Issues | THE FOREIGN ELEMENT

Demographic, economic headwinds may force a rethink

Renter guarantor system a headache for foreigners

by Charles Lewis

Things were going well for Patrick after a year in Japan. He had found a job he liked, met a girl he planned to marry and was ready to move out of the small room his older brother, a longtime resident, was letting him use.

Patrick’s fiancee had found an apartment in a good location and they hoped to move in together and marry later. The happy couple then ran into a problem: Japan’s guarantor system.

Guarantors — or co-signers — are usually required of renters in Japan. Guarantors are required to pay the rent if tenants fall behind or for any damage they may cause. Landlords prefer relatives as guarantors, especially parents who are still working.

“My fiancee’s parents were opposed to our marriage so we couldn’t ask her father to be a guarantor for us”, explained Patrick. “Our dream of living together seemed dashed. Eventually my brother — his wife was eager to see me move out — asked a local businessman he knew to be our guarantor.

“I couldn’t understand what all the fuss was about as we both had jobs and the money for the shikin [deposit], reikin [key money] and yachin [rent]. I was relieved when the realtor finally persuaded the landlord to accept my brother’s friend as a guarantor and we were able to move in.”

Patrick was able to work things out, but for foreigners who don’t have the resources he had, the guarantor system can be a major headache. One option is to have employers act as guarantors, but that only works for those with jobs lined up and where the company is willing to commit.

Even then, using an employer as a guarantor can be problematic. Changing jobs can be difficult, and if an employee using his company as a guarantor loses his job, he could find himself without a place to live. Such a predicament was described in an article on the Community pages last year (“Threatened Goldman Japan workers unionize,” Zeit Gist, Feb. 28, 2012), concerning an employee fighting dismissal at Goldman Sachs in Tokyo who was told he would have to move out of his home because the company would no longer be the guarantor of his apartment.

Share houses or dormitories — so-called gaijin houses — are one alternative for foreigners without a guarantor, but group living has its obvious drawbacks. Some companies specialize in short-term rentals for foreigners without the need for a guarantor, but they are often centrally located.

Companies known as yachin saimu hoshō gaisha can act as guarantors but the sector is unregulated, problems such as late renters being forced out of their apartments have been reported to the National Consumers Affairs Center of Japan, and some of these companies paradoxically require clients to provide a guarantor before agreeing to act as a guarantor. Apartments that don’t require a guarantor exist but they are the exception rather than the rule, and a few NPOs and municipalities offer assistance to those needing guarantors.

Some foreigners in Japan have their work cut out renting an abode because of the guarantor system, but Japan is far from unique when it comes to challenges facing newcomers looking for a place to live.

In Canada, unscrupulous landlords have been known to charge immigrants up to one year of rent up front. Although the practice is illegal, the newly arrived are easy prey as they are often eager to get into a place of their own, unaware of local laws and anxious not to make waves.

Experts advise newly arrived immigrants in the U.S., where credit scores have become increasingly important, to borrow money whether they need a loan or not in order to establish a credit history. Many landlords, especially at larger properties that use rental management companies, require renters to have a good credit score — an impossibility for foreigners who have no credit history.

Individual landlords may be willing to rent to those without a credit history but it is up to the renter to find them and convince them they are trustworthy. Rentals for those with damaged credit or no credit history exist but can be substandard and located in less than desirable neighborhoods. Some newly arrived renters resort to co-signers.

Landlords in the U.K., where tenants’ rights laws are strong, are naturally wary of potential renters, often requiring banking history, proof of earnings and rental references. Since these are things foreigners cannot provide, it is not uncommon for them to have to find U.K.-based co-signers or pay large sums up front.

The guarantor system has existed in Japan in various forms since feudal times. Conditions were particularly onerous for renters during the Edo Period, when ōya to ieba oya mo dōzen, tanako to ieba ko mo dōzen” — “a landlord is like a parent, a renter is like a child” — was a common phrase. Tenants needed caretakers known as saihainin, who managed properties for landlords, to act as guarantors for them if they wanted to rent, marry or travel through official checkpoints, among other things.

The current law covering guarantors dates back to the Meiji Era, when the Civil Code was written in 1896. In addition to rental contracts, guarantors are sometimes required for students entering technical schools, new hires at companies and other situations. Some aspects of the Civil Code, particularly pertaining to loans and contracts, are currently being reviewed but the guarantor requirement for renters is not among them.

While Japanese society has become modern in many respects, the guarantor requirement for renters and the vertical relationship between landlord and renter persists. Though it has fallen out of favor somewhat recently, some renters still give summer and winter gifts to their landlords.

“Japan is a group-oriented culture that favors harmony and conformity,” explains Hiroshi Sato, an architect with many years of experience in the housing market. “If a prospective renter doesn’t have family, colleagues or friends willing to act as a guarantor, landlords think something is wrong with them, that they have caused some kind of trouble in the past, that they don’t fit into society and cannot be trusted.”

The majority of people have been renters for most of Japan’s history, with home ownership not becoming common among the lower classes until the postwar period, when there was a severe housing shortage and the government encouraged contractors to rapidly rebuild and consumers to buy property. Construction companies are a powerful lobby and the building and purchase of new homes is still encouraged.

But several trends suggest the government may find it increasingly important to consider the needs of renters in the future. According to the Ministry of Internal Affairs and Communications, home ownership in Japan was 62 percent in 2010. In 2008 rates for those over 50 were 74.3 percent, but only 38.8 percent for those in their 30s, down from 48.9 percent in 1968. The Construction Ministry has warned that home ownership may be out of reach for many Japanese now in their 30s.

Many members of the “lost generation” who came of age during Japan’s extended period of economic stagnation and others among the estimated one-third of workers now employed as temporary or contract workers will possibly never be able to afford to buy a home.

Demographics and economics would seem to suggest a considerable spike in the ranks of older renters in the future. A fresh look at the requirement for renters to provide guarantors could be necessary if Japan wants to avoid forcing older nonhomeowners onto the streets. And faced with ever-increasing debt and a shrinking tax base, any move to make Japan an easier place for immigrants like Patrick to settle could prove to be smart policy in the longer term.

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