In recent months, news organizations have reported that people are moving out of Tokyo into the suburbs and countryside, suggesting that some remote work situations are obviating the need to go into a place of employment in the city. What these stories often point out is that many people who live in Tokyo do so because of their jobs and, when given the opportunity, they will leave the capital to reside in a less crowded and, presumably, less expensive environment.
The government, having been frustrated in its occasional attempts to decompress Tokyo, appears to be heartened by the trend and may be keen to encourage it. The land ministry enacted a plan that offers ¥400,000 worth of points to families that endeavor to build a new house with energy-saving features. The points can be used to purchase household appliances.
Attached to this plan is a rider that says if the family has three or more children and is migrating out of the Tokyo metropolitan area, the reward is increased to as much as 1 million points. In addition to the relatively large number of children required, the plan has other conditions that may limit its scope. Although families living in any of the four prefectures comprising the Tokyo metropolitan area qualify, one or more of the parents should have been working in Tokyo’s 23 wards, and the contract for the new house must be signed between Dec. 15, 2020, and Oct. 31, 2021. If such a family decides to buy a previously owned house that does not have energy-saving features, they can still receive 300,000 points. The government has earmarked ¥109.4 billion for this program.
Although lip service is paid to the environment, the guiding concern here is to promote home ownership, which is why the government has also extended the tax cut for housing loans that was originally enacted as a measure to offset the feared fallout from past consumption tax hikes. After the last tax hike, the period for the tax cut was increased from 10 years to 13.
In order to qualify, home buyers had to move into their new homes by the end of 2020, but now they will have until the end of 2022. Anyone who qualifies can deduct 1% of the balance of their mortgage from their various income taxes every year the cut is in effect.
The tax cut is being extended as part of a group of measures to offset the perceived slump caused by the pandemic and comes with conditions. The minimum floor area of the purchased home is being decreased from 50 square meters to 40 square meters, which means smaller condominiums now qualify.
There is also talk about possibly limiting the amount of the balance that qualifies for the cut, since 1% of a large balance could exceed the interest that the home buyer pays in a given year, meaning the buyer could actually make money. Developers and realtors will likely oppose this change since they use the interest gap windfall as a sales ploy.
Despite the aforementioned Tokyo exodus, which arose organically, the government still wants to use tax money to promote housing sales. A recent article on Asahi Shimbun’s Ronza pointed out that the mortgage tax cut, for which the government spent about ¥800 billion in 2019, is actually regressive under the current emergency and offers very little in terms of economic stimulus.
Housing policy since 1980 has centered on promoting home ownership at the expense of rental housing, in particular public housing, which is very limited. Depending on the region, low income people usually wait years to get into public housing after they qualify. What’s ironic about this situation is that there are now around 8.5 million vacant homes in Japan, of which about half are rental properties. Rather than spend tax money on the promotion of new house construction and sales, why not use at least some of it to convert these empty units into affordable rental housing?
The welfare ministry has realized that renters are more vulnerable to the recessionary conditions caused by the pandemic, and, under pressure from support groups, is extending emergency housing benefits for low income tenants for another three months. The measure provides rent relief of up to ¥53,700 a month for a qualified single-person household and up to ¥64,000 a month for a two-person household.
This money is paid directly to the landlord, which means that if the landlord agrees to accept the subsidy, the tenant has to make up any difference. If the tenant doesn’t have the difference, then the landlord can declare it as a loss on their income tax return, but, of course, the landlord could refuse the subsidy and demand a delinquent tenant leave the property. The relevant authorities started providing these benefits last April for three months at a time, renewable twice for up to nine months. Now they can be renewed for a third time.
These rent subsidies were always available, but before April they were limited to people who had lost employment or whose businesses had closed for some reason. After COVID-19 materialized, conditions for receiving the benefits were relaxed. According to rental housing periodical Zenkoku Chintai Jutaku Shimbun, the number of people that received the benefits between April and September in 2020 was around 26 times the number that received them during the entire 2019 fiscal year.
If the current economic situation continues after March and the emergency benefits are not extended again, some renters may end up out on the street. Local governments such as Tokyo’s have implemented temporary measures to address increased homelessness brought about by the pandemic, but, according to poverty specialist Karin Amamiya, no government body has done a proper survey to estimate the scale of the problem. Even unemployment figures are unreliable. On her blog, Amamiya writes that without a proper study, it’s impossible to implement effective anti-poverty policies. Potential home buyers can count on the government to help them even when they don’t need it, but those whose housing situation is precarious at best receive little attention.
See www.philipbrasor.com for addenda to Media Mix contributions.
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