On the 27th of last month, a Korean resident in their 30s met in Osaka and noted that society's view on empty houses is changing. While the issue of empty houses remains a chronic problem in Japanese society, more people are beginning to recognize the potential for utilizing these spaces.
This is a result of policy efforts by the Japanese government, which has supported the demolition and renovation of empty houses through special legislation since 10 years ago. Additionally, there are increasing successful cases in the private sector where empty houses have been transformed into hotels and restaurants, which is also providing clues for solving the empty house problem.
◇Japan focuses policy efforts on empty houses…from empty house tax to direct regeneration projects
Japan implemented the Special Measures Law for Empty Houses in 2015, intensively working to prevent safety issues and regional decline caused by empty houses. Through this law, targets for utilization or demolition of empty houses were identified and supported. In cases where demolition is necessary, demolition expenses are covered, while those that can be utilized receive support for renovation expenses.
Tax reductions are available for recycling or renovating empty houses. Since 2023, the 'empty house tax' has also been collected. Owners who neglect the maintenance of empty houses, allowing roofs or windows to deteriorate and weeds to grow abundantly, do not receive tax benefits.
The Japanese government and local governments have prepared support measures for attracting population to areas densely populated with empty houses, as the issue is closely linked with population decline and local economic deterioration. For those moving to rural areas, particularly smaller local cities, incentives for relocation are provided if they utilize empty houses.
At the government level, a reliable trading platform has been established to facilitate active transactions of empty houses. Each local government has created a database of empty house listings through the akiya bank (空き家バンク). Based on centralized information about empty houses, local governments connect owners with individuals seeking to purchase or rent empty houses at affordable prices.
In particular, local governments in Japan are actively supporting projects to utilize empty houses. They do not hesitate to support the remodeling of empty houses for shared dwellings, cafes, workshop spaces, or tourism accommodations.
These policy efforts are bearing fruit. Naoshima Island, located in Kagawa Prefecture, has transformed into a representative tourist destination by utilizing empty houses. The local publishing company Benesse turned empty houses in the Naoshima area into artworks through the 'ie (家) project.' This project has developed the declining area of Naoshima, where empty houses were increasing, into a prominent tourist destination that attracts more than 700,000 visitors annually.
◇Empty houses transformed into hotels in the market…owners' donations for local regeneration continue
In addition to these policy efforts, active discussions are taking place in the private sector regarding how to utilize empty houses. There are attempts to create new value by transforming empty houses into hotels or restaurants, alongside derivative businesses based on demand for demolition and renovation.
The 'Sekai Hotel' in the Fuse area of Osaka is considered a successful case of utilizing empty houses. The local construction company Kujira Construction decided to utilize an empty house that had been neglected for a long time in an old market as part of their social contribution efforts when entering the hotel business, transforming it into accommodation for travelers through long-term leasing. As of the end of last year, Sekai Hotel had a total of 22 rooms, accommodating up to 88 guests.
Mari Kitagawa, the project manager of Sekai Hotel, remarked on the 27th of last month, 'The Fuse area used to be a bustling shopping district due to its location at the end of a major train line, but once the train extended to Namba, the population began to dwindle.' He added, 'The market where the hotel is located has seen 350 out of 700 shops close down.' He continued, 'We decided to build the hotel with the aim of renovating the entire area for future generations in this declining downtown area,' stating that 'the expense for transforming each empty house into a hotel, including labor and design costs, costs around 24 million yen (approximately 221.1 million won).'
Because Sekai Hotel transformed empty houses scattered throughout the market, unlike typical hotels, the rooms are separate from each other. Guests must pick up keys and maps from the hotel front located at one end of the market to find their accommodations. The hotel has no internal dining facilities; instead, it has made agreements with market vendors to allow customers to use their services. These efforts by Sekai Hotel have revitalized a market that had become lifeless due to population decline.
Kitagawa explained, 'The market where the hotel is located used to be a shopping street frequented only by locals, but now tourists from outside are coming in, leading to new stores opening.' He also noted, 'As of 2023, the cumulative number of guests at the hotel is 6,357, which generates additional sales for market vendors when they purchase food or items from their stores.'
Hideo Hirano (67), who operates a shop called 'Naniwa Korokke' near Sekai Hotel, commented, 'Since Sekai Hotel opened, we've seen various customers of different ages with suitcases who were not previously seen in the market,' adding, 'Sales have certainly increased significantly as well.'
Some owners of empty houses have donated their houses in line with the purpose of Sekai Hotel. Kitagawa indicated, 'The structure involves remodeling the empty house, paying rental costs to the owner, and after a certain period, the owner can utilize the empty house.' He mentioned that 'some owners have chosen to donate their empty houses to participate in local regeneration.'
The successful model of Sekai Hotel is leading to the utilization of empty houses in other areas. Kitagawa noted, 'A new hotel business utilizing empty houses is underway in Takaoka City, Toyama Prefecture.' He mentioned that 'this project is not being conducted directly but rather through a franchise model, wherein local companies are being informed about empty house renovation know-how, collaboration with nearby stores, and marketing obtained while developing Sekai Hotel.'
◇Empty houses as investment properties…increasing foreign interest
As the potential utilization of empty houses grows, more individuals are expressing interest in investing in empty houses. Because one can purchase empty houses for free or at a low price, after investing only in renovation expenses, they can become legitimate rental business operators. Especially, many are purchasing empty houses located in areas with relatively high rental demand, such as near train stations, for their old-age living expenses.
Shigeyuki Okuma, chairman of the National High-Rise Regeneration Promotion Council, stated on the 26th of last month, 'With remote work taking hold during the COVID-19 pandemic, the demand for single-family home rentals has increased, leading to a 20% jump in the number of single-family home listings on real estate websites after eight months.' He added, 'While the demand for renting single-family homes is increasing due to considerations for child-rearing environments, the supply remains limited, making empty houses a potential growth market.' He continued, 'Land prices drop sharply as you move away from urban areas, while monthly rents decline more gradually, making empty houses that are located slightly away from stations, where land prices are lower yet still have a prospective profit, an attractive target.'
Foreigners are also growing increasingly interested in empty houses in Japan. There are no legal restrictions preventing foreigners from purchasing empty houses in Japan. Some local governments even provide information about empty houses and operate purchase support programs targeted at foreigners.
Ruben Glazer, CEO of the platform 'Akiya Banks' providing information about empty houses, stated, 'There is significant foreign interest in empty houses in Japan.' He noted, 'According to an analysis of Akiya Banks' traffic last year, Japan accounted for the largest share at 20%, followed by interest from the United States (10%), Thailand (9%), Australia (5%), and others.'
Glazer continued, 'Local governments in Japan, including Hokkaido and Kyushu, are actively providing incentives for foreigners to purchase real estate. To prevent surrounding areas from becoming abandoned due to empty houses, it is common for them to support information about empty houses and provide subsidies for renovations.'