Realty Check: Why does Japan have nine million empty homes?

Amidst Japan’s aging population and dwindling birth rates, the prevalence of abandoned residences is escalating at an alarming rate. According to a Ministry of Internal Affairs and Communications survey, the tally of vacant units has surged by 1.5 times, reaching approximately 8.49 million units over the two decades preceding 2018.

This translates to roughly one in every eight homes standing vacant, with projections indicating a staggering rise to 23.03 million units by 2038, reported World Economic Forum (WEF).

In Japanese, “Akiya” translates to “empty house.” This term specifically means a residential property that has remained unoccupied for a duration of at least six months.

Where did all these empty homes come from?

The survey classifies these abandoned homes into four categories: available for rent, listed for sale, serving as secondary residences, or falling under the category of “other.” Notably, those categorised as “other” comprise over 40 per cent of the total. Furthermore, the study reveals that nearly 90 per cent of these long-term vacant properties, left unattended without rental or sale, consist of single-family houses. Among them, approximately 70 per cent were constructed before 1980.

Approximately 59 per cent of these abandoned properties stem from inheritance. Many inheritors find themselves in possession of homes previously occupied by their ancestors or parents but encounter challenges in managing them, often due to geographical distance from their current residence.

Why are these houses empty?

The core of the problem lies in rural depopulation, compounded by the fact that many inheritors of such properties find themselves either incapable or disinclined to inhabit, renovate, or even dismantle them. However, urban areas are not exempt from this phenomenon, with hundreds of thousands of long-term vacant houses dotting city landscapes.

The aggregate count of empty residences accounts for nearly 14 per cent of all homes in Japan, although the actual figure may be higher. According to the Nomura Research Institute, the estimated number of “akiya” stands at nearly 11 million, potentially comprising over 30 per cent of houses within the span of a decade.

Compounding the issue, existing property tax incentives for residential land, which provide tax reductions of up to one-sixth, incentivise owners to retain vacant homes rather than demolish them, thus exacerbating the number of vacant properties.

The depopulation impact extends to the broader population dynamics. In Japan, the fertility rate experienced its seventh consecutive annual decline in 2022, dropping from 1.30 births per woman to 1.26 births per woman compared to the previous year. Similarly, Singapore and Taiwan have seen their fertility rates dip below one child per woman. Additionally, fertility rates in the United States have plummeted to their lowest level in a century.

What action has the government taken to curb empty homes?

To mitigate the risks posed by poorly managed empty homes, such as structural collapse, hygiene degradation, and adverse effects on community aesthetics and living standards, the government enacted the Vacant Houses Special Measures Law in 2015. This legislation identifies high-risk properties, labeled as “specified vacant homes,” mandating owners to either demolish or refurbish them. Failure to comply may result in government-enforced demolition at the owner’s expense.

Subsequently, the law underwent revision in December, introducing a new category termed “poorly managed long-unoccupied homes.” This classification encompasses properties exhibiting signs of potential deterioration, such as broken windows or walls, and allows for the revocation of tax reduction measures if the situation fails to improve.

Local authorities and start-up step in

Efforts to address the issue of empty homes have gained momentum among local authorities. In Setagaya Ward, Tokyo, estimated to harbour the highest concentration of vacant homes nationwide, approximately 50,000 initiatives are underway to facilitate will creation among seniors. This initiative aims to prevent the emergence of empty homes by streamlining inheritance procedures and averting prolonged deliberations over high land value, a common impediment to timely property transfers.

Various startups have also emerged to tackle the myriad challenges associated with abandoned properties. Crassone, for instance, offers a matching service connecting individuals seeking to dispose of empty homes with suitable demolition companies, reported WEF. Collaborating with over 1,900 demolition specialists, the company provides comprehensive services, including AI-driven cost simulations and post-demolition land appraisal.

Renobank, another startup, endeavours to rejuvenate the secondhand housing market by refurbishing unoccupied properties into habitable dwellings. Through a portal site, users can access information on secondhand homes, renovation costs, and property valuation. The company also spearheads the development of an AI model to generate renovation layouts swiftly and accurately.

AGE Technologies addresses inheritance challenges, a key contributor to empty homes, by offering a streamlined web service for real estate inheritance procedures. By simplifying the complex inheritance process, the company aims to facilitate proper registration and management of vacant properties.

There has been a significant interest among foreign tourists in experiencing a stay in traditional Japanese accommodation, surpassing the current supply. This demand surge has been bolstered by the yen’s multi-decade lows against major currencies, fueling a tourism boom. In March alone, Japan welcomed a record 3 million overseas visitors.

With inputs from agencies