help replace lost private property. This concept violates the spirit of “ownership” and certainly constitutes what libertarians would call a moral hazard.

We don’t necessarily support this view. The lives of people in the stricken areas have been destroyed, and we believe it is a social obligation for all of us to help them get back on their feet, whether through the agency of the government or through charitable concerns like the Red Cross. However, the man who wrote the letter to the Tokyo Shimbun has his priorities twisted. Why is a home owner–who tacitly accepts the risk attendant to ownership–eligible for greater charitable assistance (on top of the money he/she will receive from the government) than is someone who rents? Because he has “lost more”? Perhaps, but loss is an unavoidable component of ownership, so why should a renter be penalized for risking less? It’s a class distinction; no more, no less.

Shift that burden

Posted on by catforehead

Professor Yosuke Hirayama of Kobe University, probably Japan’s foremost scholar on the subject of housing and social policy, was the subject of a fairly long interview in the Asahi Shimbun recently, and though everything he said has been discussed at length in this blog, his explanation of what’s wrong with Japan’s official housing policy deserves to be summarized, especially in light of the current worldwide movement to close the income gap. For sure, Hirayama’s belief that government must shift its policy away from home ownership may raise the hackles of free market advocates and libertarians since it basically takes for granted the idea that housing is such a basic need for all members of society that the authorities need to be involved. What’s notable is that his ideas are based on classic, some might say prosaic economic principles; but in any case it was government that created the problem in the first place.

In a nutshell, Hirayama says that Japan’s long-time housing policy, which is based on promoting home ownership, has hit a wall, and that the government should shift this policy to promoting rentals. He begins by citing the disaster in the Tohoku region, where home ownership is even higher than the national average and where a good portion of these homeowners are elderly people who live alone. They are already in debt, and to encourage them to build new houses is simply to push them further into debt. Instead, the government should promote the construction of more rental housing and offer subsidies to renters. He mentions that he himself lived through the Great Hanshin Earthquake of 1995, and at the time was renting. Compared to homeowners, he survived the situation without as much emotional or financial trouble, because all he had to do was move. Of course, earthquakes are unpredictable, and by themselves can not be used to argue against home ownership (though he also points out that seismologists predict a better than even chance of a major earthquake hitting a large populated area in Kanto or Tokai in the next 30 years). The point is that renting has its advantages, a notion that has no traction in Japan. Read More

The rest of the story

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What you see is not what you get

We’ve received two letters in response to our Aug. 2 Home Truths column about renewal fees, both from landlords who obviously want to relate, as Paul Harvey used to put it, the rest of the story. Both letters were sent to the Japan Times, one for the Readers in Council page and the other indirectly to us with a directive that it not be published. Moreover, the RIC letter was published anonymously, so while both of these persons hold strong opinions as to their own situations as property owners neither seems to feel that strong that they might risk exposing themselves to whatever sort of negative reaction landlords can normally expect. This is probably unavoidable. The landlord-tenant relationship is almost by definition an adversarial one; the dynamic fraught with defensiveness. Both landlords basically wanted to show the difficulties of maintaining properties for rental purposes in Japan, and in the process defended the collection of supplemental fees such as reikin (gift money), shikikin (deposits), and koshinryo (rental agreement renewal fees) as essential to their businesses. Read More

Higher ground

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Aobayama Park, overlooking Sendai

The land ministry has decided to monitor real estate transactions in the disaster-affected areas of the Tohoku region. As evacuees start moving out of temporary shelters and rebuilding their lives, many will likely seek new properties on higher ground, thus causing steep appreciation in land prices on elevations considered out of the reach of future tsunami. The ministry, along with the prefectural governments of Iwate, Miyage, and Fukushima, is afraid that real estate companies will try to corner the market on these tracts of land.

The ministry has already asked local governments to gather information about land transactions. The idea is for the local authorities to designate certain choice areas for monitoring purposes based on the Land-use Planning Law, which regulates the buying and selling of properties. Any transactions that take place within the monitored areas will have to be approved by the pertinent prefectural governor before any contracts are concluded in order to preempt deals deemed “improper” by the law. If the governor does not approve the transaction he can have it voided or ask that the terms be changed.

It’s obviously a necessary policy, but it may be difficult to carry out. Local governments are still hashing out whether or not to allow people who own certain low-lying properties to rebuild on the same land. Until they decide, those families are in limbo. Meanwhile, families who have already decided to move to higher ground may be in the process of looking for land and will thus get a jump on everyone else. The competition could end up being fierce, so it will be difficult to judge what constitutes an “improper” deal in some cases if the buyer and the agent come to an agreement. Also, if the local government decides that certain plots of land on lower elevations should be left clear, they will probably have to compensate the owners, something that could take time. And until those families receive their compensation they won’t be able to move. This will be particularly difficult for fishermen and other people in the seafood business, who want to live as close to the sea as possible.

According to the Tokyo Shimbun smaller, more isolated coastal communities aren’t waiting for the government. Some have already started rebuilding. Since tsunamis have been a fact of life in those villages for many centuries, a kind of lore has developed that instructs the villagers where it is safe to build and where it isn’t. After a tsunami, everybody moves to higher ground, and then over the course of decades they slowly work their way closer to the sea, since they’re all fishermen, until the next tsunami hits. It’s an inevitable, tragic cycle.