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Generation gaps filled by brick and mortar

by Philip Brasor and Masako Tsubuku

Though their numbers have dwindled in the developed world over the past century, multi-generation households are still common, and in fact may become even more common in countries where income gaps are increasing. In Japan, multi-generation households have social relevance owing to cultural norms, the Justice Ministry’s Civil Code and relative high cost of land, but there are fewer than there used to be.

The housing industry has responded to the need for multi-generation households with specific products. In Japanese, these homes are called nisetai jutaku, or “two-generation houses,” though, strictly speaking, they usually contain three generations. The term was coined by Asahi Kasei Homes in 1975 for a new line of housing. The idea of more than one generation living under one roof was not new, but Asahi’s approach was.

Traditionally, the eldest son would remain in or move back into his parents’ home after he married and eventually take title to the property when the parents died. The government encouraged such arrangements by offering a “special deduction” for inheritance taxes to those who lived in the home with their parents, as long as they continued to live there and didn’t sell the home. The social advantages were clear: The son maintained the family domicile and saved money, while the parents gained live-in help for their twilight years, usually in the form of their daughter-in-law, thus saving the government a certain margin in social security.

However, the great social changes that came into effect after the war made this domestic arrangement less viable. Except for firstborns who took over the family business, sons were more likely to become salarymen with growth-oriented companies that had more sway over their lives than their parents did. Unless the parents happened to live near the son’s place of employment, it was not practical for him to live in the family home, though it wasn’t unusual for a first daughter and her family to move in with the parents, a situation popularized by the long-running animated TV series “Sazae-san.

Nevertheless, the rise of the nuclear family in postwar Japan called for greater self-reliance on the part of the boomer generation and spurred the concurrent housing boom.

Asahi’s brainstorm did not deny this sea change, but it tried to take advantage of it. The point about nisetai jutaku was that it was basically two homes in one, rather than one large house where two generations lived with each other, which was the traditional situation. All the functions of a normal home were provided in duplicate, but all were under one roof: two kitchens, two bathrooms, two living rooms, in some cases even two genkan (foyers), the point being that two generations could still live together but not have to see each other all the time.

The general appeal for the older generation is that they would still be in close proximity to their children and grandchildren, while the advantage for the younger generation was they could build the house on their parents’ land, which was already paid for, and then inherit the newer house when the parents died. They could also then rent out the other “household” to make money if their own children didn’t plan on hanging around after college. Moreover, the separation meant less inter-generational friction, especially between the older mother and her daughter-in-law, which is something of a cliche but, as the saying goes, cliches are born of common truths.

Other housing companies started offering nisetai jutaku, and since then the style has accounted for between 5 and 10 percent, depending on the year, of all new houses built. They are mainly popular in large cities where property values are high. Living in the house that you inherit will reduce much of the tax burden, but not completely. For one thing, inheritances are shared by all the children of the deceased individual, so the child who takes over the family home must make legal arrangements with siblings in terms of the legacy.

Since the Great East Japan Earthquake, nisetai jutaku have become more popular. A 2012 article in the online magazine News Post 7 conjectured that “family ties” had been re-evaluated since the disaster, and more younger people were opting to live with parents for reasons of domestic solidarity. Home-builders at the time reported a slight increase in orders for nisetai jutaku. One, Sumitomo Ringyo, said that 8 percent of the homes it built in 2010 were two-generation, but in 2011 the portion was more than 10 percent. More significantly, in Hokkaido and the Tohoku region, the portion had jumped to 20 percent.

The reason for the increase wasn’t purely sentimental. The disaster impressed on many younger people the financial advantages of a two-generation household, and would alleviate some of the higher costs for rebuilding a home into one that was completely quake-proof. Also, the tragedy came in the middle of a lingering recession that weakened job security and social welfare programs. A bigger family meant greater financial stability for the future.

Inheritance taxes will go up in January next year, a development that affects the housing market. As it stands, when a parent dies the children are not taxed for inherited assets up to ¥80 million, but starting next year that ceiling will be reduced to ¥48 million. The government estimates that with the change the number of people liable for inheritance taxes will rise by 50 percent.

As already mentioned, there is a special deduction for children who had been living with a parent and plan to keep living in the parent’s home, but only if the two households shared the same living space, at least in part. With the new law, the inheritance tax deduction will also apply to distinct households that happen to share the same roof.

Consequently, a number of housing companies are offering new models that take advantage of this tax change. Since nisetai jutaku tend to cost more than one-family houses, there is a benefit for these companies, and many are targeting well-to-do families who will be at a greater disadvantage when the new tax goes into effect. Daiwa House has even launched a new financing system for up to ¥300 million to cover the cost of a high-end nisetai jutaku, mainly in the Tokyo and Osaka metropolitan areas where the tax will hit the hardest.

But there are bigger advantages for separate-residence nisetai jutaku than just the new inheritance tax deduction. The owner of a multi-family house must register it under one of three designations: kubun, which means the two households are separate; kyōyū, which means some household functions are shared; or tandoku, which means the two households are essentially one household. The designation affects property taxes. The land under a house will be assessed as one property, but the structure can be assessed as two homes, which means the floor area is divided into two households. This is an important distinction because floor area of less than 200 sq. meters is taxed at one-sixth the rate of that for larger floor areas. But the house must be registered as kubun, otherwise the floor area of the entire structure will be assessed in total. In order to qualify as kubun, the two living spaces should have their own entrances and foyers. If they share a common entrance, then they can only qualify if they are separated by a door with a lock on it.

Consequently, the new nisetai jutaku come in a variety of styles but are basically two homes fused into one building. The industry has come up with general terms for these models: uchikaidan, in which there are two entrances and one home is on the first floor and the other on the second, with the stairway for the second floor inside the structure; sotokaidan, which also has two entrances, but the stairway to the second floor is on the outside of the structure; and rento, in which the two households are positioned next to each other and each is two stories. In such ways, housing companies have made it easier to avoid your mother-in-law.

Philip Brasor and Masako Tsubuku blog about Japanese housing at www.catforehead.wordpress.com.