By Jeff Wynkoop
On October 26, 2015, Yokosuka became the first city to tear down a property under the new law called “The Law for Special Measures to Promote Dealing with Vacant Houses, etc.” (空家等対策の推進に関する特別措置法) brought into force earlier this year. Yokosuka City is located in Kanagawa prefecture, about 60 kilometers south of Tokyo.
The purpose of the law is to encourage municipalities to tackle Japan’s growing abandoned house problem. Without new measures, Nomura Research Institute has estimated that 21% (!) of all residential buildings in Japan will be abandoned by 2023.
Earlier this year, the Ministry of Land, Infrastructure, Transport, and Tourism published guidelines for application of the new law (with concrete examples, etc.), and already over 430 municipalities have enacted ordinances to bring the guidelines into effect.
Although in the past it was possible for the authorities to have a property condemned and demolished, the new law creates a special streamlined process for designating a property as a ‘vacant house,’ and encourages local authorities to demolish such properties after a period of notice and public announcement, etc. Prior to designation, the new law gives the authorities the right to enter and inspect abandoned properties as well as the right to review private fixed asset tax records to search for the owner.
Regional Vacant House Databases
Most importantly for potential investors, the law calls for each local government to create a searchable, public database of designated properties, and to provide subsidies and consulting services to owners to further repairs and transactions with such properties.
In the above Yokosuka matter, Yokosuka City received multiple complaints about the property in October 2012, and tried to locate the owner to demand rectification without success. In Japan, owners are not obliged to register ownership at the local legal affairs bureau.
Since the building was subject to multiple neighbor complaints, vacant for at least one year (i.e., common utilities such as water, electricity, etc. had not been in use for at least one year), and the owner not found, the authorities carried out a physical inspection and decided the building was a potential hazard to public safety.
Consequently, the local authorities designated the property as a vacant house (特定空家) under the new law.
On September 1st, Yokosuka made an official public notification on the city’s home page and the Official Gazette to demand the vacant house be repaired or demolished by October 22nd, otherwise the city would take action.
When there wasn’t a response and the owner still not found by October 21st, the mayor announced the property would be demolished on October 26th.
Why are there so many vacant houses in Japan?
Why are there so many abandoned houses in Japan? The usual response includes an explanation of the Japanese demographic situation (and resulting declining demand), coupled with the long-standing tradition of young Japanese leaving the countryside for big cities. There is, however, a more direct financial incentive.
Removal of Tax Benefit for Keeping a Vacant House
Under Japanese tax law, there is a reduced basis for fixed asset tax and city planning tax calculations for land where there is a residence situated on such land. Accordingly, rather than remove the residence and lose the tax benefit for the land, it pays for owners to keep the building on the land indefinitely, even if the building is decrepit and the owner has no plans to use the property.
The situation is, however, changing. In May this year, the rules for the tax reduction above were amended so that properties designated as a ‘vacant house’ by local authorities will automatically lose the reduction in fixed asset tax and city planning tax basis for the land. The new rules are to become effective from next year on, so hopefully in the future this will spur a noticeable decrease in the number of abandoned houses in Japan.
Top Photo: Vacant houses in Okayama, Japan, not the house that was torn down in Yokosuka City.