Japan’s invisible problem: enough empty homes to house Hong Kong and no known owners

At the dizzy heights of Japan’s bubble economy, the land around the Imperial Palace in Tokyo was estimated to be worth more than all the real estate in California. In a reverse unthinkable in those heady days, there are now millions of hectares and millions of houses in Japan for which ownership cannot be established, are sitting empty, or even deliberately unclaimed by those who have inherited them.

The combination of a shrinking population, falling land values, patchy registration records and a tax system ill-suited to the current situation has left ownership unclear on an estimated 4.1 million hectares, an area larger than Taiwan. There are also approximately 3.5 million unoccupied residences – more than the entire housing stock of Hong Kong – that are not up for sale, rent or development. Although the government and non-profit organisations (NPOs) are working to address this, Japan’s skewed demographics mean it is set to only get worse in the coming decades.

According to surveys by the Ministry of Land, Infrastructure and Tourism and the Ministry of Justice, registration records for 20 per cent of private land in Japan are older than 50 years. That rises to 26.6 per cent in rural areas, compared to 6.6 per cent in urban areas.

Shoko Yoshihara, research fellow at the Tokyo Foundation for Policy Research think tank and a leading authority on the issue, points out that despite the age of the records, some of these tracts may have owners.

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“There is decreasing incentive to register land because of falling values, but that doesn’t necessarily mean there is no owner. It may remain registered in the same person’s name for more than 50 years, but because of increased longevity, they may or may not be deceased,” explains Yoshihara, author of Land Issues in the Era of Depopulation: Policy Considerations for Missing Owners, Inheritance, and Abandoned Homes.

Nevertheless, unidentifiable ownership is a very real problem and one that hampered reconstruction after the March 2011 earthquake and tsunami. The building of sea wall defences, relocating communities to higher ground and redevelopment all stalled in some areas because the owners of land could not be located.

“It is kind of an invisible problem,” says Yoshihara. “But it is important to find solutions for this before the next major earthquake or natural disaster.”

The problem exists even in areas where land is extremely valuable. The town of Niseko, Hokkaido, has attracted winter sports enthusiasts and investors from Australia to China, thanks to its famous powder snow.

“In Niseko, many small parcels of land were bought as investments before and during the bubble era, often without [the investors] seeing them. Those owners are now in their 70s or 80s and some are forgetting about them and their children don’t know about it,” says Yoshihara.

“There is no one, simple solution to this problem because it is structural and has many causes,” adds Yoshihara. “The tax system is another issue. Japanese governments implemented tax policies that were advantageous to house-building during the decades of economic expansion.”

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Under Japanese tax law, keeping a dilapidated house on a piece of land is much cheaper than paying for demolition. The annual tax rate on land with a house or building on it is 0.23 per cent, which increases six-fold if there is no structure on it, notes Toshikazu Suto, a professor of real estate science at Meikai University, just north of Tokyo.

In rural areas in particular, where values have fallen due to depopulation, it has become economically inviable for people to take possession of land they have inherited, thus depriving already struggling districts of tax revenue.

The government is examining legislation to simplify the current land registration system and make it automatic for heirs to become the official owner, but with only small fines for non-compliance.

“I don’t expect the government reforms to have much success because this is a problem of too much supply and not enough demand,” says Suto.

Establishing “land banks”, which identify empty land and houses, and trying to find buyers are “a small solution”, says Suto, but one he is engaged with in Kaminoyama, in Japan’s northeast.

The picturesque town, which boasts a castle and a row of preserved samurai houses, is a popular hot spring resort. But this has not made it immune to depopulation, says Hidetaka Watanabe, temporary head of the Kaminoyama Land Bank NPO. Ideally, places like Kaminoyama need to attract young families to help rebalance skewed demographics, though finances are a barrier even if they can find work locally.

“For young people and young families, the issue is that even though the empty houses look cheap, there are naturally costs to fix these places up. Then if they renovate the houses, they have to conform to fire regulations and building regulations,” explains Watanabe.

Japan’s building regulations are stringent, in large part due to the earthquakes and other natural disasters the nation is so prone to.

The NPO has been working closely with the local government and real estate agents since June 2019, building a database of 75 properties and lots, around half of which are now occupied. Land laws, which provide no structure for municipalities to receive donations of unwanted plots from owners and place restrictions on use, are a major barrier, according to Watanabe.

“And, of course, tracking down the owners; there are even Japanese people now living in Hong Kong who own land here,” he adds. ■