By Jeff Wynkoop
The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has announced that it plans to introduce measures to convert the growing glut of vacant and abandoned houses in Japan into quasi-public housing(準公営住宅).
8.2 Million Vacant Houses
According to the MLIT, in 2013 there were 8.2 million vacant houses throughout Japan, a 24.4% increase compared to 2003. This is about 13.5% of the entire residential stock and a much higher percentage than for other countries. Without new measures, Nomura Research Institute has estimated that 21% of all residential buildings will be abandoned by 2023.
Helping Low-Income Families With Children and Saving on Public Finances
The MLIT sees a number of potential positive effects from turning this large stock of abandoned homes into quasi-public housing, including renting them out to low-income families with children. The MLIT is also considering providing direct rent subsidies to help these low-income households with children.
Also, with Japan’s public finances already stretched, the MLIT projects that converting abandoned houses into quasi-public housing will be less expensive than spending on new infrastructure.
Once the MLIT finalizes the details of the legal framework, it aims to put the proposed law before the 2017 ordinary Diet session.
Currently, the Japanese government provides financial assistance to people living in public housing (which is constructed by local municipalities). Public housing rent is also lower than market rents. However, the country’s local municipalities are facing severe budget conditions, and spending on new public housing (as opposed to renovating existing vacant homes) would put more pressure on their budgets.
The MLIT hopes to kill two birds with one stone: To assist low-income families with children by offering them quasi-public housing and to lower construction costs that have to be paid for by local municipalities.
There is another potential big benefit for increasing liquidity in the housing market, which we discuss below. Please see the section on Vacant Houses with Owners?
It should be noted that there is currently a shortage of public housing, in general, not just for families with children. In 2013, nationwide there were about 2,160,000 public housing units, but as mentioned above, due to tight public finances, this number is unchanged from the number recorded in 2003.
The MLIT envisions that the elderly could also move into these new quasi-public housing residences.
Outline of Framework
The MLIT states that the framework for converting abandoned homes into quasi-public housing will work as follows:
- Vacant abandoned apartments and detached houses in the private sector that meet earthquake-resistance, sound-proofing, and other building standards qualify to be designated by the national government as suitable for quasi-public rental housing.
- The national and/or local government will do any additional necessary renovation or construction and local governments may directly administer and operate this housing.
- Because these residences will have construction quality standards mid-way between private rental housing and full public-housing, they will be designated as “quasi-public housing”.
- The government will also provide rent subsidies so that the net rent paid by residents will be less than for equivalent private sector housing.
Which Households Qualify
Local municipalities will ultimately decide which families qualify to move into quasi-public housing.
The MLIT projects that households that have incomes of up to less than 25% of the average income of all households would qualify. The 25% mark is equivalent to income of 158,000 yen ($1,347) a month.
As the goal is to also help families who face financial hardship in raising children, the MLIT also plans to expand the program to include families with children who have incomes of up to 40% to 50% of the average income of all households. The 50% figure is equivalent to about 259,000yen per month.
It is estimated that semi-public housing rent will be more expensive than full public housing rent, but because residents will receive subsidies, their net rent will be lower than what they would pay for equivalent private sector housing.
Separately, families with children will also receive additional rent subsidies from the government.
To prevent delinquent rent payment, the government will assist residents with premium payments to rental insurance companies. According to the MLIT, as a rule, residents who are delinquent with rent payment for several months in a row will be evicted.
New Building Standards to be Established
The MLIT also plans to establish new building standards (including earthquake, energy-saving, and soundproofing standards) that will be applicable to abandoned and vacant houses that could potentially be designated as quasi-public housing.
Vacant Houses with Owners?
The Ministry also plans to provide financial assistance to owners of vacant houses to help them fix or renovate them to meet the new standards.
It may be seem contradictory that vacant houses could have owners, but due to Japan’s ageing society, many people inherit un-occupied homes from their deceased parents.
These homes are no longer occupied, as adult children often live in cities far from their hometowns. However, as they have inherited the property, they are still responsible for maintaining them and paying the property taxes.
Some people stop maintaining their parents’ homes, as they are located too far away. These houses end up becoming not just abandoned eyesores but also a drag on the local housing market
It is also important to point out that even in urban areas, vacant and abandoned houses are a growing problem.
Thus, the MLIT’s proposal could ultimately help with liquidity in the housing market in general, not just the issues of helping low-income families and cutting down on public spending.
Impact on the Supply of Rental Housing
In this framework, the MLIT envisions that real estate agents will have a role as intermediaries, helping people decide whether renting in the private sector or opting for quasi-public housing is more appropriate for them.
The MLIT notes that it is aware that converting abandoned houses into quasi-public housing will increase the supply of rental housing as a whole, which would impact real estate brokers (who rely on commissions for their income), and it is weighing these disparate issues in finalizing the overall framework.
You may also be interested in: Yokosuka City First to Tear Down a Vacant House Under New Law
Source: Nikkei Shinbum, January 16, 2016
Top photo: Abandoned house in Kita Shinshu, Nagano, Japan.