Out of the city

Suburban street in Sakae

We’ve written in the past about how local governments come up with schemes to repopulate their areas, often by dangling cash incentives in front of families or couples who plan to have children. The coronavirus crisis has reinvigorated these efforts since more people are now working from home. Prior to the mid-90s, the pattern of home ownership was that breadwinners who worked in large cities but wanted their own home would buy one in the suburbs and commute, because they often couldn’t afford city prices. There was also the idea that it was better to raise a family in the suburbs. And because employers paid for transportation, they put up with ever more punishing commutes. However, some years after the bubble burst and the so-called ice age of stalled employment possibilities set in, younger people with no real certainty of promotion within their companies and less likelihood of settling down decided that they would live near their place of work, regardless of what it cost, because they didn’t want to spend two hours-plus on the train every day. Maybe their fathers did that and they decided, no way am I going to do that. So they live in cramped, expensive rental apartments in the heart of the city, even if they didn’t like the city.

So the increased ingress of young people to places like Tokyo is not entirely due to decisions based on desire. But now, if your employer says you can work from home there’s no reason to live “near the office,” and, according to news reports, more people are leaving the city because they don’t like living there. Some local governments are already trying to exploit that trend. Sakae, a town in northern Chiba Prefecture just west of Narita, is now offering families ¥50,000 if they move to their area. The catch is that the family has to prove that one or more of the members is teleworking, a condition we find a bit puzzling—if the purpose of the money is to lure families, then why limit it to only teleworking people? Also, a one time payment of ¥50,000 doesn’t sound like much of a mind-changer, especially since the family has to pledge they will remain in Sakae for at least three years. Read More

Slipping away

That first step is a doozy: First world elderly problems.

Here’s a fairly common retirement strategy: The kids are gone and have families of their own, so the house you bought so long ago and which is likely paid for by now becomes too big, so you sell it and use the money to buy a condo somewhere in or near an urban center where public transportation and retail resources are easy to access. However, a recent feature in the weekly magazine Shukan Gendai warned people who are thinking of doing this to think twice. It may not be as easy as you think, and, in fact, it could end up being a disaster.

The number of people in Japan over the age of 65 recently exceeded 35 million, an expanding demographic that has become a target for real estate agents who are selling used or new condos, which tend to retain their value more readily than single-family homes. As it stands, many of these new retirees probably live in single-family homes in the suburbs of large cities to which the heads-of-household used to commute. These houses are likely two stories, a structural feature that becomes more of an inconvenience the older you get, and they are also probably far from public transportation hubs, meaning the people who live in them require a car to get around. Realtors use such reasonings to convince people to sell their homes and buy condos, and it makes sense, but not as much sense as it used to. First of all, there are just too many single family houses on the market and not enough people who want to buy them, and that disadvantageous ratio will only get worse as the population greys further.

Gendai also brings up the magic amount of ¥20 million, which is what a retired couple should have in savings to supplement their pensions. Actually, ¥20 million is probably not enough unless the couple is able to invest in some kind of financial instrument that can guarantee a small income, but most people still have their savings in time deposits, which generate almost no income, so the thinking here is that the couple lives off their pensions and doesn’t touch their savings since they may need it for emergencies. It’s a precarious way to live. Read More

Alone again, naturally

Public housing complex run by Saitama Prefecture

Low income public housing is available in Japan through different levels of local government, either prefectural or municipal, though some larger cities also have public housing run by wards (ku). In almost every situation, however, the applicant, traditionally, has to have a guarantor, ostensibly as a backup in case the tenant is unable to pay their rent. Obviously, because public housing is only available for people of limited or no income, coming up with a guarantor could pose a problem, since it’s entirely likely that the applicant does not have anyone, meaning relatives, they can lean on for such support. In Japan, welfare authorities do not extend public assistance to applicants without first making sure that the applicant cannot tap a close relative for such assistance. It’s one of the uses of the koseki (family registration) system. Once it is understood that the applicant has no relation they can turn to, then welfare officials grant assistance. Of course, this isn’t a universal requirement—as with most bureaucratic processes, it’s up to the individual official—but it’s enough of a protocol to make applying for assistance difficult for many, and when it comes to housing, guarantors are thus required. Usually, officials insist on relatives, since they are more likely to honor the contract.

Now, apparently, some local governments are facing up to reality. An article in the Jan. 20 Asahi Shimbun reports that an increasing number of local governments are eliminating the guarantor requirement for public housing. Asahi Shimbun apparently carried out its own survey and found that 13 major cities in eight prefectures have waived the requirement, and the newspaper predicts that many more will follow.

According to the land ministry, in 2018 1,674 local governments provided public housing, and of these 366 reported cases where applicants were rejected because they could not provide guarantors. This problem is becoming more acute with the aging society, since single elderly people without means are less likely to have living relatives who can vouch for them. Consequently, the land ministry itself some years ago started sending out notifications to local governments to remove guarantor requirements. In the end, of course, it is the local government’s decision, but since the central government subsidizes welfare assistance, many local governments have taken the notification as a kind of directive. Read More

Kill Your (Vacation) Landlord

Judging from the amount of coverage it’s received from the domestic and foreign press, Airbnb’s decision to remove 80 percent of the properties from its Japanese listings is a big deal. That wouldn’t be surprising except that previously the Japanese press, at least, didn’t seem overly interested in the house-share service. What makes it news is mainly timing. On June 15, the new Minpaku Law, which regulates the short-time rental of private property, goes into effect, right before the vacation and tourist season starts. Apparently, Airbnb, nervous about a government crackdown, decided not to take any chances and dropped listings of properties that couldn’t prove they had already received permission to operate under the new law. That means people who had made reservations at these properties in the past are out of luck unless their owners can somehow get a license to operate by the time the visitor is scheduled to occupy the room or home. Some people are blaming Airbnb itself for, presumably, not being prepared for this sort of outcome, which has been apparent at least since the beginning of the year. Whether the visitors who made reservations have gotten the message isn’t clear, but it’s likely that, come next month when they show up in Japan after having spent money on air fare and other vacation-related expenses, they may find themselves locked out of the place they thought they would be staying at. One can imagine scores of foreigners wandering the streets of Tokyo and sleeping under bridges. Thank God it’s a safe country.

Seriously, though, the Minpaku Law, regardless of how poorly it was conceived and written, was inevitable, and its purport with regard to Airbnb is hardly limited to Japan. What makes it momentous, and, in the long run, perhaps prescient, is that it adds a layer of national intent to locally enacted rules that weren’t being enforced very strongly before. In other words, Airbnb didn’t take local regulations at face value until the central government said they supported them through the law. Ostensibly, the reason for the stricter definitions is public order–protecting communities where property owners rent out rooms to strangers. Less obviously, the Minpaku Law supports the powerful hotel and innkeepers industry, which has been calling for the banning of peer-to-peer short-term rentals. And even less apparently, but no less potently, the law favors another powerful lobby, the real estate industry, which can use the law to corner whatever market is left of short-term vacation rentals, since many of the rules call for oversight by corporate entities, or, at least, entities that act like corporations.

The Minpaku Law essentially covers two types of properties. The first type is a property that has applied for and received the proper permits, meaning they comply with the hotel law. From the outside, they may look like a regular private residence, but inside they adhere to fire regulations and there is someone who manages the property on site. Minshuku, capsule hotels, and guest houses fall into this category. The second type are properties that heretofore fell into the so-called gray zone, rooms that did not comply to the hotel law but weren’t really breaking any laws–until now. Though fire laws and other related safety regulations will presumably be more strictly enforced for these properties, the main difficulty will be stricter enforcement of zoning laws, which are locally enacted. The main blanket, national rule is the one that says minpaku can only rent out rooms for a maximum of 180 days out of the year. Also, if the property is in a condominium, the owners association must be apprised of the existence of a minpaku and approve of it in writing, which may end up being the most difficult condition to satisfy, even when localities don’t prohibit minpaku from residential zones. Read More

Pity the landlord

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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

Condomanic-depressive

DSCF2154Last 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