Abstract
A new mode of housing tenure in Japan, rental housing with a fixed rental term , was introduced in March 2000 with the revision of the Japanese Tenant Protection Law . This chapter examines the implications of this new system by analyzing the determinants of the choices by households among the three types of housing tenure in Japan: owned housing , ordinary rental housing , and rental housing with a fixed rental term; and calculating the estimated compensated variation. Our micro-data are based on the three waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) covering all Japan. The difference between ordinary rental housing and rental housing with a fixed rental term is reflected in the length of the contract term and the level of rent. We carefully eliminate potential sample selection bias introduced to the conditional logit housing tenure choice model through the estimation of the hedonic price regression of each housing tenure alternative. We find that households with a smaller number of family members, those who moved from outside the local housing market, those headed by an unmarried household head, and those with plans to own a house in the near future tend to select rental housing with a fixed rental term. The estimated mean compensating variation by introducing rental housing with a fixed rental term for all households selecting that tenure is 1205 yen per month, 1.96% of their monthly rent. Moreover, the young and/or low-income households receive the greatest benefit from the revision of the law in terms of lower rents.
This chapter is adapted from Seko and Sumita (2007b), Springer Nature.
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Notes
- 1.
A similar contract system was introduced in the land market in 1992 when the Land and Housing Lease law was enacted permitting owned houses with a fixed-term lease for the land.
- 2.
The average floor space of owned housing in 1968 was 85.36 m2 while that of rented housing was 35.46 m2. The corresponding floor space increased to 101.29 and 39.36 m2 in 1978, 112.08 and 43.08 m2 in 1988 and 121.67 and 45.59 m2 in 2003. Source: Japanese Census of Housing.
- 3.
- 4.
See, for example, Abe et al. (1998).
- 5.
Seko and Sumita (2007a) examine this court-arbitrated rent control system on Japanese renters’ mobility.
- 6.
To make a distinction, rental housing without a fixed rental term is referred to as ordinary rental housing.
- 7.
The KPHS dataset is quite different from their dataset. Our dataset is more general than theirs, because their data is limited to the Tokyo Metropolis and only new contract-basis asking rents. Our dataset covers all Japan and includes not only newly contracted rents, but also the low rents for non-contract basis rentals. In addition our rents are the market rents which were actually contracted between landlords and tenants. Their rents are the asking and advertised rents and not the realized and actually contracted ones.
- 8.
Grenadier (1995) showed that there are three patterns, that is, upward-sloping, single-humped, and downward-sloping patterns between rent and length of time of contract. Yoshida et al. (2016) demonstrated that, regardless of the expected future rents, the rent term structure is upward-sloping when there is no leasing cost but U-shaped when the lessor faces moderate leasing costs.
- 9.
Although the ownership rate decreases after age 40, it may be because the KHPS sample covers only those respondents aged between 20 and 69 as of January 2004.
- 10.
Gu and Colwell (1997) suggest that rent levels are affected by the characteristics of renters.
- 11.
- 12.
It is important to bear in mind that the revised Rental Act does not permit the conversion of ordinary rental housing to fixed-term contracts while existing tenants reside in the dwelling.
- 13.
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Seko, M. (2019). Housing Tenure Choice After the Revision of the Rental Act. In: Housing Markets and Household Behavior in Japan. Advances in Japanese Business and Economics, vol 19. Springer, Singapore. https://doi.org/10.1007/978-981-13-3369-9_6
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