Japan's Rental Housing Market Defined by Land Scarcity, Earthquakes, Demographic Shifts

A Brookings Institution report by Jiro Yoshida on Japan's rental housing market reveals "a mismatch between housing stock and demographics in a rapidly aging and shrinking society, exemplified by vacant housing units." The country's unique geography and post-war economy have created a market "characterized by a large construction volume, rapid technological progress, fast depreciation of housing value, a thin secondary market, and low maintenance of existing properties."

The combination of scarce habitable land, "frequent and significant earthquakes," and "a rapid change in housing stock, demographics, and lifestyle after WWII" led to a "significant housing shortage in urban areas, especially during the 1950s and 1960s, alleviated in part by active public sector investments," Yoshida writes. "After the housing shortage was resolved, the government enacted the Basic Act for Housing in 2006 by focusing on housing quality issues such as elderly persons’ housing, low carbon emissions, and condominium management."

Other takeaways:

• "In 2020, approximately 60% of Japan’s newly constructed units were owner-occupied houses and condominiums, and the remaining 40% were rental units," but "rental units account for only 19% of the total floor area."

• "Young households tend to live in private rental housing. Among heads of households younger than 30 years old, 82% live in private rental housing, and only 9% own houses."

"The biggest challenge," says Yoshida, "is managing the housing stock in an aging and shrinking society."