Image: Tokyo, Japan. Aleksandar Pasaric, via Pexels.
Japan ranks highly when it comes to the availability and affordability of housing. This is despite Tokyo’s current investment boom (triggered by a weak yen and international nervousness about the Chinese real estate market and geopolitical situation). The boom has caused a recent surge in property prices and rents relative to incomes. Hence the current situation has raised fears among many young professionals and would-be home buyers that sound familiar to North Americans.
Nevertheless, the first two decades of this century were characterized by remarkably stable prices, the lowest rate of homelessness of any large country and a very high level of satisfaction with housing. The fundamental soundness of Japan’s housing policies, which helped to rebuild the country after the Second World War and again after the collapse of the property bubble in the 1990s, should help it weather the current market fluctuations as well.
It might be thought that Japan’s generally enviable housing situation has simply been linked to its demography. Japan has long resisted substantially expanding immigration, and largely as a result is facing acute labour shortages, dying rural towns and rapid population decline (dropping more than three million since 2008 to under 125 million in 2023). There are between eight million and 11 million empty or abandoned houses in Japan.
Yet this does not explain Japan’s success in expanding supply during its years of rapid population growth, or its usual success at maintaining the supply of affordable housing in the largest cities throughout the postwar period, or its current success at keeping the national rate of homelessness in 2023 at 0.2 persons per 10,000 population, as compared to 10.0 for Canada, 17.5 for the United States and 54.4 for the United Kingdom. The low rate of homelessness has not been achieved by an exodus of poor people to the countryside to purchase inexpensive abandoned homes; the population flow has been in the opposite direction, just as it has during most of the postwar period, as younger people gravitate to the larger cities in search of employment.
Thus, demographic trends are not as important in explaining Japan’s history of providing affordable accommodation to all income groups in the largest cities as is the country’s unique housing policy. Japan has benefited greatly from concentrating zoning authority in the central government after the war, as well as instituting astute mortgage market reforms in recent decades.
After millions of houses were burned in the Second World War, there was a shortage of about 4.2 million units, exacerbated by the postwar baby boom. In that context, the government of Japan undertook a “three-pillars” approach:
- The Government Housing Loan Corporation (GHLC) was established in 1950 to provide liquidity to mortgage markets;
- the 1951 Publicly-Operated Housing Act authorized “Local Government Units” (LGUs) to construct public rental houses for low-income people;
- in 1955 the Japan Housing Corporation (JHC), established “to promote collective construction of housing and the large-scale supply of residential land for middle-income people, mainly in major urban areas,” addressed the needs of people migrating from rural to urban areas.
Between 1954 and 2019, cumulative migration into three of Japan’s major metropolitan areas was 12 million people – of whom 10 million moved to Tokyo’s metropolitan area. This massive migration created a significant housing shortage in urban areas, especially during the 1950s and 1960s. It was alleviated in part by large public sector loans from the Fiscal Investment and Loan Program (FILP) under the Ministry of Finance.
FILP raised funds from postal savings and national pensions nationwide, thus mobilizing unused financial resources that otherwise might have been devoted to less productive uses – an excellent example of how Japan both encouraged and capitalized on its famously high savings rate. As a result, the GHLC financed the construction of 19.4 million homes nationwide between 1950 and 2007, when it was replaced by the Japanese Housing Finance Agency (JFA). Overall, the “three pillars” oversaw the construction of 76.7 million units for 54 million households between 1948 and 2020.
These pro-housing policies did not always proceed without local resistance. In the 1970s there was some backlash against the proliferation of highrise condominiums in Tokyo and Osaka, which delayed the implementation of zoning reforms. The resulting housing shortages and price rises exacerbated the bubble in property and asset prices that occurred in the late eighties.
The collapse of the bubble in 1992 was disastrous in terms of short-term unemployment, falling incomes and a string of bankruptcies and bad loans that nearly ruined the financial system. However, the collapse also provided the perfect economic and political context for the national government to reassert its authority over NIMBY impulses. When zoning is a national law (and not just a municipal bylaw), administrative changes can have widespread and rapid effects, as occurred in Japan in the mid- and late nineties. These changes culminated in Prime Minister Junichiro Koizumo’s Urban Renaissance Policy in 2002, which made it easier to rezone land and sped up the process for building permits.
Cities can only choose among 12 possible zones (as opposed to the hundreds of zones found in North American cities). Further, Japanese cities are constrained in terms of ratios of floor to lot size areas that they are allowed. Such measures have made it possible for Japan to engineer a cultural shift away from suburban sprawl. As Alan Dunning of the Sightline Institute puts it, “The national interest lies in developing compact, walkable, low-carbon neighborhoods with plenty of homes for everyone, and that’s what policy allows, obstructionists be damned.”
One reason for the relative success of Japanese central planning in this policy area is that housing obstructionism surfaces only occasionally and has been quickly responded to by the central government. Another related reason is that social cohesion and support for policy is assured by Japan’s greater attention to the interests of lower-income renters and homeowners. Since local governments are more constrained by national zoning laws and therefore less easily lobbied by existing homeowners to prop up house values, they have more incentive to use central government grants to build, buy or rent public housing on behalf of low-income renters.
While concern about income inequality has been increasing in Japan since the 2008 global financial crisis, this aspect of Japan’s postwar social contract has remained intact: the stock of public housing reached 2.16 million in 2016, and has been maintained through the government’s five-year plans as Japan’s focus has shifted from the quantity of housing in the 1960s and 1970s to the quality of housing stock. The 2017 Law Concerning the Promotion of Rental Housing to Those Who Require Special Consideration created three different programs for (1) a registration system for supply of private housing; (2) financial assistance for renovation of registered housing; and (3) housing income supports of up to ¥40,000 (approximately C$400) to pay the difference between market rates of rent and the rent paid by qualified low-income tenants, with the necessity of the subsidy being reviewed every three months.
Several distinctive characteristics of Japan’s housing market and the policies governing it limit their applicability and transferability to other countries, such as Canada. The scarcity of land (a per capita habitable area of only 800 square metres) is the fundamental difference. The prevalence of earthquakes (Japan has 20 per cent of the world’s high-magnitude earth tremors) is another: the national building code has been revised after every major earthquake; old structures become obsolete and depreciate very rapidly, with the largest difference in housing value being between homes built before and after the 1981 Building Code Revision. Rapid postwar growth and urbanization have meant a faster turnover of housing stock, and according to the 2018 Housing and Land Survey, fully 76 per cent of the 53.6 million currently existing housing units have been built since 1981.
Nevertheless, there are two instructive takeaways from an examination of Japanese housing policy for other countries in general and Canadian jurisdictions in particular. One is stressed in the conclusions of Masahiro Kobayashi’s 2016 analysis for the Asian Development Bank Institute: “The most important lesson from the Japanese experience is that policymakers should be vigilant to detect and prevent bubbles in property markets.” In the post-1992 era, financial prudence by the national government in containing property speculation has been conducive to good housing policy as well.
A second takeaway is provided in 2021 by Alan Dunning: in a ranking of ten industrial democracies in terms of their ability to construct “an abundance of housing … in compact, low-carbon neighbourhoods that allow car-lite lifestyles,”
The clear frontrunner is Japan. It’s likely no coincidence that Japan’s overall system of regulating housing has always been simple, uniform, and markedly more welcoming to homes of many sizes and types than are other nations’ policies. This national control has only grown in recent decades, even as other nations have gone into residential lockdown. In Japan, a broad public interest in abundant housing has usually trumped parochial housing obstructionism.
There is clearly more to Japan’s housing success than just low immigration and a declining population.
In Europe, Finland has succeeded in reducing homelessness
In the mid-1980s, there were around 20,000 single homeless people in Finland. According to national estimates, in 2021 this figure had been reduced to around 3,950. Finland is committed to eradicating homelessness by 2027.
Finland is the only country in the European Union to see homelessness numbers significantly decrease. In Helsinki, decades of progressive housing policy laid the groundwork for tackling street homelessness. The municipality owns 70 per cent of the land in the city, including over 60,000 social housing units, and maintains a housing policy that increases this housing by around 6,000 units a year. District housing laws limit segregation, ensuring that 25 per cent are social housing with the rest a mixture of purchased and private.
The core principle is that people are better able to move forward with their lives if they are first housed. Studies have found that something like €15,000 a year is saved for every homeless person in properly supported housing, against the cost that would be otherwise incurred in emergency health care, social services and criminal justice involvement.
A result of these initiatives has been the conversion of existing homeless shelters into permanent housing. Programs have been developed and implemented through wide partnerships between the state, municipalities and local NGOs, notably in the city of Helsinki, which has become the model.