How-tos | HOME TRUTHS

A rise in vacancies won't mean drops in rent

by Philip Brasor and Masako Tsubuku

According to the June 11 issue of Nikkan Gendai, the vacancy rate for rental properties in the 23 wards of Tokyo is currently 33.7 percent, while in surrounding prefectures, it’s even higher: 35.5 percent in Kanagawa and 34.1 percent in Chiba.

One real estate consultant told the newspaper that the combination of record-low interest rates and recent revisions to the inheritance tax law have spurred construction of new rental housing units by people of means who want to reduce taxes on the money that they will leave to their children. Nationwide, the number of such units built in April 2016 was 16 percent higher than the number built in April 2015.

The land ministry predicts that this year alone 430,000 units will be newly made available for rent. In contrast, between April 2015 and April 2016, the number of new for-sale housing units nationwide only increased by 1.2 percent. In Tokyo, new for-sale units actually fell by 7.9 percent during the same period, while new rental units increased by 20.1 percent.

Sales agents for housing companies continue to bombard well-to-do families with investment plans that include the construction of new apartments that the companies will then let and manage for them. In most contracts, they even guarantee a certain amount of income, though the fine print usually says this term is “renewable” every two years, meaning if the realtor can’t find enough tenants they can reduce the amount of income passed on to owners. Since owners count on this income to pay their mortgages, they could end up losing money and some, according to the consultant, are facing default on their properties.

This situation is likely to continue. Everyone knows Japan’s population is declining, but when it comes to housing, the media usually relate this development to home sales. At present there are 8.2 million vacant housing units in Japan, but few people know that a good many of these are rental units.

In accordance with the laws of supply-and-demand, the surplus would only seem to be a problem for landlords. In an environment of oversupply, rents are expected to drop — and they are, but not by much. According to the housing portal site Homes (www.homes.co.jp), nationwide rents peaked in 2007 at about ¥9,000 per tsubo (3.3 square meters). Right now the average rent is ¥8,633 per tsubo, a drop of 3.7 percent, and about the same as it was at the end of the bubble period in the early 1990s.

The reason rent hasn’t gone down in proportion to the rise in vacancies is that an increasing portion of the rental housing stock is made up of recently built apartments. In Tokyo, for instance, developers are tearing down old wooden apartments, which tend to charge low rent, and replacing them with new ones. In most wards there is no minimum size for wooden apartments, so landlords can get more units into the available space. We found an apartment on the internet, 14 minutes from Suidobashi Station, that goes on the market in July. It will cost ¥70,000 a month, but it’s only 12 square meters.

The real problem is that wages for those who traditionally rent have dropped 8 percent since 1999. The average expenditure for rent in 2014 was 30 percent of a renter’s income. That’s why more young people are remaining with their parents, even after they graduate from university and get jobs.

In her blog at the Magazine 9 website (www.magazine9.jp), writer and poverty activist Karin Amamiya recently wrote that when she was working for a company about 10 years ago, half her salary went toward rent, which meant sometimes her utilities were cut off. Eventually, she had to move back in with her parents. “If they had died, I would have been homeless,” she says.

According to Big Issue, a newspaper sold to aid low-income people, 77.4 percent of Japanese people who make ¥2 million or less a year and are aged 20 to 39 live with their parents.

A demonstration in Tokyo’s Shinjuku, Ward on June 12, organized by the group Call for Housing Democracy, demanded that if the government doesn’t raise the minimum wage, it must work to either push down rents, provide housing subsidies to low income people or build more public housing. The government promotes home ownership in Japan with tax breaks and the like, but there are no government programs to protect or help renters. One member of the group, Kazuhiro Sato, who is researching housing issues at the University of Tokyo’s graduate school, says that with the current wage-rent dynamic, fewer young people can become independent, which means they have to postpone marriage and starting families, that’s if they even choose to get married.

The situation is also getting worse for the genuinely poor. Last year, the government reduced the housing subsidy for welfare recipients, and Tokyo stopped building new public housing under former Gov. Shintaro Ishihara. The chances of getting into a public housing unit in the capital is now 1 in 20 for families and 1 in 57 for singles, and by singles the government means retired people. If you’re young and unmarried, you have no chance of getting into public housing, regardless of how poor you are.

Amamiya contrasts this situation with that in Europe, where rent subsidies and public housing are integral parts of the social safety net. Even in Singapore, 60 percent of all rental properties are operated by a public authority. The Japanese government has shown an intention to tackle the rental problem, it just hasn’t made any plans. In 2007, it approved a housing safety net law and four years later formed a public entity that would supply money to prefectural governments to work with realtors, landlords and support groups to provide more reasonable rental housing. However, according to Homes, “The current financial situation has made it difficult to realize these plans,” so it isn’t being promoted.

When Call for Housing Democracy asked the land ministry what it was doing about the issue, they were told the matter needs more “serious study,” though there has been talk of trying to turn some vacant properties into low-cost public rental housing.

Renters should keep in mind that they can benefit from the apartment glut, but it may take some effort on their part. When your two-year lease is up, ask your landlord to reduce your rent before signing a new one. This will suggest that you may move out if he doesn’t. If the local market is over-supplied, the landlord could have trouble finding a tenant to replace you, and will lose money if the unit is vacant for more than a month. It’s definitely worth a try. Renters have to take advantage of every opportunity.

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

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