Yes, Other Countries Do Housing Better, Case 1: Japan

Last time, I imagined an alternative political economy of housing in the United States. This time, I begin a tour of other countries’ housing regimes.

“If you can’t solve a problem, enlarge it.”

This oft-repeated maxim was probably not expressed by Dwight D. Eisenhower, despite Internet claims to the contrary. (Experts at the Eisenhower Presidential Library have never found evidence he said it.)

Still, it’s wise counsel: expanding the scope of a problem can make new solutions possible. Confronting French beaches so fortified with German armaments that they seemed impregnable, Supreme Allied Commander Eisenhower launched a D-Day invasion that attacked five beaches at once—an operation the scale of which dwarfed all previous military landings. Attacking one beach was too hard, but when the problem was redefined as landing simultaneously on five, military planners began imagining the scale of engineering and force concentrations that would be needed.

Later, as president, confronted with a balkanized and piecemeal US highway system and a reluctant Congress, Eisenhower didn’t whittle down his proposal: he enlarged it. He proposed an interstate highway system so vast that it would not only speed travel but serve national defense needs, including evacuating cities in an age of nuclear weapons. If the problem was just transportation, it was politically unsolvable. If it was both transportation and military preparedness, the stakes were high enough to mobilize a commensurate response.

Just so, enlarging the problem of residential lockdown from a local housing issue to a state or national issue—elevating it to higher levels of government—is the cutting edge of pro-housing political strategy in recent years in North America. It’s an Eisenhower-like strategy. Starting in California and then in Oregon and a string of other states, advocates of abundant housing have elevated their case for upzoning and other pro-housing reforms from city halls to state capitols. Sightline has been prominent among them. Some advocates, including Sightline again, have escalated further, to the national level.

The political theory behind this strategy is that by taking the campaign to a larger arena, advocates can draw in a vast and rarely assembled coalition: displaced and would-be urban residents, affordable housing providers, major employers and unions, chambers of commerce and economic development agencies, and advocates for everything from racial and social justice to economic opportunity to climate sense to private property rights to transit improvement to children’s health to homelessness services. These interests have a lot to gain from abundant housing, but they lack enough incentive to expend political effort in thousands of jurisdictions in countless local land-use planning processes. Only the obstructionists are widely distributed enough to engage in that conventional process. By enlarging the fight, pro-housing forces can dilute the excess influence that these housing-shortage deniers and home-building obstructionists hold in city politics.

Two lessons

This political theory is, in fact, one of the central tenets of American political scholarship from the Eisenhower era: that solutions to hard political problems—solutions that advance the broad public interest—are more likely to emerge from larger arenas, from higher levels of government, where the power of narrow, private interests is watered down by the profusion of other such interests. Cascadian political scientist Grant McConnell wrote perhaps the classic articulation of this mid-twentieth century view that national government is more likely to solve hard problems well than are state or local governments. Small might be beautiful, went the reasoning, but it could also be parochial, backwards, and oligarchic.

This logic fits the problem of housing well: putting much more at stake, all at once, in one giant fight, rather than piece by piece in hundreds of separate local ones, might interrupt the trench warfare that has made abundant housing an unattainable goal. It might allow abundant-housing proponents to outflank the defenders of the status quo. That’s the hope, at least. And pro-housing forces, including Sightline, have had some notable statewide and federal wins.

So in my quest for better strategies to win abundant housing in Cascadia, I have been scouring the world for models of victory by enlargement. The world has provided some (especially Japan, my first case study below), but it has also provided counterexamples. Enlargement does not always work. The most striking truth that emerges from comparing housing policies and realities among countries is how idiosyncratic nations are. In each, a distinct history has embedded a different set of institutions, laws, norms, cultures, political alignments, asset values, and the like. Each place has its own political economy of housing. Within the resulting variety, two imperatives prove reliable in most cases:

1. Enlarge it! Higher levels of government tend to be more pro-housing than lower levels, so places that empower localities are especially susceptible to residential lockdown and housing shortages. Pushing housing decisions such as zoning rules farther up the chain is usually a good idea for abundant, low-carbon housing.
2. Incentivize cities! Left to their own devices, local zoning authorities tend to block homebuilding, especially when it entails filling in existing neighborhoods. But many of them will welcome housing abundance if their budgets depend on it. Establishing state or federal incentives that reward cities for allowing more housing can make a huge difference; it can give local officials the courage to withstand pressure from housing obstructionists.

The main takeaway for housing reformers in North America is to add “incentivize cities!” to their “enlarge it!” campaigns. Indeed, Sightline is acting on this maxim in the state of Washington right now. And of course, combining the two imperatives is probably even better strategy.

Abundance league

Imagine a rough-and-ready league list for countries that ranks their success in creating an abundance of housing—housing plentiful enough so that it is broadly affordable and has stable rents and prices—in compact, low-carbon neighborhoods that allow car-lite lifestyles. Among the ten industrial democracies for which I found enough research to include in this article, the clear frontrunner is Japan. It’s been extraordinarily successful at building housing, as I document below. It has long been a leader, and it extended its lead in this century after backsliding in the seventies and eighties. Germany, Austria, and Switzerland have consistently had excellent records, trailing Japan but still performing well. France has long trailed its German-speaking neighbors in housing abundance, but it too has been building its way out of shortages of late, at least in greater Paris. These countries usually employ rule-based (or “by right”) permitting systems for construction: if your plans check the boxes, building authorities have no choice but to sign off.

The league’s English-speaking countries, including Australia, Canada, the United Kingdom, the United States, and New Zealand, are laggards. Their permitting systems are more often discretionary, granting local officials the power to approve or reject buildings at will. In many parts of these countries, especially their large cities, housing is chronically expensive because it’s egregiously scarce. In the case of the United States, especially, housing is also strewn far across the countryside, sprawling in ways that multiply greenhouse emissions by necessitating driving for most trips. Some English-speaking countries, prominently New Zealand but also the United Kingdom, have announced bold new policies that could unleash more-abundant housing. And stirrings are audible elsewhere, but for now, the Anglosphere suffers the worst home shortages and prices. In this and subsequent articles, I’ll examine these ten country cases, starting today with Japan and following with the others in turn.

Case 1: Japan

Japan is the best example of the power of “enlarge it!” Japan’s national government controls land use and buildings to a larger degree than do national authorities in other affluent democracies. It’s likely no coincidence that Japan’s overall system of regulating housing has always been simple, uniform, and markedly more welcoming to homes of many sizes and types than are other nations’ policies. This national control has only grown in recent decades, even as other nations have gone into residential lockdown. (In the advanced industrial democracies overall, the number of dwellings built per year, adjusted for population, has fallen by more than 60 percent since the early 1970s, according to The Economist. Japanese homebuilding, meanwhile, has remained robust throughout.) In Japan, a broad public interest in abundant housing has usually trumped parochial housing obstructionism.

Professors Andre Sorensen, Junichiro Okata, and Sayaka Fujii of the universities of Toronto, Tokyo, and Tsukuba, respectively, detail the political history. Japan’s first land-use code, adopted in 1919, had only three zones. In 1968, the number grew to eight, and in 1992, to 12, where it remains to this day. For comparison, the city of Seattle alone has 38, and Cascadia’s cities together have thousands.

Japanese localities are not powerless in land-use planning. They, not national authorities, apportion land among the different zones. Still, their plans require approval from Tokyo. By changing the rules about each zone, the Diet in Tokyo can, by majority vote, overhaul zoning for the entire nation of 126 million people. In contrast, more than 22,000 US cities and counties write their own zoning codes with no input from national authorities and little from the states.

Of equal importance, Japan’s national government also controls building codes, which in Japan hold much of the regulation that zoning codes elsewhere specify. For example, Japanese building codes, not zoning codes, set height and setback limits, along with the details of “slant plane” rules that protect access to sunlight and are commonly the main determinant of how big a building can be in Japan. In the United States, states and localities control building codes, although most of their provisions rely on standard codes developed by large collaborative bodies of building professionals.

Furthermore, Japan’s Ministry of Land, Infrastructure, Transportation, and Tourism wields vast authority over building codes. It can often change what’s legal to build without parliamentary approval. To comprehend Japan’s national housing regulation system, imagine if the US Department of Housing and Urban Development weren’t just an underfunded administrator of federal grants for low-income housing. Imagine if it were a regulatory heavyweight like the Environmental Protection Agency, the Food and Drug Administration, or the Securities and Exchange Commission and had authority to change building rules across every city and county.

The ramifications of Japan’s centralized zoning system are immense, as Sorensen, Okata, and Fujii explain. The most restrictive zone in Japan is more like a North American townhouse district than a single-detached zone: buildings can be bigger. They can also hold multiple dwellings, so “smallplexes” and small apartment buildings are common. What’s more, even this low-rise zoning is atypical: already by the seventies, only one-fifth of urban and suburban Japan was covered by it. In the United States, in contrast, most cities zone the large majority of their land for detached houses on large lots surrounded by driveways and yards. Fully one-half of Japanese metropolitan land, meanwhile, allows residential development without height limits; in these zones, nonresidential uses such as stores and workplaces are allowed too. The median Japanese residence, consequently, is an apartment in a mid-rise, mixed-use neighborhood, close to transit, shops, and schools, not a detached house in an auto-dependent subdivision.

Japan’s pro-housing policies have not been uninterrupted. The seventies brought a grassroots backlash against high-rise condominium construction, and homebuilding slowed. Housing shortages emerged and prices began to rise. National zoning reforms of the period, waylaid by local foot-dragging in implementation, proved inadequate, and housing shortages added fuel to a bubble in property and other asset values in the late eighties. The 1992 collapse of this bubble laid the national economy low.

To boost construction and lower prices, national leaders redoubled efforts to allow more homebuilding. They turned, especially, to administrative changes to the building codes. “To help the economy recover from the bubble, the country eased regulation on urban development,” Hiro Ichikawa, a development advisor to builders, told Robin Harding of the Financial Times. “If it hadn’t been for the bubble, Tokyo would be in the same situation as London or San Francisco.”

Among a long series of administrative changes that national leaders made were, in 1994, a rule that excluded basements from the formula for calculating permitted indoor floor area—in essence, allowing buildings to be one floor taller. In 1997, common areas stopped counting toward floor-area limits in condominiums. In 1999, to speed the review process for building permits, Japan began allowing private consultants to authorize permits. In 2001, Prime Minister Koizumi introduced a sweeping new Urban Renaissance policy for economic recovery that created a fast-track around local control to authorize new high-rise developments in city centers. The year 2003 brought more floor-area expansions and an alternative to slant-plane restrictions called the “Sky Exposure Criterion,” which gave builders flexibility about how they protected sunlight for their neighbors. The stepwise process of welcoming more homes has continued.

Housing obstructionism is a potent impulse among neighbors in Japan, just as it is in other places. It’s a constant in human affairs. But the nation’s centralization of control over buildings makes it moot. The national interest lies in developing compact, walkable, low-carbon neighborhoods with plenty of homes for everyone, and that’s what policy allows, obstructionists be damned. Takahiko Noguchi, a planner in Tokyo’s Minato ward explained to the Financial Times’ Harding, “People have the right to use their land so basically neighbouring people have no right to stop development.” Just so, “local government has almost no power over development,” said Professor Junichiro Okata of the University of Tokyo. The Japanese housing regime has grown to be like the US regime for interstate commerce: states and localities just do not have a say.

The results—in housing abundance, low prices, and walkable, transit-centered, low-carbon urban forms—are remarkable. The city of Tokyo proper, called Tokyo Prefecture, had 13.5 million residents in 2018, the same as Idaho, Oregon, and Washington combined. But the city built 145,000 new residences that year, compared with fewer than 84,000 in the Cascadian states. Tokyo’s accomplishment was particularly astounding considering that the prefecture has precious little empty land, so almost every one of those 145,000 homes was tucked into an existing neighborhood. In North America, such “infill” development is contentious, slow, and expensive because of the red tape and neighborhood opposition it kicks up. Tokyo’s homebuilding prowess in 2018 was no anomaly, though. The Japanese capital city’s astonishing pace of homebuilding has held for years. Tokyo routinely builds more new homes not only than Cascadia but also than all of California (which has three times its population) or, in some years, all of England (which has four times). It has increased homebuilding by 30 percent since the turn of the century, even as Japan’s population peaked and began to edge downward in 2007 and the city’s population did the same in 2018.

It’s true that Japan demolishes homes much sooner than do other industrial countries, so a larger share of its housing starts are replacement dwellings. But Japan’s much-criticized “disposable house” culture is actually one of the secrets of the nation’s success. Japan’s rigorous and often-updated earthquake-safety laws, plus a cultural attachment to new homes, mean that small homes in Japan often depreciate completely in just 30 years and are replaced soon thereafter. (That’s about the same lifespan as cars in the United States!) Because housing stock turns over rapidly—one of the idiosyncrasies of Japan’s political economy of housing—the country has far more chances to install bigger buildings. In places like Cascadia, where buildings commonly have an economic life of 100 years, you only get one chance a century to replace a house with an apartment building. In Japan, you get three.

Consequently, even after correcting for its higher-than-average demolition rate, Tokyo’s homebuilding pace is extraordinary. The prefecture has tripled its housing stock in the last 50 years and expanded the number of residences in the city by close to 2 percent annually since 2000. That’s net of replacements! Indeed, its growth rate for housing units overall was three times faster than London or New York in the 2010s. Among 14 megacities around the world, only Singapore and Seoul topped Tokyo for pace of overall housing growth. Thanks to Japan’s “enlarge it!” approach to governing housing, Tokyo Prefecture and the larger 38-million-person megacity it centers (the world’s largest metropolis) have avoided residential lockdown entirely.

The key determinant of housing prices is how many people are chasing how many homes. And year after year since Japan’s asset bubble collapsed in the early nineties, Tokyo has been adding residences faster than it’s been adding households. The resulting excess of housing over households creates a buyer’s market, vacancy rates stay high, and all the benefits of abundant housing accrue. The resulting slack in the system has kept rents and prices low and stable. A typical two-bedroom apartment in Tokyo has rented for under $1,000 a month for years, about half of what the same apartment cost in Seattle during the pandemic, when rents dropped for the first time in decades.

And Tokyo is 18 times larger in population, which would normally give it much higher housing costs! Cascadia’s housing costs have surged for decades, and single-family home prices continue to do so during the pandemic. Tokyo’s prices and rents have barely budged since 2000. In Japan overall, inflation-adjusted house prices have edged downward, and rents are lower than in any OECD country other than Greece, which has been in economic crisis for years. (Other metrics that warm housing wonks’ hearts, by adjusting for varying incomes, such as price-to-income ratios and price-to-rent ratios, also look good in Japan.)

Incentivize cities?

Japan leads the world’s industrial democracies in employing “enlarge it!” as a success strategy for abundant housing. Because all the key housing policy decisions are made in Tokyo, Japan has escaped the trap of lockdown and provides affordable housing in walkable neighborhoods in great abundance. It’s a model worth emulating.

At the same time, it’s not the only model, and the idiosyncrasy of each country’s political economy of housing warns against overweighting any single country. Japan in general governs itself with a much higher degree of national control than do other industrial democracies. That tradition and legal structure of central control might be why Japan has had no need to “incentivize cities!”

Professor Nobuki Mochida of Chuo University in Tokyo, who has studied the fiscal effects of population and housing growth on cities, explained to me by email that Japan’s local public finance system includes a potent fiscal equalization scheme that shifts funds from rich to poor localities. A similar scheme in Germany, which I will review in a subsequent article, is a major incentive for local leaders to allow more housing. In Japan, however, the particular formulas the scheme employs penalize cities when their populations grow: they get smaller grants per person as their head counts rise, and they owe more as their local tax receipts increase. In fact, Japan’s fiscal incentives for local officials work at cross-purposes to its national housing goals, but the nation’s centralized land-use and building rules overwhelm the ill effects.

Japan seems to have learned the maxim attributed to Eisenhower better than did his own country: if you cannot solve a problem, enlarge it.

Next time, I’ll look at Germany, where “incentivize cities!” has been key to housing success.