Too much of not enough

Posted on by catforehead

One of the prime purposes of this blog is to explain the paradox of Japan’s housing situation. The country’s residential real estate market is one of the liveliest in the world, and yet most homeowners can’t count on their properties being net assets in the long run. And then there’s those 8.5 million empty residences, which, despite the occasional media story about some foreigner swooping in and turning a derelict kominka into a dream home, will likely remain empty forever without a concerted effort on the part of the central and local goverments to either find a way to make them desirable or get rid of them. 

A recent story that appeared on the financial magazine Toyo Keizai‘s web site reinforces this paradox. The writer, a real estate consultant named Yujin Oki, claims that there is a critical housing shortage in Japan. In a long article dense with statistics he doesn’t even mention the akiya (empty house) situation, probably because his focus is still on urban housing, and most abandoned homes are in the countryside or outlying suburbs (though there are also quite a few in Tokyo). The part of the paradox he does mention is the demographic angle: Japan’s population is declining, which means the available housing stock should be increasing, but it isn’t. He then endeavors to explain why. 

Since 2013, he writes, the price of condominiums in Japan has increased by 70 percent. The main reason is Abenomics, or, more precisely, the monetary easing policy that was a core component of the late Shinzo Abe’s master plan to bring the Japanese economy back to its former glory. The Bank of Japan would print more money and give it to commercial banks at low interest rates. Most of this cash was loaned out to buy land, since it is the most secure investment, and that drove prices up. This always happens with monetary easing. 

However, the situation was complicated by extraneous factors, namely the sudden increase in the price of construction materials and the more gradual decrease in the construction labor pool. Residential developers who borrowed all this available cash were faced with rising construction costs and delays in construction time due to lack of workers, thus driving the price of newly built homes higher. On top of the boost in land prices, new housing was more expensive, especially in places like Tokyo and its surrounding suburbs. Though he doesn’t specify exactly when, Oki says that the number of new condos in the Tokyo metropolitan area going on sale was once 90,000 a year, but this year the number has dropped to only 30,000. That’s why there is a shortage.

As we’ve often pointed out in this blog, almost all the writing about real estate trends focuses on Tokyo, and this article is no exception. Oki does make a point of saying that the shortage he’s talking about is in “places where people want to live,” but doesn’t interrogate that qualification any further. For instance, we can say for a fact that the suburb where we live, an hour from Nihonbashi by train, has seen a lot of new building in the last five years and many young families moving in, but this kind of growth seems to play no part in Oki’s calculations. New homes still seem to be affordable and plentiful for people with average incomes in our neck of the woods.

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When in Tokyo

Posted on by catforehead

The most perplexing part of writing about housing in Japan is the mass media’s fixation on Tokyo. As we’ve said in this blog many times before, Tokyo is distinct from the rest of Japan when it comes to real estate, and while trends in the capital can often be extrapolated to cover Japan as a whole, many specific aspects don’t apply, the most obvious one being that people who own or are looking to buy property in Tokyo can expect at least some return on their investment, if not always an actual profit; whereas those who live in the rest of Japan, not counting certain regional urban centers, cannot. Even the akiya (vacant housing) probem is different in Tokyo. There are akiya there—quite a few, in fact—but they have not been completely abandoned, which is often the case in the suburbs and the countryside. Sometimes their owners are just waiting for the right opportunity to sell and sometimes there are financial obstacles involved, such as a failure to pay property taxes or inheritance issues. But the land will always be worth something, and that isn’t necessarily true elsewhere.

Consequently, the big real estate news in recent months has been the skyrocketing value of Tokyo real estate, in particular, that of new condominiums. The average price of a condominium in the 23 wards has now breached the ¥100 million mark, thanks mainly to the fact that brand new condos at the high end of the price spectrum sell out almost immediately. According to the land ministry, if the average price index were set at 100 in 2010 for condos throughout Tokyo prefecture, it would be 190.1 as of April of this year. In contrast, new house prices in Tokyo would only be 125.6 as of April 2023. The main accelerant is the rash of ultra-luxury apartments that have gone on sale in the central wards. The average price of a condo in the newly opened 65-story Azubadai Hills is ¥2 billion, with the top price reaching ¥20 billion. And they’ve all been sold. According to one real estate research company, in July, 1,542 newly built condos went on sale in the 23 wards. The average price was ¥134 million, and only 20 percent of them could be had for less than ¥70 million. Moreover, 93 percent of the units priced above ¥100 million have been sold, but that’s true of only 64 percent of the units priced between ¥80 and ¥100 million. 

Tokyo real estate values have always been supported by people of means, but it should be noted that the average income nationwide has not increased at all in the last 20 years. In fact, it’s now going down. The tax agency reported that the average income was ¥4.61 million in 2020. The following year it dropped to ¥4.43 million. This means the real estate gap in Tokyo is getting wider all the time, and pretty soon only very wealthy people will be able to live in the center of the city. 

This intelligence is certainly newsworthy, but the amount of obsessive detail that has gone into the story in the mass media has precluded what such economic shifts mean for the rest of us who don’t live in Tokyo and don’t make even the average income cited. There is very little. One example of this kind of reporting is a Yahoo! News special report posted Nov. 4 about the Tokyo condo boom and how hard it has been on two-income households that make less than ¥15 million a year. It is not a schadenfreude-fueled piece, but rather a serious study of how the condo boom has adversely affected the fortunes of those who get by at the lower end of the upper middle class. 

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Stranded

Posted on by catforehead

Here is a link to our November column in the FCCJ’s Number 1 Shimbun, which is about how people without cars are finding it more and more difficult to access transportation options in Japan.

Price is right, for the moment

Posted on by catforehead

The news that land prices throughout Japan have risen 0.3 percent over last year’s prices was covered extensively by the media last month. Though 0.3 might sound negligible, it’s the first time in 30 years that the change was in the positive direction. Of course, land values in the three major metropolises have always gone up in a net fashion to a certain extent, but prices in what are called “regional areas,” meaning the countryside and smaller urban metropolises far from Tokyo, have either gone down or remained stagnant. The big news is that this increase has happened two years in a row, thus proving it isn’t just a fluke. According to the Asahi Shimbun, four regional capitals led the surge—Sapporo, Sendai, Hiroshima, and Fukuoka. During the pandemic these cities saw land price increases of between 4 and 6 percent, but last year the change was plus 8.1 percent. As it happens, rural land continued to lose value during the pandemic, but on average last year it leveled off: prices in 27 of 38 prefectures surveyed went down as a whole, but the prices in the capitals of 20 of these prefectures either increased or remained the same, further proof that land value may finally be turning the corner, so to speak. 

What this means, according to Asahi, is that people are moving into these regional cities in substantial numbers, thus boosting hiring and education, which in turn spurs redevelopment. So far the most publicized examples of this trend have been the introduction of semiconductor factories into areas where there was previoulsy little industrial development, namely Chitose in Hokkaido and Kikuyo in Kumamoto. In the former, the company Rapidus is building a factory that will open in 2027, employing about 1,000 people. Local realtors told Asahi that individuals and businesses are snatching up property near Chitose Station, the main train hub in the area, which is about 40 minutes from Sapporo. Some realtors claim that there is no more vacant land to be had around Chitose Station, and what is available slightly farther from the station is “very expensive.” By the same token, TSMC, the Taiwan semiconductor maker, plans a factory in Kikuyo, and the news has caused land prices in the area to skyrocket. One reason for the unusual increase is that a lot of people who own land in the area are not selling at the moment, but waiting for land values to increase even more before they put their properties on the market. 

Another reason for regional increases is that retired people are selling their homes and moving into apartments and condominiums in regional cities, thus boosting property values in those cities. One developer told Asahi that in Yamagata City a new 70-unit condominium still under construction is almost sold out and cites the availability of services in the area as the main appeal: a ten-minute walk to Yamagata Station, and within a 5-minute walk 3 hospitals, a full range of public schools and a retail district. Even with prices going up, a unit in the new condo is very affordable, 3LDK for only ¥35 million, including tax. One 88-year-old woman told Asahi that she moved to an apartment in the area after selling her house and since then her life “has become easier because I don’t have to shovel snow.” Asahi notes that land prices in Yamagata Prefecture are still dropping, but prices in Yamagata City have increased for 9 years in a row. 

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Capital gains

Posted on by catforehead

As recently as a decade ago there was fairly active discussion in the Japanese government about moving certain central government functions out of Tokyo. The reasons were varied, but it mostly came down to their being too much power concentrated in the capital, be it administrative, economic, or cultural. Besides the most urgent issue of what this concentration means if a major disaster strikes Tokyo, there are the demographic considerations. As the city remains affordable to most workers and the center of government and commerce, the rest of the country is drained of manpower, resources, and capital, since young people still move to Tokyo and its suburbs in large numbers. On the most basic level, the job of moving millions of people twice a day to-and-from their jobs becomes an undertaking of enormous precision, and while Tokyo has managed to do it with miraculous agility, the cost to the country in terms of both money and individual well-being has never been properly gauged. As the pandemic recently proved, it seems most people would prefer working either at home or much closer to home. At the very least, twice daily 90-minute-plus-long commutes on crowded trains take their toll, and the main reason is that they have to work in Tokyo but prefer living in a place where they can own a home without risking their savings and raising a family in a comfortable environment. 

Nevertheless, the idea of moving government functions out of Tokyo as a means of encouraging decentralization has never received anything more than lip service. Some years ago a tourist-related government office was removed to Kanazawa or thereabouts, and there was talk about transferring culture-related bureaus to Kyoto, but Tokyo remains the overwhelming center of the Japanese universe. 

With this in mind, it’s interesting to observe how South Korea has addressed its own decentralization problem. Seoul is also a kind of black hole that sucks resources and people from other areas of the country, attracted by the concentration of corporate, administrative, and educational functions. But the government has actually tried to do something about it, and a recent interview in the Asahi Shimbun with the mayor of Sejong, which is located in the middle of the country, points up the differences in approach between Korea and Japan. In 2012, the central government of Korea designated Sejong, then just a patch of dirt about one hour south of Seoul, as an autonomous district and the future administrative capital of South Korea. Now, some 23 government entities have permanently moved their operations there, which is more than the number that remains in Seoul. In the end, the only ministries that will not move are those involved in foreign affairs and national security. They even plan to build a second presidential office and second parliament building in Sejong. 

The current mayor, Choi Min-ho of the People Power Party, who was elected last year, has been involved in the project since its beginning. Choi is an alumnus of Georgetown but, more significantly, studied local government administration at the University of Tokyo graduate school, thus giving him a unique insight into how the Japanese government’s approach to decentralization compares to Korea’s. As he notes during the interview, the main difference is “the speed of decision-making.” In South Korea, politicians have more power in this regard than do bureaucrats. The opposite is true in Japan, he says, where all matters are discussed thoroughly by civil servants and thus take a long time to reach any kind of realization. “And once a decision is made in Korea,” he says, “we take action.”

Of course, such a process has its own demerits in that decisions made in haste require ongoing repairs and improvements. He presents as an example the transfer of personnel along with the offices in which they work. “We had to think about housing them and their families, and if they already owned homes in Seoul, it might be difficult for them to sell them and move here. Some may decide not to move, preferring to commute, and then the problem is transportation.”

Though these problems were formidable, in time they became workable. A massive construction project to build collective housing was approved and carried out, and the government built a high-speed train between Seoul and Sejong that takes 50 minutes one-way. 

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Not cool

Posted on by catforehead

According to news reports, the extreme heat we’ve had to put up with this summer is going to be a normal thing from now on. For a while it seemed as if Japan was going to be spared the worst of it, but that isn’t the case any more and forecasters are saying we’ll be sizzling until early October. The authorities warn people, especially the elderly, to use their air conditioners whenever necessary because heat stroke can creep up on you, even when you’re indoors and out of the sun. According to the land ministry, 89 percent of Japanese homes have air conditioners, but that portion drops along with income. Of households that earn less than ¥3 million a year, 84 percent have AC. 

There’s one demographic, however, that lacks AC almost altogether, and mainly for systematic reasons: people who live in public housing. An August 1 report in the Asahi Shimbun told of a 43-year-old woman who lives with her three children in a 3DK apartment run by the Tokyo Metropolitan Government for low income families. The rent and management fees for the apartment come to about ¥30,000 a month, which is half what the woman paid for a private rental apartment before she moved into the prefectural building 3 years ago. At the time, the apartment did not have an air conditioner, so she bought one for ¥70,000, including installation, at a discount appliance shop. Her apartment is situated on the corner of the 6th floor and gets a lot of sun, so nights can still be intolerable due to poor air circulation. The woman and her 13-year-old daughter share a six-mat room, leaving her two sons, one 19 years old, the other 17 years old, with a room each to themselves, but in the summer they all sleep in the same room because that’s the only one with AC, which isn’t strong enough to cool the whole apartment. Consequently, the sleeping arrangements in the summer are close and uncomfortable. During the day, they place electric fans strategically throughout the hallways to distribute the cool air, but it doesn’t work very well. The woman would like to buy a second AC, but there’s no place to put it. Her room is next to the veranda, so the fan unit can be placed there, but there are no other places in the apartment where a second AC could be installed. The building, which is 40 years old, was not designed with AC in mind. The electrical current in each apartment is set at 20 amperes, though it can be increased to 30, which still would not be enough. If the AC is on, she has to  be careful not to use too many other appliances, otherwise the circuit breaker will trip. And, of course, her electric bills are high. Public housing is notorious for having bad insulation, and her salary as a caregiver is only ¥220,000 a month. Besides, if and when she leaves the apartment, she is required to leave it as she found it, which means she will have to remove the AC and take it with her. 

There are 2.16 million public housing units in Japan, all run by local governments. The central government requires that all have kitchens, flush toilets, wash rooms, and bath rooms. AC is not required. The land ministry says that 60 percent of public housing units are more than 30 years old and 60 percent contain a head-of-household over 60. The Tokyo Metro government only provides 260,000 units (individual wards may run their own low-income public housing), 79,000 of which were built before 1970. None of the public housing in Tokyo comes with AC, though newer buildings have features that make it possible to install AC units. When Asahi contacted the relevant prefectural authorities, they said that older buildings are regularly renovated but not in terms of improving insulation or making it possible to install AC units. One staff member said, “We formulate design policies in terms of cost effectiveness.” 

A professor of environmental engineering told Asahi that all public housing in Japan is concrete-based and poorly insulated compared to wooden buildings. That means that temperatures don’t drop appreciably at night. Even if a unit in such a building has AC, it’s possible that the interiors will remain above 30 degrees. This is particularly worrisome for elderly tenants, who are more susceptible to heat stroke. Top floors are particularly dangerous since rooms sit right under the roof. According to medical statistics, about half the people who suffer from heat stroke and live on the first floor of a collective housing facility end up hospitalized while 90 percent of heat stroke patients from top floors are hospitalized. 

Another professor who studies low income households says that even when they have AC installed, elderly people in public housing often don’t use it because of the electricity costs. He cited statistics showing that most of the people hospitalized in Tokyo for heat stroke were old people who simply did not turn on their AC, especially this summer after electrical utilities nationwide raised prices considerably. He has demanded for years that local governments not only improve insulation in public housing, but that they install air conditioners in all apartments, because the problem of heat stroke among lower income people is only going to get worse from now on.

Resort resources

Posted on by catforehead

One of the resort condos in Yuzawa offering short-term stays

Last month, Gendai Business published an interesting article about the glut of empty resort condominiums throughout Japan and what some local communities and businesses are doing about them. This blog has addressed the “resort mansion” problem, which stemmed from a post-bubble construction boom of vacation properties. Many of these condos were built near popular ski resorts, since there was also a ski boom in the 80s and 90s that eventually went bust. Consequently, the owners of these condos stopped coming to ski and didn’t keep up their properties. Market values plummeted, sometimes, as Gendai points out, to as little as ¥100,000 for a standard 50-square meter unit. The reason for the cheap price was more than just low demand. Resort condos have higher monthly management and repair fees owing to extra facilities, like large, collective bathing facilities and ski lockers. Absentee owners were not paying these fees and anyone who bought the units were expected to pay them retroactively. There were also property taxes that local governments were keen to recoup.

Gendai’s take on the matter is optimistic, starting with the idea that, as inbound tourist traffic goes back to pre-COVID levels and the yen remains low vis-a-vis the dollar and other currencies, foreigners have become interested in these properties. The novel inference in the article is that most of the interested parties are rich Southeast Asians for whom snow is a fascinating draw. The reporter states that while “there are high mountains” in other Asian countries, “the snow doesn’t normally accummulate,” meaning that a sport like skiing isn’t feasible in these countries. Even China had to manufacture snow when it hosted the Winter Olympics. So if Asians do partake of skiing and they have money, Japan is a much more convenient destination, because ski resorts are eash to access from Tokyo or any other city with an international airport. 

The reporter may be stressing this point beyond its natural flexibility, but what he wants to show is why one ski resort town, Yuzawa in Niigata prefecture, is seeing a Renaissance in its property market. Yuzawa is an hour and 20 minutes by Shinkansen from Tokyo; 3 hours if you take a highway bus. And while some ski resorts in Japan have seen less snow in recent years, Yuzawa still has enough of the stuff to maintain its ski and snowboard cred. It may not be Niseko in Hokkaido, which is treasured by world ski freaks for its natural powder, but Niseko is also expensive and more remote and, besides, it seems to be overrun with Australians during the high ski season. So Yuzawa is accessible and affordable to a wider cross section of tourists. Moreover, it has hot springs, which are just the frosting on the cake for Asian travelers. And, in fact, as Gendai points out, this aspect at first made Yuzawa a problem for Asian tourists, since most Japanese tend to think of Yuzawa first as a hot spring destination rather than a ski resort, which didn’t really show up until the late 80s, so there are still some inns in the region that don’t welcome non-Japanese speaking guests. 

But Yuzawa has plenty of resort condos, and local real estate companies, not to mention the local government, are keen to introduce them to foreign buyers. Last February, another business publication, Toyo Keizai, ran an article focusing on the condo market in Yuzawa. Since the end of COVID, prices have almost doubled, which may not necessarily say much since, as Gendai pointed out, some units were going for as little as ¥100,000. But Toyo Keizai claims that the average price for a resort condo in Yuzawa now is more than ¥2 million. 

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Dead reckonings

Posted on by catforehead

Typical wooden apartment building

An article in the July 1 Asahi Shimbun reported on a police investigation of a staff member of Tokyo’s Edogawa Ward’s public welfare department who was suspected of “abandoning a dead body.” Usually, when police make such an accusation, it’s a preliminary stop toward a charge of murder, but this case is very different. 

According to the article, a 65-year-old man died in his Edogawa home in January. A caregiver who regularly visited the man discovered the body on January 10 and called a physician at the clinic that dispatched the caregiver. The doctor went to the residence and confimed that the man was dead and, following official procedures, reported the death to the relevant case worker in the ward’s welfare department, since the deceased had been receiving public assistance. 

But while the case worker later acknowledged that he had received the doctor’s report, apparently he did nothing. On March 27, an agent of a rental supply organization visited the deceased’s home to pick up some equipment that had been lent to the man through the welfare program and found that the body was still there two-and-a-half months after being reported. In trying to explain this lapse in procedure, the case worker said they had been overwhelmed with work and had simply kept putting off the matter of the dead body. It should be noted, however, that this worker wasn’t the only person aware that the man had died. After receiving the doctor’s report, the case worker immediately informed their superior about the death so that the ward would stop its public assistance to the man. Following an investigation, the police said they sent their file to prosecutors, but apparently the case worker wasn’t charged. When contacted by the Asahi, the head of the ward’s welfare department said they purposely did not publicize the incident and would have nothing to say until a news conference scheduled for July 3, which is today. 

According to subsequent media reports the deceased had been renting, which makes the story even more bizarre: When they didn’t receive a monthly payment, why didn’t the landlord check on the tenant?

In any case, the story will likely only reinforce an unfortunate trend that has been on the rise for several decades and which was described in a June 16 post on the Daily Spa!. Landlords have become increasingly averse to renting to people “over 60” because they are afraid that elderly tenants will die on the premises, thus causing them considerable expense in preparing the residence to be reoccupied.

The main thrust of the article is that more and more seniors are having difficulties finding rental properties that will accept them. Many real estate agents for rental properties don’t even allow elderly people through the front door because it’s too much trouble. Spa! says that the general image in Japan is that the elderly are all homeowners, but, in fact, according to a government white paper, one-in-three people living in single-person households who are over 65 do not own the homes they live in. And this portion is increasing. As one agent who specializes in helping senior renters find dwellings told the magazine, most conventional realtors won’t even talk to elderly renters “no matter how much money they have.” The agent said that according to his company’s in-house survey one out of four elderly people say they’ve been rejected for rental housing as least once, and of these 13 percent said they’ve been rejected more than 5 times. 

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Reform or Die

Posted on by catforehead

Here’s another chapter from our unpublished book about housing in Japan based on our own experience of buying/building a home. This one is about keeping up properties.

One of the most popular sub-genres of reality TV is the home improvement show. In 2002, Japan’s Fuji TV launched one called “Before/After,” where superannuated, usually cramped properties were magically transformed into marvels of modern design. The producers hit on a fool-proof hook for the show that they exploited successfully week after week, year after year, without seeming redundant. 

People with properties they wanted to fix up would contact the producers, who sift through the candidates, looking for the most broken-down or unusual cases. The best sequences highlight houses that would seem impervious to improvement due to their state of disrepair or local environment. A surefire hit is always the hovel located in one of Tokyo’s warren-like residential areas, usually dating from just after the war, when neighborhoods were constructed on the fly, and which require not just ingenious design skills to improve, but superhuman feats of logistics, since there usually isn’t any room to get heavy machinery to the property owing to narrow alleyways. The architects are lone wolves who waive their design fees and charge only for materials and labor. The recipients of their largesse come up with a ceiling amount they will pay, thus adding another layer of challenge to the architect’s task. The family is then sequestered off-site while the work is done and documented in detail by a film crew. The residents are not allowed to view the property until the “reform” is complete. The climax is dramatic, with the family entering the sparkling new house with tears streaming down their faces and the anodyne voice of the female narrator showing us the stark differences achieved by the architect. 

“Before/After” sparked a boom in home improvement TV shows but not in home improvement–or, at least, not to the extent that it made a difference in the marketability of older homes. One of the main problems with remodeling in Japan is lack of regulation and oversight. The vast majority of homeowners can’t afford the kind of architects featured on “Before/After,” but anyone can start a home improvement company. In the past, the biggest complaint with regard to remodeling was fraud, characterized by operations that over-billed elderly people for poor work. Eventually, the complaints became more general owing to greater demand by homeowners who decided it was cheaper to renovate their present houses than it was to buy new ones, even if that wasn’t necessarily the case. In 2011, the Center for Housing Renovation and Dispute Settlement Support addressed more than 4,500 claims, mainly in Tokyo. In most cases there were no contracts, design plans, or even written estimates. If a particular job costs less than ¥5 million, according to the law, the company that carries it out doesn’t have to be registered as a construction firm, though remodeling companies are supposed to be insured for shoddy work. Also, the work doesn’t need to be inspected by the relevant authorities unless “it affects the integrity of the structure.” Some years ago a Nagoya woman whose condo became virtually unlivable after a reform company replaced her floors and windows couldn’t sue because there was no contract. The National Consumer Affairs Center of Japan handled more than 13,000 reform-related complaints in 2011, or twice as many as in 2010. Since there were no regulations, the center urged homeowners who were going ahead with remodeling to record all conversations. The Japan Bar Association in April 2011 urged the construction ministry to pass new laws to cover the industry, no matter how small the company.

When it comes to home improvement, experts recommend hiring designers who understand the engineering aspects of a remodeling project and can subcontract the various jobs to tradespeople. Such projects, however, can run into the tens of millions of yen, which is why comprehensive discount remodeling companies have sprung up, offering total renovations for much less. Many are associated with major retail home improvement centers, and are thus deemed to be reliable. They cut costs by buying materials in bulk, which usually means limited choices for the consumer. As with anything, you get what you pay for. 

But most homeowners in Japan don’t renovate in any substantial way, because they’re not conditioned to think of their properties as an investment. And until very recently, there were no government incentives to improve properties. The idea that one’s house, as opposed to the land it sits on, accrues or even retains value over time isn’t widespread in Japan, so as long as people can put up with the wear and tear, they let their houses slide. So the question becomes: Do the houses not retain value because people don’t keep them up? Or do they not keep them up because they believe their houses don’t retain their value? In any case, the majority of used houses, especially those built before, say, 1990, are virtually junk. 

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Occupy Kyoto

Posted on by catforehead

(Kyoto Shimbun)

Last week, the Kyoto city assembly passed a regulation to introduce a special tax on unoccupied properties or underutlized second homes for the purpose of opening up the used housing market. Kyoto is experiencing an acute housing shortage that is pushing up prices and, as a result, making the city unaffordable for young families, who are moving out to the surburbs. Before the regulation goes into effect it has to be approved by the internal affairs ministry, and when it does it will be the first such local tax system that targets vacant properties, or akiya, as they’ve come to be called.

The regulation, which wouldn’t be implemented until 2026, targets three categories of empty properties according to appraised value: properties that are less than ¥7 million, those between ¥7 million and ¥9 million, and those that are more than ¥9 million. Each category would entail a different rate of taxation, and if the appraised value is actually less than ¥1 million, no extra tax is imposed for the first five years after the new regulation goes into effect. There are probably very few, if any, properties worth less than ¥1 million in Kyoto, since the appraised value would be for both the structure and the land together. Unoccupied properties includes non-rental condominiums and apartments that are empty. Excluded from the new tax are “historically significant structures,” such as Kyoto’s famous machiya row houses; as well as properties used exclusively for business purposes, rental properties, and empty houses and apartments that the owner plans to put on sale. 

According to the Nippon Keizai Shimbun, during the press conference to announce the new tax, the mayor said that the purpose is not to raise revenue, but rather to “improve civic life and stimulate urban renewal.” Apparently, the idea for the tax originated in a proposal for a kind of vacation home property tax, but experts who studied the proposal told the city that it would be better if Kyoto’s large number of unoccupied properties, including vacation homes that seemingly no one was using, were either made available for others to occupy or torn down and replaced by new homes. 

In effect, the tax would be levied on any property deemed to be unoccupied or vacant. The special tax would increase the property tax on such a property by about 50 percent, the idea being that owners who didn’t live there or rent them out would be thus encouraged to either sell them or destroy them and build something new or sell the land. Empty land, it should be noted, is taxed at an even higher rate, as much as six times as land which contains a structure, whether vacant or not. It should also be noted that properties that are categorized as residences but which are being used only for storage are not exempt from the tax; as well as properties that are only occupied a few times a year—though exactly how few isn’t clear from media reports so far.

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