In the debate about how to solve the housing shortage in UK cities, foreign examples, especially in the rest of Europe and English-speaking countries like the US and Australia, often pop up to show what we can do better. But recently, some of the most exciting ideas in housing policy and planning reform have started to come out of Japan.
The Centre for Cities recently visited Tokyo, Sendai, and Onagawa Town through the Japan Local Government Centre on the Japan Study Tour to find out more about how cities function in one of the most urbanised countries on the planet – and what we can learn from them here in the UK. Here’s what we found.
Japanese homes are cheaper because they build more
Compared to skyrocketing housing costs in many Western cities, Japan has seen remarkable success in supplying affordable housing – even in cities with lots of economic growth. While average mean rents in London are upwards of £2,000, average rents in Tokyo are about £1,300 – even after Brexit-related depreciation of pound sterling.
This isn’t caused by social housing or danchi – less than 5 per cent of homes across Japan are socially rented, compared to about 17 per cent in England. And it’s not because Japan’s population is shrinking either – Tokyo’s population is still growing due to migrants from other parts of Japan and abroad.
Instead, it’s because the supply of housing in Japanese cities is responsive to local demand. While the UK saw about 194,000 houses start construction last year, Japan saw 942,000 housing starts last year.
Even though Japan demolishes and rebuilds lots of houses, the net increase in homes is still much larger than the UK – about 600,000 homes (Table 5) are added to Japan’s dwelling stock every year. Tokyo has added roughly 110,000 homes a year since 2003, compared to 20-40,000 a year in London over the same period.
These homes are often smaller than what we’re used to – the average property in Tokyo is 55 square metres, compared to 80 square metres in London. But this isn’t the full story. New supply in Tokyo responds to demand by building lots of smaller one-bed flats for singles, and young people can live independently without needing to share with housemates. This means that, even though average homes are smaller, the average Tokyoite probably has more housing floor-space per person today than the average Londoner because living with housemates is so uncommon.
Japan’s flexible zoning system is a different kind of planning
The planning framework that underpins this supply is a simple zoning system that allows by-right development, rather than one that relies on granting planning permission for each individual site. There are only 12 zones, defined according to the maximum nuisance level they allow, ranging from sleepy residential to polluting industrial uses. The key is that pretty much anything can be built, provided it does not exceed the zone’s nuisance level – so in areas zoned for high street usages it is possible to convert a hotel into housing and vice versa, but this is not possible in residential only zones.
This allows market supply to respond quickly as market demand changes and ensures development and density is driven by land values. If the demand to live in a city grows, older houses can be knocked down by landowners to provide more and better quality homes. In the case of apartment buildings, 80 per cent of the apartment owners need to agree to demolition and redevelopment. This is why Japan’s higher rate of demolition isn’t wasteful, as it enables an efficient supply of more and better quality housing.
Local taxes in Japan also encourage more homes
As a result, there is a clear difference in Japan between the value of land and the value of the property that sits on it. Like in other countries, the price of land in Japan reflects local economic strength and access to amenities and jobs. But unlike the UK, in Japan, the value of houses declines as they get older, because it so easy to supply new homes. Reflecting this, the property tax valuation of Japanese homes also declines over time, increasing the incentive for local government to build new homes to fund public services.
Japan shows how political choices cause Britain’s housing shortage
Of course, the planning system is not the only thing which is different. One factor is that the politics of housing are rather distinct – for instance, green belts around Tokyo in 1946 and 1956 failed because they were so unpopular with residents and local government.
But what Japan’s inexpensive homes and its alternative policy approach prove is that the housing shortage in British cities is not inevitable. Housing does not have to be expensive in prosperous cities. The housing shortage is something we have chosen to experience and can choose to change if we want to. If Tokyo managed to reform its green belt, twice, why can’t London or Cambridge?
We may not want to copy-paste everything about Japanese housing into UK policy. We may, for instance, choose a larger role for social housing, or slightly stronger heritage conservation. But for national and local policymakers trying to end the housing shortage, understanding Japan’s experience is essential if we want housing to be inexpensive for everyone.
Anthony Breach is an economic analyst at the Centre for Cities, on whose blog this post first appeared.