akiya | Cat Foreheads & Rabbit Hutches

Counter intuitive

Last week the Ministry of Internal Affairs and Communications (MIC) finally released its latest survey of the Japanese housing situation. We say “finally” because the survey is conducted every five years and the last one came out in 2018, so we’d been waiting for it since last fall. The big news is that the number of vacant houses, or akiya, has grown to more than 9 million, or 13 percent of all homes in Japan, a statistic that’s earned headlines all over the world, though the last time the survey was published the number was already way over 8 million, so it’s not as if it’s a surprise. Still, given the global housing situation vis-a-vis inflation and other economic pressures, it’s a mighty powerful indicator of something that few people have explained satisfactorily. We think we know the reason, and we’ve discussed it for years on this blog, but that’s not our concern today. What we want to talk about is the real mystery surrounding the survey, which is how it’s conducted.

For the most part, nobody questions the MIC’s methodology, but given the sheer scale of the akiya situation, one would naturally wonder how the field staff who carry out the survey could possibly count every single vacant home. And, of course, they can’t, so they use the common statistical technique known as extrapolation, which means inferring the unknown based on the known. Specifically, it means taking a scientifically derived sample of a population and then using those results to draw a conclusion about the larger picture. So the real question is: How do they choose a sample?

In 2016, the real estate investment website, Rakumachi, published an article about how the akiya survey was conducted based on questions it had submitted to the MIC. The first point was how the ministry defined a vacant home, and, as it turns out, it has five categories, which are:

1. “Second homes,” meaning vacation properties that are used only on weekends and/or holidays; no year-round occupancy.

2. “Other” second homes, such as residences that are used only for work purposes and occasional overnight stays.

3. Vacant properties that are for rent, regardless of age.

4. Vacant properties that are listed for sale, new or used.

5. “All others,” including homes owned by people who are not occupying them at the time due to work transfers or extended hospital stays, homes that are being “prepared for demolition or rebuilding,” and homes that are vacant but to which none of the above criteria apply.

We assume that “abandoned homes” (hochi akiya) are included in category 5, and in the latest survey they total 4 million, which is quite substantial. Nevertheless, it also means that most of the residences described in the survey are still in use to some extent, so the term “vacant” needs to be qualified.

When Rakumachi asks how the akiya statistic is estimated, the MIC gives a fairly detailed answer. A vacant home is defined as a residence that is not occupied “on a daily basis,” and an evaluation is reached without necessarily interacting with the owners of the residences in question. The field surveyors “make an effort” to talk to the owner/titleholder of a property several times. But mainly they inspect the exterior of the property and question neighbors or, if the property is collective housing, like an apartment building or a condominium, they try to talk to the manager. They collect all this information for a sample of a given area and, using other information specific to the locality, extrapolate. The MIC stresses that collective housing is more difficult for different reasons, the most obvious one being that field surveyors usually cannot enter the building to interact with residents.

So already there is guesswork involved in compiling the information that will form the basis for the akiya statistic. In January 2021, Nikkei Business ran a story that questioned this methodology with the headline, “Is the 10 percent vacancy rate in Tokyo true?” Nikkei ran off the most recent vacancy statistics: 8.49 million akiya out of a total of 62.4 million residential units in Japan; more than 800,000 vacant properties in Tokyo out of a housing stock of 7.67 million. The reporter, Takeshi So, wondered about these statistics because he rarely sees what he would describe as an akiya, be it a single-family house or an apartment, in Tokyo. (For what it’s worth, we’ve seen quite a few, but we are sensitive to that sort of thing.) And when So looked carefully at the MIC’s methodology he was struck by one thing, namely the discrepancies between the MIC’s numbers and those reported by local governments.

Occupy Kyoto

Posted on March 27, 2023 by catforehead

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.

Dead houses

Posted on August 4, 2021 by catforehead

In the last year, we’ve seen a lot of headlines on social media about how you can buy a house in Japan for a song. The usual figure quoted is about $500 US, which makes us think that all these articles spring from one source that’s likely American. We haven’t bothered tracing the articles to one source, though we read a few of them and they all say basically the same thing: local governments throughout Japan are promoting the acquisition of abandoned houses in order to get people to move into their regions and lift the tax base. In some cases, they are even giving houses away, but in any situation these structures will need a lot of work before they are at all habitable. We’ve written extensively about the problem of akiya and since you get what you pay for it follows that the lower the price the more work that will need to be done. The worst akiya, it must be said, are not even on the market, meaning they were literally abandoned by the owner for any number of reasons—either because they moved out and couldn’t be bothered to try and sell it, or they did try to sell it with no success, or they simply disappeared in order to avoid having to pay property taxes, which, in all probability, were very low to begin with. Or they died—with or without an heir. There are a lot of akiya whose owners are dead, meaning they never transferred the title to anyone, and though heirs are still legally responsible in Japan they can be difficult to contact if they don’t want to be found. Those houses are probably unihabitable since they’ve been left to rot, and the local government doesn’t want to spend the money to have them demolished.

There are more than 8 million akiya and, not counting dedicated rental units, many are not livable and fewer are even sellable due to other factors such as location. So when you read an article about somebody who bought a house for nothing and fixed it up into a nice place it’s not just an exception to the rule, but almost an anomaly. Anytime a foreign person buys an old farmhouse or kominka and turns it into a monument to traditional Japanese craftsmanship they’re bound to get it featured in the news, but, again, it’s exceedingly rare. Most people prefer new homes, and because government policy has always privileged new house construction, potential buyers can always find something they can afford that’s new; and in many cases it will even be cheaper than an older house that requires extensive renovation, which describes a substantial number of old houses that are on sale.

The reason these articles about cheap houses have proliferated in the past year is mainly the pandemic, which, for a while, cut into new home construction. People are moving out of the cities because they can now work from home, so used houses starting selling well, but, again, a lot still aren’t selling. We know of several houses in our general vicinity that are in good condition but they’ve been on the market for months, some even years. There are just too many cheap old houses that people want to sell and not enough buyers. Of course, much of it has to do with Japan’s decreasing population, but mainly it has to do with oversupply. When construction resumes apace, those old houses will become even more difficult to sell.

More to the point, people who do sell their homes almost never make back what they paid for them. The exception is certain areas of big cities, but even in those cases it isn’t guaranteed, and then the seller will be even less likely to see a profit, especially when you factor in the interest they paid on their loan. (You’re more likely to make a small profit if you bought an old condo in a popular area of Tokyo and resell it later.) At this point, we think most Japanese people know this, despite all the talk about “maintaining property values” at all cost. We certainly know it. Almost as soon as we moved into our new house in 2014 the assessed value dropped by almost two-thirds—and that’s for property tax purposes, which tends to be higher than market assessed value. (Assessed value for land is a different matter) So we know we will never be able to make money on this house, which is one of the reasons why we had it built the way we wanted—meaning few other people would probably want it. But the problem as we get older is: What can we do with it when we reach the age where we can no longer live here? There’s a very good chance we won’t even be able to sell it. Since we don’t have children, there’s no one to inherit it. We’ve already brought up the possibility with some younger relatives that any of them can have it for free, and while they sound interested, we’re not sure if the idea of taking on a property is something they have the wherewithal to carry out. We’ve even thought of donating it to some organization, but that might run into problems with neighbors who find out about it beforehand.

Empty nest syndrome

Posted on March 21, 2020 by catforehead

Occupied house undergoing a Sumitomo makeover

A Kyodo news report carried by the March 18 issue of the Tokyo Shimbun clarified an important point in the discussion of abandoned or otherwise empty homes in Japan, vernacularly referred to as “akiya.” According to a survey of 700,000 properties throughout Japan conducted by the Ministry of Internal Affairs and Communications, 46.4 percent of akiya are at least 50 years old. Moreover, among the reasons given by present owners for not having unloaded the properties or demolishing them, 52 percent said they had inherited them or received them as gifts and, essentially, didn’t know what to do with them. As years passed, neglect took its toll, and in many cases if not most, the homes, especially if they are single-family houses, have become uninhabitable.

Five years ago the central government enacted a special housing law that would compel local governments to manage vacant properties more proactively. According to Kyodo, the government is now going to “check the effectiveness of the law” in order to see whether it should be revised or supplemented. As of October 2018, the last time the land ministry released findings from its national housing and land survey, which it conducts every five years, the number of vacant homes stood at 8.489 million. That includes apartments and condos that have not been occupied for at least one year. According to the government, there are 12 percent more akiya than there were when the survey was conducted in 2008. In addition, 14 percent of all homes in Japan right now qualify as akiya, and the ministry estimates that 40 percent are “abandoned,” meaning they are permanently unoccupied. Last year, Nomura Research Institute projected that by 2033, the number of akiya would increase to 19.55 million, or 30 percent of all homes in Japan.

In a related story, Nikkei Business Daily’s March 15 edition explained Sumitomo Realty and Development’s new project to exploit vacant single-family houses. The project accepts orders for renovations of derelict houses in order to turn them into share houses (i.e., homes with multiple residents who share common spaces), minpaku (guest houses or airbnb properties), or social welfare facilities. Sumitomo has a lot of experience in the home renovation business through its Shinchiku Sokkuri-san brand home “reform” service. “Shinchiku sokkuri-san” roughly translates as “making an old house look just like a newly built one.” Since the service started in 1996, Sumitomo has renovated about 130,000 houses, and is now working on expanding the business to include renovations that turn old single-family houses into share houses or guest houses.

Sumitomo’s target with regard to akiya are wooden houses, which number about 2.39 million. The land ministry says that about 480,000 akiya in Japan that are judged to be easily renovatable are also located within one kilometer of the nearest train station, making them easily sellable after going through the reform process. Last year, the government relaxed the building standards law so that usage of a structure could be changed more easily, for instance from residential usage to commercial usage. Consequently, Sumitomo wants to turn some of these old family houses into airbnbs or share houses or even restaurants/cafes. Sumitomo, in fact, projects that its revenues for reform business will amount to ¥123 billion in fiscal 2020, a 6 percent increase over fiscal 2019. So there may be some life in those old empty houses after all.

Suburban blight, Japanese-style

Posted on January 3, 2017 by catforehead

In our latest housing column for the Japan Times we talk about a new book by Chie Nozawa that explains in simple, clear terms why more and more abandoned homes, both houses and condos, will litter the landscape in coming years. She gives a lot of good examples of the kind of city planning, or, more precisely, lack of city planning, that has given rise to over-production of housing even as the population in general is shrinking and homes are left vacant.

Last week, she published an article in Gendai Business that summarizes and elaborates on the book. (Gendai is published by Kodansha, which also published her book) Her main thesis is that housing is “no longer” a financial asset, though we would probably argue that it never really has been. She points out that by 2033 one out of every three homes in Japan will be vacant, and that if nothing is done–either through demolition or some program to make more effective use of existing housing–there will be 21.5 million vacant homes in Japan. She give two reasons based on the fact that the huge boomer generation will be dying out in large numbers: 1) the homes the boomers have inherited from their own parents will be empty; 2) the homes the boomers built themselves will be empty because their own children built their own homes and thus have no reason to take those homes over. It seems almost redundant for her to mention that these homes, unless they are located in major cities on desirable land, have no value whatsoever. The homes that boomers now live in are old, and so their heirs cannot possibly move in or sell or rent them without extensive renovations, which is not liely to happen given the nature of the housing market, which is all about new things, as we pointed out in our column.

Thus, these properties have “negative value,” meaning regardless of whether the heirs tear them down or improve them, they will have to spend money that they will never see again because it will become increasingly difficult to sell or otherwise liquidate these properties, most of which are in the suburbs. And the more there are, the worse this problem gets.

This vacant house problem brings about what Nozawa calls the “sponge phenomenon.” In English parlance we might refer to it as the Swiss cheese effect: The suburbs of major cities, and even the cities themselves, become pocked with holes of vacancies that further erode surrounding property values and scare off younger potential homeowners, who gravitate instead to the nearest brand new ultra-cheap, ultra-cramped subdivision. Nozawa gives examples of regional capitals where this effect is already in full swing: 20.8 percent of the homes in Kofu, Yamanashi Prefecture, are vacant.

Vacant housing comes in four types: rental housing that is presently uninhabited, vacant houses on sale, secondary housing (vacation homes, etc.) that is unoccupied almost all of the time, and abandoned housing, meaning not for rent or sale, merely empty. Nozawa provides statistics showing that of these four type, the last, abandoned housing, is increasing at the fastest rate. She also shows the direct relationship between the amount of new housing being built in a town or city, and that locality’s portion of vacant housing. In most cases the more building that’s happening, the higher the number of vacant homes. A few enterprising spirits are trying to address this problem. One local real estate company in Higashi Matsuyama, about 50 kilomters north of Tokyo, is actively buying up small lots in these sponge-like neighborhoods and combining adjacent ones to make larger lots that can accommodate larger houses, but in order to do that effectively the realtor has to locate the owners of land that in many cases has been abandoned for a long time, and often that means negotiating with more than one reluctant heir.

It’s not a problem that is going away any time soon, or even later.

Fill ’em up

Posted on July 18, 2015 by catforehead

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