Negative legacies

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We’ve often talked about how the media has glossed over the worsening housing crisis. Though newspapers, magazines, and TV will occasionally run stories about specific cases of foreclosure in order to illustrate structual economic problems, they almost never connect these examples to the structural problems inherent in the nation’s housing policy, which hasn’t really changed for forty years. Our feeling is that the media itself has too much at stake in terms of advertising to point out these structural problems and that, fundamentally, the idea that new housing fuels the economy as a whole is so unassailable that it doesn’t even occur to many reporters that problems related to housing could be systemic and related to other social problems. But a few weeks ago, Shukan Bunshun ran an article that reflected, at least in part, much of what we’ve been trying to explain on this blog.

The article was about properties as legacies, which most people tend to view as “assets.” However, the reporter discovered that in many cases properties have turned out to be considerable liabilities for heirs, some of whom would prefer not inheriting them at all. The first illustration they give is the most potent. A 53-year-old man who lives and works in Tokyo recently traveled to his home town in Hiroshima Prefecture to dispose of his parents’ house, a 50-year-old wooden structure built on a steep grade. His father died six years ago and his mother, who suffers from dementia, entered a nursing home two years ago. The house is in disrepair and the small piece of land around it is overgrown with vegetation. The neighbors have repeatedly complained to local authorities, and the son understands that he has to do something. He decided to tear the structure down, but the lowest demolition estimate he could get was ¥2 million, owing to the fact that access to the property is difficult. Since he had no intention of using the land and couldn’t afford the demolition, he put it off. One could reasonably assume the cost might have been covered by selling the land, but that was another problem. The title was still under his father’s name, which meant, according to the law, it belonged to his mother. Since she was not legally competent to handle the matter, it fell to the next in line, his older brother, who had been estranged from the family for many years. No one knew how to get in touch with him. So in order for the second son to dispose of the property, he would first have to go to court to assume title, a process that would require a great deal of time and money, neither of which he had. Meanwhile, the neighbors become more angry, but the local authorities can’t do anything.

Such abandoned properties have become a real problem for local governments, and some have tried to address the issue with special regulations. In Tokorozawa, Saitama Prefecture, more than 600 homes stand vacant, and so the local administration has set up a dedicated division to handle it. In Daisen, Akita Prefecture, the problem of abandoned houses is compounded by the heavy snowfall that characterizes winter in the region. Old structures collapse under the weight of the snow, and the local authorities have sent notices to owners of the properties demanding they tear them down. If the owners don’t reply, the government will tear them down anyway and send the bill to the owners, but so far few have paid, meaning local tax revenues is going toward demolition. The town has a population of 90,000. Four years ago there were 951 vacant houses. Now there are 1,262. They don’t have enough money to tear them all down.

The Internal Affairs Ministry conducts a housing survey every five years. The last one was completed in 2008, at which time there were 7.57 million vacant residences (houses and apartments) in Japan, or twice the number counted in 1988. Half of these were designated as rental properties, and 2.68 million are classified as single-family houses. Bunshun credibly estimates that the number has gone up in subsequent years, but the next survey won’t be until 2013. Vacant residences are problems because they tlead to increases in crimes, including arson, vandalism, and squatting. They also attract refuse and vermin, and tend to put downward pressure on surrounding property values, which is why neighbors are so vocal about them. But without the consent of the owner, local governments cannot enter the property, much less clean them up or knock them down, unless they pass special laws like the above two municipalities.

The article runs through a bunch of other examples, each one illustrating a specific problem related to the housing crisis. A 50-year-old woman living in Kanagawa Prefecture inherited her mother’s home in Yamanashi Prefecture. Because the land attached covers more than 300 square meters, she thought it would be easy to sell, but every real estate agent she talked to in the area said it was too remote. Consequently, she has to maintain the property under pressure from the town and neighbors, which means installing a security system, hiring someone to cut the grass and keep up the grounds, paying property taxes, fire insurance, electricity and phone fees (for the security system), and transporation to and from her home in Kanagawa to check on things. All of this runs her more than ¥600,000 a year, and the neighbors still complain.

A 55-year-old man who lives in Chiba inherited a store front in a suburb of Tokyo as well as a vacation home on the Izu peninsula. The “shotengai” (retail district) where the storefront is located has been moribund for years, and he’s been unable to sell it. The vacation home was bought during the bubble years and was rarely used. It has fallen into disrepair, and though the man could probably sell it, it would take millions to return it to any sort of condition that might be attractive. Even worse, his father, without him knowing it, put his name on the title of both properties without telling him, which means he’s saddled with “management fees” from the neighborhood associations who oversee both properties as well as property taxes. He tells Bunshun that he’d be happy to give both properties away for free, but since they are “negative legacies,” anyone who acquired them would already be taking on a “large burden.”

Rental properties are just as bad. A 58-year-old woman inherited a six-unit apartment building from her parents in Kanagawa Prefecture. The 40-year-old building is in need of extensive renovation, but the woman doesn’t see any benefit and would prefer tearing it down. However, she can’t because there are still two tenants and they don’t want to move. She collects ¥60,000 a month from each, but just upkeep for the building costs more than that.

Even supposedly guaranteed markets are not immune. A woman inherited her parents’ wooden house in Tokyo, only 15 minutes from Ginza, but she can’t do anything with it because it is not built along a public road. According to local regulations, the house cannot be rebuilt, it can only be torn down. (See our April 3 Home Truths column for a more detailed discussion of this law.) At first, the woman thought she could rent out the house, but her new neighbor, who owns the land that affords the only access into the boxed-in property, won’t allow passage through his property. She would have to go to court to secure a right of way. Essentially, this neighbor wants to force her to sell her land for way below market value so he can combine it with his own land and build a larger house. A realtor told Bunshun that this problem is very common throughout Tokyo, where, according to the Internal Affairs Ministry’s survey, there were already 750,000 vacant residences in 2008.

One economist told Bunshun that vacant housing should be approached as a social problem, and not just an economic indicator, since it will have an effect on so many related issues in the future. In 2009 Nomura Research published a report on the effect of population shrinkage on housing and land use. The report said that there were 1.16 million new housing units built in 2003. Based on this number, Nomura projects that by 2040 the vacancy rate in Japan will be 43 percent. The turnover rate of housing for owners 65 or older is only 6.6 percent, which means that these people have decided to remain in the first home they bought until they die, even if it’s too old or too big. Reasons weren’t mentioned, but it isn’t too difficult to figure them out. Even if they want to move, they wouldn’t be able to sell their homes. Since the entire housing market is geared toward new units, older units have little resale value, and as the years go by they just keep accumulating, cluttering the landscape like the carcasses of starved animals.

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5 Responses to “Negative legacies”

  1. eurasiaendtoend Says:

    I have been following your blog since after the 3.11 quake (or maybe before it) and would like to thank you for it. It is unique (being in English) and very informative.
    This article is as good as any for me to comment on, so here goes.
    I feel that the Japanese market for property is doomed for several reasons.
    1. The obsession with all things new. New is perceived as better, cleaner and convenient while old must dirty and troublesome. So, build more, newer and nicer places while pulling down or abandoning older ones. Demand seems to have little to do with it.
    2. Earthquakes. The damage caused by quakes and tsunamis reinforces No.1. Newer is supposed to be more quake proof and older properties, while still standing, may have been weakened by past tremors. So, build more and more instead of strengthening old places.
    3. Politics and land-use laws. Might seems to be right here and mere ownership of land is enough to construct whatever, wherever without regard for design, demand or impact on traffic or environment.

    The result of all of this is that there is overbuilding leading to a view of property as disposable and not expected to hold value. With the coming plummet in population even the underlying land with lose its value in more and more of Japan.

    A year ago I visited a friend living in Tatebayashi city in Gunma. I was shocked by the dereliction along some roads with closed up drive-ins followed by abandoned restaurants, gas stations and on and on. If it were torn down and turned back to fallow land it would not look so bad. Amidst the ruins there was a gigantic Aeon mall which buzzed with activity.

    The planning process should be tightened to slow down the endless construction of new condominiums and shopping malls. Of course it will not happen because vested interests would be hurt.

    I like driving and have visited many of the places you’ve looked at, including out in Onjuku, Chiba. Asking agents if places will hold value or be easy to sell again are the killer questions. The honest answer in most of Japan must be “no”.

    Like

    • catforehead Says:

      These are all valid points, but probably the most important one is land-use laws. Though Japanese authorities are somewhat obsessive about legislation and regulations, most don’t change with the times. For that reason, city planning is very weak, and because there is no long-term vision, short-term solutions always win out; and short term solutions benefit industries (real estate, construction, in this case) at the expense of the greater society.

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  2. Jeffrey Says:

    Great piece. It’s sad to see that so little has changed in the last twenty years when I first did research on this.

    Like

  3. Perogyo Says:

    This is very interesting. I agree that this is a policy issue, but I wonder how to change it for the better. I’ve been following along with your search of older properties and also done my own and there are so few houses that are acceptable for resale on the market. What to do about the huge percentage of homes that are crap? It would be great to change policy to favour older homes but who would want to live in one of the asbestos-laden, dark, dank, hole-in-the-ground toilet homes that make up so much of Japan’s older home market?

    Like

  4. angelo Says:

    Very informative and well-researched piece. I follow this blog because you have a great blend of the personal (your never-ending house-hunt) and the political/social. I like people who state what seems to be obvious but noone here dares to say out loud. It’s a particularly Japanese ailment. As others have said, a lot of the engine for all of this is vested interest, and the political corruption ensures that noone who would threaten these vested interests is allowed to get in there and do anything in the public interest, even when it’s screaming out for help.
    Anyway, keep on writing this kind of piece – I’m hooked! Keep visiting properties and reporting on those too – they’re very good for learning from!

    Like

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