Last week the media reported that the Ministry of Land, Infrastructure, Transport and Tourism was devising a plan to limit the number of abandoned houses and apartments in Japan to no more than 4 million by fiscal 2025. As of 2013, the year the results of the last ministry 5-year survey were released, the number of vacant homes in Japan was estimated to be 8.19 million, about 40 percent of which–3.18 million–were not on sale or for rent. At the present rate, the number of abandoned abodes would rise to 5 million by 2025, so the ministry has decided to put into effect measures to bring down that number. They will announce these measures in March.
According to reports, the plan would involve “putting some abandoned houses and apartments back on the market and removing others,” as well as “offering such houses and apartments to low-income earners and families with children.” In addition, the government would also promote “the replacement of aging condominiums.” Any of these measures would require a much larger existing home market, which was worth about ¥4 trillion in 2013. The ministry thinks it can boost it to ¥8 trillion by 2025 and increase the remodeling and renewal market from ¥7 to ¥12 trillion. Since there would be no attendant increase in the population, the new home market would probably have to decrease in order for these targets to make sense; that and salaries would have to see a boost.
Since new housing starts has always been a chief economic motivator in Japan, it’s difficult to imagine that the government would do anything to discourage new home construction, and as long as it’s a priority it will be difficult to reduce the vacant home problem. For one thing, only new home buyers get tax breaks. More to the point, while the problem of abandoned single-family homes can be addressed in a relatively direct fashion–either fix them up to make them sellable or tear them down–the problem of abandoned units of collective housing is not so simple. For one thing, in order for a building to be rebuilt or “replaced,” four-fifths of the owners of the building’s units must approve, and that’s a hard portion to reach, especially given the fact that a lot of condo owners do not live in their units but rather rent them out. According to Yomiuri Shimbun, the government is thinking of changing the law so that absentee owners of condo units can be ignored if for whatever reason they do not participate in the vote for rebuilding. Read More
The landscaping took more than two weeks. It rained off and on, thus making work a bit difficult. We were surprised at how much equipment was needed to do what we had assumed was a fairly simply job, and wondered how they could charge so little when they were using backhoes, steam shovels, and cranes installed on the beds of large trucks. One of the reasons we didn’t order any concrete work was because we didn’t think it was worth the expense, the reason being that you had to hire an outside company with a cement mixer regardless of how much cement you were going to pour, but in any case on a few days there was quite a bit of equipment on the property.
The first order of business was moving the huge mound of dirt displaced by the septic tank. An older man did that and it wasn’t until the second day or so that we realized he was the father of the huge guy in charge of the project. It turned out to be a fairly tedious task. Since carting the dirt away would have cost us more money we asked if he could distribute it evenly along the akamichi–the strip of city-owned dirt road that bordered the southeast side of our property. We didn’t bother asking for permission from the city since it was obvious no public vehicle was ever going to use it. The old guy did as we asked for no extra fee, though to us it looked like extra work, since after depositing the dirt on the road he had to spread it around. In the end he did quite a good job of making it look inconspicuous–except that at the far end of the dirt road, just after it reached past the end of our property, there was a noticeable dip. Read More
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
The central government is supposedly working on new measures to deal with the ballooning vacant home problem, and it’s no secret they would prefer local governments handle the matter, even though most local governments don’t have any extra money to throw at it. Recent media reports, however, indicate that Maebashi, the capital of Gunma Prefecture, is working on a very ambitious program for not only addressing the vacant home problem, but increasing the city population at the same time.
According to a 2013 survey, the vacancy rate in Maebashi is 15.9 percent, which is higher than the national average of 13.5 percent. Officials decided they had to do something about it and boldly earmarked a ¥200 million budget program. The idea is that the owner or purchaser of a vacated property receives subsidies for renovating an existing structure. Under such circumstances, the owner would receive either ¥1 million from the city or one-third of the cost of renovation, whichever is higher.
Other local governments have similar programs, but what makes Maebashi’s different is the “special cases” that offer even more money. For instance, the city will pay a resident of Maebashi ¥200,000 toward the renovation of a vacant home if it is within one kilometer of the person’s parents’ home, thus encouraging the children of elderly or soon-to-be-elderly city residents to be in close proximity so as to be able to take care of them. In the same spirit, ¥200,000 extra will also be given to people who renovate a vacant property into a two-generation abode as well as to extended families who tear down a vacant house and replace it with a new two-generation home. Read More
Last 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
Two 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
Here is our latest Home Truths column, about public housing in Japan and, more specifically, Tokyo. One point inadvertently removed during the editing process is that Tokyo’s public housing system is called toei jutaku. Koei jutaku is a general term for all public housing, anywhere. Kuei jutaku is public housing facilities run by an individual city ward (ku), etc.