Japan's Housing Market Myth

People like to point to Japan as an example of how we should create affordable housing. But housing is ridiculously complex. Japan has a bigger, deeper story than just being a place with affordable homes.

[chrishornat]

While Japan’a population overall has been declining, Tokyo metro has continued to experience local population increase. I think this is an important fact that you did not mention. It would make sense that the national housing environment has an impact, but I’m sure you would agree the local housing environment with supply and demand probably matters more.

[shindenkokonomaru]

The zoning alone is not what makes Japanese housing so affordable. What the real kicker is, is that it's fundamentally not seen as an investment vehicle. There is no impetus (or even a structure) for people to lash out about what is being built around them because

1: the only value that exists is in the land and its location relative to desirable amenities like train stations etc, that means your house is not actually seen as being valuable and

2: nobody expects that value to increase over time, at all, ever. The lesson was learned from the bubble bursting, meanwhile the US is currently trying to do 2008 redux because nobody who actually has the power to make these policy and financial decisions learned any lessons.

Americans gave up on retirement savings and pensions because they put all the chips into housing infinitely increasing in value making even high interest mortgages profitable for the borrower in the long term.

[reallyreason]

When you go to Japan's major cities, it’s striking just how much building is going on in the cities and how diverse and heterogeneous the architecture is. Walk down virtually any block in Tokyo and someone is building something new.

The main thing that drives affordability in the Japanese housing market is dynamism in construction and a fundamentally and utterly different relationship between people and housing. Housing in Japan is a rapidly depreciating product. It’s something you buy for its use value with the expectation of a limited lifespan and not an investment, most of the time. Combined with the rapid lifecycle of houses, this leads to a level of market responsiveness that is unparalleled possibly anywhere in the world.

The expectation is that if you buy a house that’s more than 20 years old you’re either going to tear it down and build something new or do a total renovation. Exceptions to every rule, but this is the norm.

Tokyo is growing faster than any city of its size in the OECD and is somehow virtually the only one without a housing crisis. There’s clearly something important in how Japan approaches housing.

[usernameryan]

As others have commented, Tokyo has been seeing an increase in population. Regarding immigration, all that would be an argument for is even further housing deregulation to allow for the even increasing demand pressures on housing. Houston is able to keep very affordable housing prices even with disproportionate effects of immigration by not having an urban growth boundary and allowing unlimited sprawl. The housing would be even cheaper with less regulations on infill via parking minimum deregulation, some less strict environmental review, and ending private HOAs near the city center.

[sillyhead]

I could have sworn that Tokyo specifically had an increasing population. Does this detail not undermine your point that Japan's housing prices are in part held in check by an ever-decreasing population?

[ChristineMeier]

Fear and uncertainty create major wealth. It's those who take the risk and have strong gut to endure the bloody days. When i notice extreme dips i tend to actually move more money to crypto

[jameshansenbc]

Appreciate you sharing your thoughts on this Chuck. I do agree the declining population definitely is a factor, but it's kind of the like the counter-narrative to when people blame immigration for higher housing costs, it isn't the whole picture either.

To me, Japan really has mastered housing abundance in ways that go beyond the simple declining population. Some other bonus points towards Japans approach to housing not often mentioned:
* houses are often factory built, bypassing labour shortages. they literally have factories that use robotics to build houses in modules the same way factories build cars.
* houses can be assembled on-site in 1-2 days
* you can browse on a house builders website, find empty lots for sale, and have a house delivered there, as a "retail" type situation, in contrast to North America where you are often beholden to the rollout speed determined by the developer.

So as well as the less regulatory environment in terms of setbacks, sizes and types, as well as the reduced perception of it as an investment vehicle, there are some big differences. It's possible it is seen as less of an investment vehicle due to the overall declining population, in a sort of a morale sense. It's an interesting topic to explore though.

[mariusfacktor]

Isn't the fact that America has immigration an argument to become MORE like Tokyo?

Tokyo had a housing crisis in the 1980s because their stock market was booming. Working class people had to move further and further to the outskirts of the city to commute longer distances. Sound familiar? The Prime Minister at the time asked the local councils to allow more housing construction. They said no. So the Prime Minister took their zoning capabilities away. And ever since there has been a construction boom in Tokyo and home prices came way down. To this day, Tokyo has WAY higher housing production per capita than European or American cities.

America having higher immigration does not explain why US cities have lower housing production per capita. If anything it should mean the opposite. It should mean America increases housing production because we anticipate more newcomers. So I'm not sure the point Chuck is making here.

[johnsmiff]

Hey Chuck,

I'm curious to hear your thoughts; what would your top 5-10 projects be if you were somehow magically HUD secretary Chuck Marohn?

[mpr]

Would be interesting to compare Japan to South Korea that also suffers from a population decline and even worse birth rates. I thought their housing situation is much worse.

[Nopenopenonono-uq]

You might be right, but I’d highly recommend visiting Japan - it’ll give you some ideas about zoning. They might not be silver bullets for affordability (though I think their system is quite good at creating many different rings of starter homes/apartments), but you’ll wish you could import an idea or two. My favourite was how anyone can convert the first floor of their home into a family business - so you get a proliferation of tiny restaurants and cafes that are run by grandma and grandpa, only fit three people, and from the outside look like a big family dinner.

[maxpeterson]

I don't recall the reflecting pool ever being that green. Hope it's the angle.

[michaelberry]

Just last month, a couple friends of mine moved to Japan. They are lifetime teachers, 2 grown boys and ready to roam. I believe they met in Peace Corp. My understanding is that they will teach over there. So it is happening to some of us.

[vincewhite]

I can send you many YouTube channels of ex Americans, /Canadians/ Brit’s. Who live in Japan & Korea, most towns are mixed use. And good cycling too.

[zacheryhernandez]

So much insane cope regarding this guys points about Japan and Tokyo in the comment section

[richdobbs]

This is one of the weaker arguments that you have made. You need to look at housing prices in Tokyo and compare it to other metro areas. You are accusing other folks of cherry picking, yet saying that you can't look at Japanese practices because their national population is decreasing. But Tokyo's population isn't decreasing. So you skepticism is mainly driven by cherry picking.

[stanyu]

@chuckstrongtowns your sunglasses resemble a Matrix character and do not compliment your face. Ask your daughters to choose a replacement pair, I’m sure it will look better on you!

[mattboop]

Oof. It's hard to take anything you say seriously when you're going on and on about complexity and yet are just missing some basic facts about housing in Japan and what's going on here. You're as guilty, if not more, of cherry picking as those you accuse since you're leaving out Tokyo vs. the rest of Japan. The countryside has been emptying out for decades, and that's a real problem for Japan, but Tokyo has been growing. And Tokyo itself is larger than many developed nations and so is not an unfair area to look at on its own. There's nothing wrong with saying "we're not addressing the totality of Japan's housing situation and its social problems" in order to focus on what is going well in Japan and specifically in Tokyo. That isn't dishonest and it isn't cherry picking. You've simply not engaged with any of the factors or realities of housing in the greater Tokyo metro area and instead have used a largely irrelevant national context to somehow refute the cherry-pickers. Unconvincing at best, makes me actively distrust anything else you have to say at worst.

And I say this not with any ideology I'm pushing. I'm not saying that pro-market housing folks are right, and I'm not saying that Japan (Tokyo) does everything perfectly, but you've simply not put together a sound argument for your case.