Three’s a crowd


A model Hebel House “nisetai jutaku” by Asahi Kasei

In the Japanese government’s neverending quest to realign the economy through tax incentives, a new proposal is about to go into effect with little fanfare. On the surface, this scheme seems both harmless and inconsequential. Starting in April, families will receive tax breaks when they remodel their homes to accommodate “three generations,” meaning grandparents, parents, and children. In order to qualify for the deduction, the renovation has to incorporate a doubling of household functions–at least one additional bathtub, toilet, kitchen, and foyer. The amount of the deduction would be equal to 10 percent of the total cost of the renovation up to a maximum of ¥250,000, which means if the total cost of the work is ¥2.5 million you get a ¥250,000 deduction, and if the work costs more you still get a deduction of only ¥250,000. Still, that’s quit a bit since this amount is subtracted from the total tax owed to the government. Moreover, if you take out a loan for the renovation, you get another tax cut for that. In addition, there’s talk about a subsidy system, much in the same vein as the subsidy system for home improvements that incorporate barrier-free functions and energy conservation measures.

What’s interesting about this scheme is that it doesn’t follow the usual Liberal Democratic Party thinking when it comes to consumer-oriented tax breaks, especially those involving homes. Usually, the purpose of such schemes is to prop up the housing market or the construction industry, but according to the Asahi Shimbun, a representative of the Housing Renovation Promoting Council said that while the council “welcomes” the tax cut and hopes it will stimulate sales, it had nothing to do with it and, in fact, didn’t know anything about it until the media reported it.

The government, specifically the cabinet office, which is handling the wording and implementation of the directive, says that the purpose of the tax break is to “reduce social welfare.” By encouraging extended families to live together the government hopes to relieve some of the burden on social welfare functions related to nursing care for the elderly and daycare for preschool children, two issues that require immediate attention. Read More

“Semi” isn’t in it

The construction company in Shiroi, Chiba Prefecture at the center of the Amari scandal

The construction company in Shiroi, Chiba Prefecture at the center of the Amari scandal

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

More Than Enough

Pamphlet from local government explaining how property is assessed

Pamphlet from local government explaining how property is assessed

We’ve written about Japanese property taxes a few times and in our JT column we once mentioned that the system for assessing property values and calculating the amount owed is complicated. Consequently, local governments, who do all this work based on laws implemented at the national level, sometimes make mistakes.

Apparently, the problem is even more widespread than we thought. According to a survey conducted by the Ministry of Internal Affairs, between 2009 and 2011, 97 percent of local governments reported at least one case of overcharging for property taxes, though, of course, that would indicate there are probably many more cases. A recent issue of the tabloid-style weekly Friday interviewed an official from a support network for “asset preservation” who pointed out that property taxes are very different from income taxes in that they are completely determined by the authorities. With income taxes, at least the taxpayer can see how his taxes are calculated since he has the documents with all the pertinent information. But property taxes are determined by the local tax office and the property owner simply receives a bill every year saying how much he owes without any explanation of how the bill was calculated, and unless the taxpayer has knowledge about the property tax laws and how they may apply to his particular circumstances, he won’t know whether or not the amount charged might be wrong.

The extent of the problem was illustrated in a feature in the Oct. 5 Asahi Shimbun, which cited a number of recent high-profile cases. Last May, the owners of apartments in a complex in Isehara, Kanagawa Prefecture, found out that they have been paying too much property tax for their units since the complex was built in 1972 by the then national housing corporation. Condominium values are assessed according to floor area, and almost all of the 600 units in the complex are about 63 square meters, but they also have verandas. The city tax office was including the verandas, which are about 8 square meters, into the assessment, but verandas are considered kyoyo, or common property, meaning they don’t belong to individual owners, but rather to all the owners, just like corridors and building foyers. The assessment for common property in a condo is divided up among all the owners but taxed at a much lower rate than property that is owned individually. Read More

Sub Standard

CIMG3720Last year we wrote a Home Truths column about real estate schemes being promoted to property owners whose legacies would be subjected to higher inheritance taxes under new government rules. Since the government also is in thrall to the construction industry, it offers tax cuts and deductions to people who build on their property or improve it. The focus of our report was on rental apartment buildings that property owners could have built by companies that would then manage them for the owners, thus killing two birds with one loan: greatly reducing the inheritance tax burden for the owners’ children, and bringing in income from the property itself.

However, according to a special report that NHK aired a few months ago, these schemes have turned out to be a great deal of trouble for property owners. Typically, a real estate company gets a landowner to build an apartment building on his piece of land and helps the landowner secure a loan. The company then guarantees a certain amount of “rent” to the landowner for the next thirty years and subleases the apartments. The company does all the work: solicting tenants, maintaining the building, collecting rents, etc. The owner simply pays for the structure and sits back and collects money. Or, at least, that’s how the scheme is sold.

The NHK program profiled an elderly farm couple living in Gunma Prefecture. Though both are in their 70s, they continue to work the land, but don’t have the energy to work all of their land any more. However, if they let part of it go fallow, the property taxes for that portion will go up. And then there was the inheritance taxes to think about when they died. Ten years ago they were approached by a real estate company who had a plan that would solve all their problems and set them up with a monthly income for the rest of their lives. All they had to do was take out a ¥100 million loan to build an apartment building on the unused portion of their land. They took the offer. Read More

Year zero (1)

CIMG3311Two weeks ago we received a phone call from N, the salesman at A-1 whom we worked with when we built our house. There was a young couple who were thinking of asking A-1 to build a house for them, but they hadn’t yet secured a piece of land. Apparently, their desires are similar to what ours were: an area that had a bit more nature than your average subdivision. They currently lived in Matsudo, which is about 45 minutes west of us.

The request was a surprise. A-1 doesn’t advertise, since advertising adds to their overhead and thus to the cost of their products. They don’t build model homes for the same reason. When a potential customer wants to get an idea firsthand of what their homes are like, they ask past, presumably satisfied customers if they can bring the potential customers in for an inspection. We did it ourselves when we started looking for homes and read about A-1’s philosophy and design concepts, and were impressed, much more so than with any manufacturer’s model home display. In A-1’s case, you get to see how the owner is actually living in the house designed for them.

However, we thought our home may have been too individualistic for this kind of tour. When N called we had just received the property tax bill for the house and land. Since we moved in after January 1, 2014, we didn’t have to worry about a tax bill for the house until this calendar year, and last summer, when a city official came to assess our property, he almost laughed, implying that what we had wasn’t really worth that much. The tax bill seemed to bear out that implication. The estimate for the house came to less than ¥50,000. Of course, that wasn’t based on an assessment of the market value of the house, but nonetheless, even if you take into account the special deduction that reduces the amount due on a building for tax purposes to one-sixth its assessed value, the assessment was much less than what we paid for it a year ago. We’re not sure what that means, but we do understand that our house is unusual and, perhaps, not the kind of thing that would attract the average buyer: the kitchen and bath are on the second floor, the bedroom on the first; few doors and walls. It was designed to be inexpensive and to satisfy our peculiar needs, so it wasn’t exactly marketable, especially when you compare it to the vast majority of Japanese homes, which, we assume, reflect market demand. We had to assume that N was bringing the couple here because of the environment–the surrounding woods and such–which would give them an idea of what A-1 could accomplish in such a place. Read More

Too much sharing

A share house in Adachi Ward, Tokyo

A share house in Adachi Ward, Tokyo

The Western, or, at least, American, idea of communal living has never caught on in Japan. It’s common for college students in the U.S. to rent a house together and share living expenses, and many continue this sort of living arrangement until they get married or make enough money to live alone. In Japan, it’s more common for college students who live away from home to rent small rooms if they don’t live in dormitories, but in any case, out of school they tend to live with their parents until they marry or may continue renting small apartments by themselves. The concept of small-scale shared abodes is rare, not so much because it’s not popular but because the housing market has never been accepting of such a situation. Landlords tend to be uncomfortable with multiple renters.

But for at least a decade now, something called “share houses” have become more prominent in Tokyo and other major cities. In most cases, they are commercial enterprises, houses built and maintained by companies for the express purpose of making money, and in that regard there’s very little difference between them and traditional Japanese apartments where individual units share toilet and kitchen facilities. What you usually get is a number of bedrooms, a communal living space that includes a kitchen, a communal shower, and a toilet or two. The tenants are coed and may or may not interact with one another. Of course, there has also been an increase in the number of conventional houses renovated so as to accommodate multiple individuals and which are closer to the American “roommate” style living situation, but share houses are more common.

But not common enough. A story that Tokyo Shimbun has been following since last fall shows that the authorities still don’t know what to do about share houses in terms of legal administration. An article that appeared in the paper in January described an anonymous, 41-year-old single woman and her daughter who started living in a share house in Kunitachi, Tokyo, in the spring of 2013. The woman makes a living as a freelance illustrator, but her income is not stable, so she applied for child allowances from the Kunitachi city office and received two payments, the jido fuyo teate, which is provided by the central government, and the jido ikusei teate, which is provided by Tokyo Prefecture. Combined, these two allowances, which in principle go to the children of single parents, amounted to about ¥40,000 a month. The money was approved by Kunitachi, which administers both allowances. Read More

Passive Houses: A conversation with Kevin Meyerson

While doing research for our November 2014 Home Truths column in the Japan Times, we talked to Kevin Meyerson, who has lived in Japan for 25 years and recently sold his web design business in Tokyo and moved to Karuizawa in Nagano Prefecture, where he built a passive house. Our conversation about his new home lasted more than an hour, and, obviously, only a small part could be used in the article. Here’s a bit more.

-How did you find out about passive houses?

We bought land in Karuizawa in 2010 and I was going to commute to Tokyo. I wanted to build an environmentally friendly house. My company had gotten ISO 14001 certifications several years before and I became more aware of energy efficiency and environmental issues concerning the use of energy, so I wanted to build an energy efficient house and looked at Japanese smart houses. There’s a new Japanese standard being considered for 2020 and I looked into those houses, and then I found out about LEED in the U.S., which is similar to CASBEE here in Japan, and I talked to the LEED architect for a while and found out through him about passive houses and that there was an architect who just brought the standard to Japan. She built the first one in Kamakura in 2009. There’s about ten now in Japan and a bunch more under construction. It’s going really fast, actually.

The LEED architect’s comment sort of blew me away with regard to passive houses. “I could probably build you a house that could be heated by a single candle, but why would you want to do that?” But my thinking was, if you can do that why wouldn’t you? So I contacted the architect who brought the passive house standard to Japan and she was quite busy but we were in a rush, and about nine months later her schedule became open and she decided to take on the project.

-Is LEED a company?

No, it’s a standard in the U.S. In Japan there’s a similar kind of system, though it’s not really a standard. It’s a checklist: Do you have solar panels on your house? Do you eat organic? There’s a whole bunch of stuff indirectly related to environmentally sound living. It’s been adopted by some architects who want to make environmentally friendly structures.

-Is it like LOHAS?

It’s a bit more formal than that. The passive house is a very simple standard in that it’s extremely focused on energy consumption on a per-square-meter-of-floor-space basis. If you have a square meter of floor space in your house you can only use 120 kilowatt-hours of energy per year. There are a couple of other standards besides overall energy consumption, but it’s focused on reducing the amount of energy you use per square meter while maintaining a comfortable living environment. The LEED standard, like CASBEE in Japan, is broader. It’s not just about energy consumption. It’s about a whole bunch of things. Some people think that’s a better way to do it, but if you build a house that’s LEED-certified it still can consume a lot of energy, so some people have been criticizing LEED and CASBEE as being a means of looking environmentally friendly without actually being environmentally friendly.

-When you first decided to build a passive house, did you have a model you looked at?

I looked up a bunch of stuff on the net and found that the passive house standard is quite common in Europe. And it’s becoming more common in the U.S. as well. And in all the cases the comments of people who lived in passive houses was that they never knew how comfortable a house could be, or now that they live in one they couldn’t live anywhere else. Read More