Empty Homes: A Growing Problem for a Shrinking Nation

Economy Society Lifestyle

The number of unoccupied homes in Japan is rising. Some of these are dilapidated and dangerous structures, but outdated laws make it more advantageous for owners to leave them standing than to knock them down. Housing expert Yoneyama Hidetaka explores the issue and potential solutions for a country with a shrinking population.

As of 2013, there were 8.2 million unoccupied homes in Japan, representing a record 13.5% of all residences. In many countries, the proportion of unoccupied homes fluctuates in response to economic conditions, but in Japan the vacancy rate has risen steadily since the end of World War II, reflecting government policies that have promoted residential construction.

Home ownership was encouraged in Japan in response to the postwar housing shortage and the population increase during the period of rapid economic growth that followed. The forerunner to today’s Japan Housing Finance Agency offered low-interest financial assistance and a tax break system for housing loans. New homes were built en masse, but attention to quality was lacking. Nonetheless, land prices increased continually through the high-growth period, so even if the buildings were intrinsically worthless, it made financial sense for people to buy homes at an early stage in order to benefit from the rising value of the land they stood on. And since the 1990s, the government has regularly deployed homebuilding as a way of boosting the economy and greatly increased tax breaks for loans.

As postwar housing was of indifferent quality, it became normal to treat it as “disposable” and rebuild homes after just 25–30 years. This was good for construction companies because it meant that there was no end to the demand for their services. Via this process, the country lost sight of the ideal of building good houses and repairing them as necessary for long-term use, a way of thinking that had existed even in Japan before World War II.

As a result, while in Europe and North America pre-owned homes account for 70%–90% of all housing transactions, in Japan they represent only around 15%, an extremely low figure. Japanese people’s preference for newly built homes is commonly cited as a reason, but this preference should properly be seen as an outgrowth of the government’s postwar housing policies.

Empty Lots Taxed Six Times More Than Land With Housing

Even as the supply of new housing continues unabated, Japan’s population has started to shrink, and vacant homes are an increasingly common sight in both urban and rural areas, particularly those that are unattractive to would-be homeowners. Changes in the family have accelerated this trend. Japan experienced a shift toward nuclear families in the postwar period, and even when parents die or move to care facilities, their children have become less likely to move into their empty homes.

If children do not want to live in a house their parents have vacated, it ought to be put on the market for sale or rent. However, since postwar-built homes were of mediocre quality to begin with and often have not been kept up with necessary repairs over the years, most of the vacated structures have no resale value.

If finding a buyer or renter is difficult, logically it would make sense to demolish the home. But under the Japanese tax system, the fixed property tax on empty lots is six times the tax on land with housing. This applies even to lots with dilapidated and dangerous structures, so it is advantageous to leave the houses standing, no matter how old they are, to avoid an increased tax burden. The system served to encourage residential construction and boost home ownership at a time when there was limited housing, but now it only deters the destruction of hazardous edifices.

As Japan’s population declines, the once well-intentioned housing policies are fostering unfortunate consequences. Even now, around 800,000 homes are being built every year, and this figure approached 1 million in the fiscal 2013 (April 2013–March 2014) rush of demand before the April 2014 consumption tax hike. In Japan’s peculiar housing market, construction of new residences continues apace even as the number of unoccupied homes keeps rising.

Initiatives for Tackling the Problem

In order to tackle this issue, we need to promote the prompt demolition of buildings in danger of collapse and to push reuse of homes that can still be occupied.

More and more municipalities are requiring owners of vacant homes to manage them appropriately and imposing penalties or enforcing demolition if owners do not comply. Some municipalities provide financial assistance to encourage owners to tear down dangerous structures, while others are withdrawing fixed property tax breaks if housing is unsafe. Meanwhile, the national government is preparing laws to support such initiatives.

To promote reuse, rural municipalities in particular are setting up “empty house bank” websites and providing subsidies for repair work. The websites provide information about vacant properties with the aim of finding new residents, and a growing number of people are using them, including young people and retired seniors who dream of country life, people with trades who are looking for a place to practice them, and people who are interested in getting started in agriculture.

Alongside these initiatives, it is likely to become increasingly important to enhance the quality of pre-owned housing and introduce reforms that make it more advantageous to buy pre-owned homes. Japanese homeowners did not traditionally keep up their houses with the thought of a future sale in mind, and so buying a pre-owned home was a worrying business. And since making repairs did not lead to higher prices in the resale market, owners felt little incentive to fix up their homes. But in recent years, Japan has finally seen movement toward keeping records of home maintenance and taking these into consideration in the pre-owned market, and the government is seeking to spread these practices. Meanwhile, since the 2000s various measures have been implemented to promote the construction of better-quality housing, and a growing number of homes are meeting these higher standards.

Initiatives Linked to Community Development

Possibilities for providing financial incentives to buy pre-owned homes include imposing less tax on housing loans if homes are pre-owned and expanding the repair subsidy systems introduced by some municipalities to a national level. Another possible approach is to convert empty homes into public housing. Under the current model, Japanese municipalities have built and supplied public housing to support those with difficulty finding housing. Much public housing was built during the high-growth period and is now showing its age, but financial constraints make it difficult to replace these old buildings. Providing financial assistance for rent payments to those in need of housing if they move into unoccupied homes could be a future option.

However, even while promoting use of vacant homes, it will be difficult to keep the number of these homes from rising in a country where the population is declining substantially. A big issue now is how to make urban areas more compact, reversing the disorderly sprawl of the high-growth period. Through initiatives focused on such compact urban districts and related strategies, unoccupied home usage must be linked with overall community development.

(Originally written in Japanese on September 8 and published on September 24, 2014)

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