The paradox of Tokyo's housing
Amongst the many major cities suffering from severe housing shortage, Tokyo’s housing market stands out as a unique phenomenon, offering an affordable and abundant supply of housing.
According to Monocle, Tokyo was the world’s most liveable city in 2016. What marks a city’s liveability is, vitally, its price, which is shaped by the balance between the number of available homes and the demand for them. Japan has an abundant, and perhaps even excessive, housing supply. In the aftermath of the early 90s’ asset bubble burst, Tokyo has been adding residences faster than it has filled them. Over the past 50 years, Tokyo's housing stock has nearly tripled, from 2.51 million homes in 1963 to 7.36 million in 2013. Yet property prices in Tokyo hardly budged despite consistent population growth. In the Minato ward, a 20-square-kilometer section of central Tokyo, the population increased by 66 percent in the past two decades, from 145,000 to 241,000 residents. Whereas a similar population increase occurred in San Francisco, housing prices there skyrocketed by 231 percent, and in London, by 441 percent. In contrast, Minato ward’s prices only saw a modest 45 percent increase.
The success of Japan in averting a housing crisis, unlike many Western countries, can be largely attributed to the speculative house price bubble in the 1980s. André Sorensen, a geography professor at the University of Toronto, argued that at the time, Japanese economists identified planning and zoning systems as the major factors contributing to the reduction in housing supply. Hiro Ichikawa, an advisor to developer Mori Building, noted that to facilitate economic recovery from the bubble, Japan eased regulations on urban development. He remarked, ‘If it hadn't been for the bubble, Tokyo would be in a situation similar to that of London or San Francisco’. In another article, Alan Durning highlighted a series of administrative changes implemented to relax development rules in response to the bubble. In 1994, a rule that excluded basements from the calculation of permitted indoor floor area was enacted. In 1997, common areas were no longer considered in floor-area limits for condominiums. By 1999, Japan allowed private consultants to authorize these building permits to speed the review process. These changes finally culminated in the Renaissance Law of 2002, which streamlined the process of rezoning lands.
In other words, the Japanese government made it easy for developers to build, as demonstrated by the national zoning law. In an article, Robin Harding explained the Japanese zoning system, which categorizes cities into commercial, industrial, and various types of residential areas. Construction regulations are flexible in commercial zones, and they are only strictly limited in low-rise residential districts. ‘There is no legal restraint on demolishing a building’, Takahiko Noguchi, head of the planning section in Minato ward stated. ‘People have the right to use their land so basically neighbouring people have no right to stop development’. Thus, houses canbe built and rebuilt almost everywhere in Tokyo. Furthermore, Durning suggested that Japan's frequently updated earthquake-safety regulations, along with a cultural attachment to new homes, result in houses depreciating rapidly and being replaced soon after construction. Houses are frequently demolished in Tokyo; according to James Gleeson, approximately one home is demolished for every four new ones built. Tokyo’s pace of construction and rebuilding is about twice as fast as in Paris, London, or New York. The frequent demolition and rebuilding aligns with a prevailing perspective in Japan that treats houses like Americans treat cars, having a 30-year lifespan, as Durning argued.
Although the prospect of ‘building whatever and wherever you want’ may appear ideal, the freedom to demolish and rebuild not only homes but also various types of commercial budlings comes at a cost. Harding argued that Japan can be ‘spectacularly ugly’. Indeed, it is not uncommon to find a convenience store or even a three-story shopping mall right next to a residential house. The intensification of housing and small businesses also results in a scarcity of open green spaces. Parks and gardens occupy a mere 7.5 percent of Tokyo's land, a stark contrast to New York (27 percent) and London (33 percent). This aesthetic concern is shared by Scott Beyer, who argued that it represents a primary objection to new developments in the U.S. cities. Beyer suggested that such developments can harm the character of neighbourhoods because ‘if people can build anything, they will build something ugly’, which diminishes the very appeal that makes these cities enjoyable to live in.
Yet what’s more to this lack of visual coordination and little opens spaces is the larger crisis of empty houses behind Japan’s excessive housing supply. Although Tokyo is a liveable city, it turns out that perhaps no one is living within it. One of the contributing factors is a shrinking Japanese population. The country is expected to experience significant negative population growth, reducing its current 127 million inhabitants to 88 million by 2065. Japan is also an ageing society, with more than a third of its residents projected to be 65 or older within the next 20 years. This demographic shift leads to a concentration of shrinking and aging population in metropolitan areas, resulting in millions of vacant houses. By 2023, the vacancy rate is expected to increase from about 13% to over 30%.
Empty houses, also known as akiyas in Japanese, bring a lot of problems. Harding argued that empty homes can attract pests and turn neighbourhoods into dumping grounds. They are also called ‘urban measles’, as an ever-falling population of taxpayers has to pay for abandoned homes. While most of the akiyas are outside of Tokyo, the core issue here stems from a declining population alongside a continually expanding housing supply. This situation, thus, implies an even greater number of akiyas in the future.
Some Japanese cities have come up with strategies to address the issue of akiyas. Harding points out that in Toyama, for example, subsidies are offered to lure people from the suburbs to move to the city center. The underlying hope is that akiyas within the city will find new owners. Over the past decade, the percentage of Toyama residents living in the city has increased from 28 percent to 32 percent, with a target of reaching 42 percent by 2025. In another article, Akira Daido, the chief consultant at the Nomura Research Institute's Consulting Division, also pointed to a legal revision that enables local authorities to effectively raise property taxes on abandoned houses if the owners ignore municipal requests for maintenance or demolition. The government has approved a plan by Kyoto to impose taxes on owners of empty houses. Alternatively, in cases where owners cannot be found, the city can repurpose the land for more productive uses.
Tokyo's housing market has been thriving. A pressing question remains, though, over how long this growth can be maintained. Its current trajectory, marked by an increasing number of vacant properties on the outskirts, hints at a market that could eventually deflate. In light of the situation, Tokyo's success story may continue only if it can find effective ways to manage the challenges of urban development and population dynamics. Whereas the city's continued growth may offer a buffer, sustainable solutions are essential to safeguard against a potential downturn and secure the city's position as a global real estate powerhouse.
Image courtesy of Joon Kyu Park via Wikimedia, ©2015. Some rights reserved.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of the wider St. Andrews Foreign Affairs Review team.
