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Can Japan level its problem with vacant buildings?

by and

On July 29, the Ministry of Internal Affairs and Communications released the results of its latest survey on Japanese housing, which it completed last fall and conducts every five years. The statistic that caught the media’s attention was the one for akiya, or vacant homes. As of the end of October 2013, 13.5 percent of all housing units in Japan were empty, which is 0.4 percentage points higher than the portion in 2008, the last time the survey was carried out.

The rate itself is considered high, even if the increase over five years seems slight. The fact is, the overall housing stock has increased during those five years. In 2008 there were just over 7.5 million vacant homes in Japan. Now there are at least 8.2 million, which is a rise of 9.3 percent. The reason for the discrepancy is that so many new homes were built in the meantime while a larger percentage of existing homes went vacant or were abandoned. More importantly, few of these older, derelict homes were torn down.

Though the number of akiya has been growing for many years, the central government has done nothing about it. These new statistics, however, cannot be ignored. Vacant houses are fire traps and sanitation hazards. They also bring down surrounding property values — or, at least, they do in most developed countries. In Japan, vacant houses are usually found in neighborhoods containing homes that are just as old, and regardless of whether or not they are occupied, houses of a certain age have no market value in Japan, so nobody worries about that aspect of akiya.

After the report was published, the government announced that it would finally address the akiya problem. The ruling coalition plans to send a bill to the Diet this fall to promote the renovation or removal of vacant homes. According to the land ministry, about 350 local governments have laws that regulate the disposal of derelict structures. In most cases, these laws stipulate that if a house remains vacant for a certain period of time and poses a health or safety hazard, the local government can order the owner to demolish it.

If the owner doesn’t respond within a certain period of time, then the authorities can demolish it themselves and send the owner the bill. However, this strategy has not proven to be very successful. It costs several millions of yen to demolish a house and remove the debris, and the reason most owners don’t do it is because of the high cost. If the local government does demolish a vacant house, it usually just gets stuck with the bill because the owner can’t pay. Consequently, most local governments don’t demolish houses on their own.

One purpose of the central government’s planned bill will be to subsidize this sort of demolition. In order to accomplish that, it will need to enforce the concept of eminent domain, which is rarely applied in Japan since national and local governments are hesitant to infringe on private property. That’s why it takes so long to complete public works projects and why many roads and railways are built on land that is already publicly controlled. The relevant authorities have to negotiate with the owners of the land they want to condemn for these projects.

According to a report in Tokyo Shimbun, the coalition bill will set up guidelines for determining what sort of vacant houses can be targeted for demolition in terms of sanitation, safety and overall environmental quality. Local governments will use these guidelines to identify dangerous derelict houses and access local tax data and other means to locate the owners. The local government can then apply to the central government for subsidies to tear down the house if other means prove ineffective.

Another problem the government needs to address is the property tax system. Besides being wary of the cost of tearing down a structure, property owners are slapped with a much higher tax bill when land they own has no building on it. As it stands, the property tax law, which is implemented by the central government, has a special provision that reduces the tax on land to one-sixth its assessed rate if the plot has a structure on it. That means owners of land with vacant houses will suddenly see their property tax bill increase sixfold after demolition, so the central government needs to adjust the tax rules in order to gain cooperation of property owners.

If subsidizing demolition sounds like a desperate solution to the akiya problem, it’s because the central government’s housing policy since World War II has made widespread derelict housing an inevitability. The government itself releases no statistics on sales of existing homes because they have never cared about existing homes. Land is considered an asset; houses are not, unless they are located in major cities such as Tokyo or Osaka.

The government only cares about new homes, which is why it only subsidizes new housing with tax breaks and incentives. In the U.S., the ratio of new-home sales to existing home sales is about 1 to 5. In Japan, it’s the opposite. Existing home sales in the U.S. is an important economic indicator and often drives the stock market. In Japan, sales of existing homes have no affect on financial activity. Many real estate agents don’t even deal with them.

Thus the akiya problem will only get worse as the baby boom generation continues to retire and die off. Traditionally, homeowners passed their property on to their children, but the children of boomers have already bought their own homes and the trend for young people now is to move out of the suburbs and back to the cities, in order to be closer to where they work. Until now, most non-rental vacant housing has been concentrated in rural areas, but soon it is going to be a big problem in the suburbs of major cities.

Though it’s obviously too late, the central government and local governments have finally decided to address the existing home issue, but they haven’t gone beyond statements of purpose. The problem is that they don’t want to promote existing homes at the expense of new construction, which has always been central to the government’s growth strategy. Last year, in fact, thanks to the anticipation of the consumption tax increase, new housing starts increased at the highest rates in years: an 11.5 percent increase in the number of people building houses on land they own, a 15.3 percent increase in new rental housing, and a 3.8 percent increase in housing built by developers.

At the same time, all prefectures except Tokyo saw a year-on-year increase in the number of existing homes that went on sale. The housing market will continue to be over-saturated with available units, which could lead to a collapse in prices, thus confounding the government’s scheme to boost inflation. Housing expert Hidetaka Yoneyama told Asahi Shimbun recently that vacant homes should be commandeered by local governments and turned into desirable dwellings for “migrants” or even low-cost public housing. Moreover, the authorities must rethink its policy of privileging new home construction at the expense of existing home sales.

But at the bottom of the problem is quality. The main reason there is no existing housing market is that existing houses are junk for the most part. The government never regulated quality or encouraged home improvement because its only goal was to sell new houses and condos, and the country is filled with fire traps and eyesores. Boosting quality at this point won’t affect the current existing housing market, but it might create one for the future — if there’s anyone left to buy homes in the future.

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

  • Jeffrey

    “If the local government does demolish a vacant house, it usually just gets stuck with the bill because the owner can’t pay. Consequently, most local governments don’t demolish houses on their own.”

    Simple answer to this is confiscation. The local housing authority simply seizes the derelict property. If they can sell it, then they do, take a fee for razing the structure and any associated costs, take a modest penalty fee for the nuisance of it all, and then pay the owner the remainder.

    • Earl Kinmonth

      A large fraction of the empty dwellings are apparently located on land that if sold would not cover the cost of demolition. In some cases, you cannot give the land away. Many derelict dwellings are on plots that do not meet street access requirements stipulated in current law. The owner is allowed to rebuild on the plot under old rules but new owners have to conform to current law. Since they cannot do this without buying adjacent properties as well, the plot with the derelict building has essentially no resale value.

      • Slade Rhinestone

        Judging from the the location of many derelict houses in the city where I live I agree that this seems to be a major factor. In some places there are several abandoned houses alongside which are roads that themselves are no longer in use or are so narrow that demolition and construction would be problematic if not impossible. In some cases the surrounding (currently inhabited) homes are in such close proximity that the abandoned homes have been literally boxed in with no access at all.

        I found this article (and the comments) to be very informative. Thanks very much!

      • Jeffrey

        Good points. But, as was noted in the article, so many of these derelict structures are fire hazards. It is incumbent on municipalities, which are mostly broke of course, to clear these lots. I suppose it’s a shogenai shrug of the shoulders for most city officials waiting for the whole block(s) to go and then just disconnect the power and turn off the gas and water and hope that someone will build something new.

        In spite of having so much power centralized in Japan, eminent domain has never been used much either.

      • Earl Kinmonth

        Property rights are extremely strong in Japan. There are large legal and cultural barriers to using eminent domain. Further, eminent domain probably does not really apply to the issue of demolishing buildings. If the buildings are empty and no one is paying the bills, I rather doubt they are being supplied with electricity or gas. (Water is not much of a threat.) Generally, the pattern is not for there to be a cluster of such buildings but rather a building here and there surrounded either by fields or inhabitated and maintained buildings. Many of these structures are in rapidly depopulating areas in hamlets where they do not present that much of a threat. The fact there we are reading about this is evidence of official concern about the problem. The JT does not have the resources to investigate a problem like this on its own. It can take up the issue because government agencies have taken this up.

  • Stephen Kent

    “The main reason there is no existing housing market is that existing houses are junk for the most part” – I have to say the quality of housing is always something I have been surprised at in Japan; it seems to me that the approach has always been, even in urban areas, to ensure that the value of land remains high while minimizing the cost of the actual buildings people live in (as well as any costs associated with town planning) because it’s going to be torn down again in 20 years to make way for another temporary, energy inefficient, cramped residence.

    With the country’s ageing population and shrinking workforce, surely the last thing you want is for labour to be locked up in the construction of more houses when there are other things that need to be built (nursing homes, kindergartens, paths along the sides of roads for pedestrians, that sort of thing) so I think the best thing would be to introduce quality standards and ensure a minimum usable lifespan for a building. However since the current leader is bent on “restoring Japan” to exactly the way it was 30 years ago I suppose there’s little chance of that happening.

    • Jeffrey

      I spent three years in Japanese housing back in the mid-90s and the houses built in the last 20 years are measurably better than they were in the first 30 years of so after WWII. In fact, many of the products, particularly those “to the elements” and structural are as good as anything used in the U.S. where houses are expected to last for decades with the best generations.

      YKK and Tostem build stupidly good aluminium windows. Toto is a world leader in faucets, sinks, tubs and, of course, toilets. Traditional post and beam is still a sensible (if less efficient) way to frame a house and has been improved dramatically in terms of seismic reinforcement and roofing tiles have been lightened putting less stress on this during earthquakes. About the only aspect I remember from then being pointlessly and consistently shoddy was interior finish – “vinyl close” (the crappy textured wallpaper used in most Japanese houses and apartments), nothing by hollow core interior doors, cheap mouldings and insufficient insulation.

      Otherwise, spot on about encouraging a resale market. Rather than spending millions of yen razing and rebuilding, you can dramatically raise the value and “livability of an existing house with renovation and remodeling.

      • Stephen Kent

        Don’t get me wrong, there’s no doubt that the capacity to make high-quality energy efficient building materials exists here, it’s just that in the extremely large rental sector the landlords know that the actual house is worth next to nothing so they don’t invest anything in it. You might have had a different experience to me, but all of the apartments I’ve lived in in Tokyo have had single glazing, paper-thin walls, and no insulation – and it’s the windows, walls, and insulation that largely determine the energy efficiency of a building, and that makes up a large part of a building’s value these days.

        No arguments here about the sinks, faucets, tubs, and all that – obviously very good products.

        Renovation and remodeling is the way to go, definitely. But it needs to be combined with mandatory levels of quality to force investment in buildings otherwise I think we’ll just end up seeing single glazed windows being replaced with new single glazed windows and hollow interior doors just being given a new lick of paint (or vinyl). This, however, wouldn’t fit in with the government’s plan to revitalise the forestry industry by spurring the construction of new homes – apparently they want lots of people out in the countryside cutting down cedar trees to build new houses to knock down.

      • Jeffrey

        I was thinking SFR rather than apartment buildings or “mansions.” The newest apartment I ever lived in was probably 20 years old then (making them nearly 40 years old now) and, yes, they were uniformly crap.

        About the best thing you could do with these is gut them and reduce the number of units by half removing walls between two units. To be sure, there are still housing pressures in the ‘burbs of Greater Tokyo, Osaka-Kobe and Nagoya – where everyone lives because that’s where the jobs are. But elsewhere the “quality of living,” as it is in less populous regions of the States and Canada, should be had for a lot less. But then, we all went down the RE rabbit hole that is Japan.

        With regards to spurring forestry, doubt anything has changed since I last worked in that business there with most framing lumber coming from Canada and the U.S. They save hinoki and tsuga for decorative touches. If anyone is building houses out of cypress of any variety, they must be very expensive and, perhaps, of questionable structural integrity as that family of trees has low tinsel and bending/deflection strength.

      • Stephen Kent

        Oh right, so you used to work in the industry here! I’d like to ask you a question in that case; assuming high quality materials are used to make the building as strong as possible, how do wooden homes perform against steel/concrete homes in terms of lifespan and energy efficiency?

        With regards to the types of trees you mentioned, I read that cedar (sugi) and hinoki are used for the actual frames of buildings, but that there is competition from foreign timber. The article was called “Women armed with chain saws head to the hills under Abe’s growth plan” on the Japan Times.

  • TLD_0819

    PM Abe had proposed 10-year ‘Demolition Bonds’ to help finance the removal of these abandoned properties. Time will tell if helps.

  • Stephen Kent

    Thanks for that information Jeffrey. So basically only traditional old houses were made with wood actually produced in Japan, and these days the wood mostly comes from overseas? If there are no types of wood in Japan suitable for making the frame of a house, that would seem to call into question the wisdom of Abe’s forestry policy.