Issues | LAW OF THE LAND

Perfect storm of factors conspires to empty Japan

by Colin P.A. Jones

When I was still new to living in Kyoto, a couple of times other foreign residents asked me if I was interested in living in a Taisho Era machiya, meaning one of the traditional wooden houses in the ancient capital, the abundance of which helps make the city special. The question was always framed as a tremendous opportunity: They knew somebody, and could set it all up.

This made it all the harder to respond honestly. See, there are also Taisho (1912-26) houses where I grew up (Calgary, Canada), but nobody wants to live in them because they are broken-down dumps. Insulated dumps, mind you, but going out of your way to be deliberately uncomfortable was never as big back home as it seems to be here in Kyoto. (Come on down and we can discuss this after some zazen meditation — over an overpriced, unfulfilling meal in a cramped restaurant.) Anyway, the appeal of living in such a house — or just about any old house in Kyoto — has always escaped me.

The fact that a lot of houses here are long and narrow doesn’t help. Last time I looked at a possible house here, it was on a lot that was basically the same size as an American mobile home. Architecturally it was also similar to a mobile home, with thin, uninsulated walls and single-pane windows. By removing the storage compartment in the kitchen floor you could even see the dirt below. Granted, it wasn’t propped up on cinder blocks, but the real difference was that unlike most American mobile homes, it would have cost half a million bucks to buy.

So I have always struggled with the concept of buying a house in Kyoto, and will probably do so quite a bit longer now that I have read Tomohiro Makino’s 2014 book “Akiya Mondai” (“The Empty House Problem”). While ostensibly about housing, it is really about demographics and the disaster that awaits many communities, homeowners and families as the relentless impact of Japan’s aging, shrinking, childless population starts to be felt.

Makino probably knows what he is talking about. After graduating from the University of Tokyo’s economics department, he has spent much of his career in real estate at Boston Consulting, Mitsui Real Estate and other firms. He predicts that by the time the Tokyo Olympics are held in 2020, Japan will have as many as 10 million empty homes, most of them single-family dwellings. This is probably a safe bet given government data showing that as of 2013, the number of vacant dwellings had already reached 8.3 million, accounting for over 13 percent of homes nationwide. Another 10 percent of homes are inhabited by a senior citizen living alone, so those will presumably be empty soon, too.

Between 2009 and 2013 approximately 3 million new homes were added to the Japanese real-estate market, despite the population shrinking by almost three quarters of a million people. Most Japanese people apparently don’t want to live in Taisho Era houses either, so new construction is understandable. (I hear that some of the latest model homes even feature some of that newfangled “insulation” stuff!)

As people move into new homes, it leaves existing neighborhoods with more and more empty houses and condominiums whose actual value may be close to zero. The houses are more noticeable, of course; perhaps you have some in your neighborhood — shabby-looking, typhoon shutters permanently down, unkempt gardens, inviting burglars and vandals and generally bringing down the tone of the whole street.

You might as well get used to such blight, as it will probably increase. The prospect of inheriting the parental home might have once given adult children a sense of comfort and security, but now it may just as likely be a source of dread. This is particularly true for people who work and have their own homes in a metropolis such as Tokyo or Osaka but have parents who live in some other part of Japan to which they never plan to return. Inheriting that house means paying the upkeep and taxes, which may include a big inheritance tax bill for a lot more people than would have qualified previously, thanks to recent amendments that lowered the scope of exemptions.

Paying any of these amounts may be hard to do if you can’t sell the house or even rent it out. Depending on the location, this can be a challenge. Even in Kyoto, a global tourist destination where a lot of ill-advised people aspire to live, 13 percent of homes are vacant, including thousands of machiya.

Disclaiming inheritance rights will thus be a rational choice for a growing number of people, leaving the resulting abandoned houses as a problem for local governments to deal with. Another solution might seem to be to tear such houses down. This costs money, of course, but would at least make the land available for other uses. Unfortunately, perverse rules result in vacant lots being taxed several multiples higher than when they have a house on them.

This leads into what Makino identifies as an even greater macro-level version of the empty-house problem: empty towns and villages. Municipalities depend upon property taxes for a significant part of their income and are thus reluctant to lower rates. Moreover, tax assessments are supposed to reflect market value, but the illiquidity in some communities means there effectively is no market, leaving the historic value of the house as the default basis for taxation. And of course, less tax revenue — whether due to lower rates or fewer people paying them — means local authorities must cut expenditures and reduce services at a time when many are struggling to retain, let alone attract, young residents.

Towns that shrink below a certain size become inviable. Based on projected declines in female residents of child-bearing age, almost every municipality in a rural prefecture like Akita may cease to exist within two generations.

The problem affects even those Japanese who thought they were well off. Makino writes of a large-scale condominium development next to a JR station in Kanagawa. Just 50 minutes from Tokyo by train and with units selling for ¥40-50 million each, the project was aimed at young working families. Surprisingly, though, it also generated a lot of interest from the elderly residents of a nearby upscale housing estate. Having reached an age where tending to a large empty house with a garden was too much work, a smaller condo close to transportation and shopping was an obvious draw. Yet none of the seemingly upper-middle-class citizens who submitted a purchase offer was able to follow through. The reason? None could sell their current house — all valued at over ¥100 million — due to a lack of buyers. With fewer young people getting married or having children, there is less need to upgrade to detached housing. Commoditized, conveniently located condominiums become not just starter homes but permanent ones.

As this anecdote illustrates, while “empty-house syndrome” may seem like a problem mostly afflicting rural Japan, it is already an issue in metropolises such as Tokyo and Osaka, and will become more so in the years to come. Depopulation means condominium associations in many aging buildings lack the funds to renovate or rebuild. Moreover, hospitals and elder-care facilities in sprawling cities like Tokyo will soon be overburdened as baby boomers finish spending their money and fade into incapacity and inactivity, just in time for the Olympics.

But wait, there’s more. Despite all the empty houses, new condominium projects not only get built, but continue to get more expensive. This is thanks in part to “Abenomics.” A weaker yen has driven up the prices of building materials, and the latest wave of government-funded public works, including 2020 Olympics projects, means fierce competition for any construction-related resources — even trucks and truck drivers.

Furthermore, the construction industry is experiencing the same demographic transitions as the rest of Japan, meaning that a large proportion of the nation’s highly skilled licensed construction workers will retire over the next few years. They are not being replaced, as Japan’s shrinking population of young people doesn’t want to do demanding physical labor. For the most part they have other options, particularly if they have given up on getting married or having a family, as is increasingly the case.

Even if large-scale immigration were a possibility (which it probably never will be politically), the problem is not just one of there not being enough people to shovel gravel and bang nails into bits of wood. Many jobs in the construction industry involve skills that take years to master. So the Keynesian concrete opiate on which the nation’s policy makers have been hooked for so long may soon fail to deliver any high at all because — oops — we forgot to think about how to make Japanese people want there to be more Japanese people.

Makino does offer some solutions: giving more power to local governments to aggressively deal with abandoned houses, rethinking the balance between property rights and public interest, and restructuring rural communities so they are more centralized and easy to live in and govern, for example. On a higher level, he argues that Japan needs to adapt to a new set of values, casting aside the monozukuri (“making things”) obsession that made Japan great in the past, and concentrating on knowledge and expertise — areas where Japan can still hope to compete globally.

He tries to close with some positive notes, but at the end writes of arriving at Tokyo’s Haneda Airport after a trip abroad and stopping in his tracks as he realizes that he can see no young people — that he is surrounded by ojisan and obasan. I found this passage particularly depressing, because whenever I visit Tokyo I am always struck by how much younger everyone seems compared to Kyoto.

In the end, Makino wonders whether the finale of the Tokyo Olympics might not prove to be the beginning of a finale for Japan itself. Cheerful stuff.

Colin P.A. Jones is a professor at Doshisha Law School in Kyoto. Law of the Land appears in print on the second Monday Community Page of every month. Your comments: community@japantimes.co.jp