Japan's housing mix: an example

In the previous article, I talked about the need for varied housing choices in every community to allow for people to find housing that fits their needs, no matter their income level. I also mentioned in many instances how Japan has a much more varied and integrated housing choice thanks to its zoning law that does away with separating residential housing types. I just wanted to provide an example of this, through a neighborhood I chanced upon in Sendai while going through the Japanese real estate site suumo.jp.

It's a suburb of Sendai but at 15-minute walking distance from a train station linking directly to Sendai station and thus Sendai's downtown area, a 25-minute trip. The train's frequency is about 15 minutes during the AM and PM peak, 20 minutes between the two and 30 minutes in the early morning and late at night. That station's name is Rikuzenochiai.

Here is where it is:

Area in relation to nearest train station

 Anyway, here is what the area looks like from the sky:

The area from the sky

Already, you can notice how chaotic it seems from on high, but what does it look like from the street? Well, with Google Street View, we can explore things. I have selected a few of the housing types, and calculated the housing density they offer in dwelling units per hectare (DUH) and dwelling units per acre (DUA).

So, let's begin, first by showing where each housing type is:

Where each housing example is

Small apartment buildings

The first example is a couple of 2-story apartment buildings (アパート, apaato as the Japanese say it). There seems to be two units per floor, maybe around 50 square meters (540 square feet) each. Yes, the Japanese tolerate smaller apartments than we do, in fact, you can easily divide density by 1,5 or even 2 if you presume North American space per unit instead of Japanese space.

Very big estate

This is really a house for someone who is comfortably wealthy, the lot is big and surrounded by nice walls, and there is a big lawn, very rare in Japan.

Townhouses

We'd call this "semi-detached" in Canada, these are two housing units with 2 stories each with a shared wall. The Japanese call it a タウンハウス, a townhouse. But according to the real estate site, these are actually rental apartments, with the important distinction that they have 2 stories. A decent density brought down by a relatively large parking lot around the two buildings.

Small 1-story houses

These houses are pretty small and lack a second floor. the parking associated with them is on the other side of the street. What is special is that some of them don't actually flank the street, there is just a small passageway through which people can access them.

Typical middle-class houses

This is more typical of Japanese suburbs and would dominate more if there wasn't a train station in easy walking distance. Each house is different as Japanese tend to prefer buying a lot then having a house built by a contractor on it rather than buying a house that's been built in bulk by a big-pocketed developer like we often do here. There are a few models of houses that are copied here and there though, as local building companies have certain base models they offer.

Studio apartments

Despite the appearance, these aren't townhouses but 2 stories of 4 small studio apartments each, as much as I can figure. What the Japanese call ワンルーム, one-room apartments. No, not one bedroom, one room, often about 20 square meters only (215 square feet) with a small kitchen counter and a small toilet. It's made for singles who want cheap housing. The density is quite high, but these are suitable only for one person, so the density in people per hectare is not as high as the density in terms of units per hectare suggest.

A long bloc of studio apartments

Like the previous one, these are small one-room apartments, 26 of them going by the numbers written on the walls. Again, as they fit only one person per unit, this is probably only 4 times as dense in terms of population as the middle-class houses, despite the sky-high number of units per hectare.

So within close walking distances, you have a tremendous amount of variety in term of housing. Single-family homes, from the very big to the very small, townhouses, small apartment blocs and studio apartments. Housing solutions for every wallet and household, all with 1- or 2-story buildings only. Very cheap housing is plentiful for singles. All of them are very dense and most lack yards, but this could be transplanted in North America with yards, reducing density by maybe 30% but maintaining the variety of housing. So if you want to keep some yards and offer space more in line with North American urban standards, the density would be about 2 or 3 times less.

And all this is in a small area of 300 meters by 150 meters. That's the result of an absence of zoning regulations requiring only one or two types of housing per neighborhood... or even per city.

As an added bonus, here is what can be found on the wider arterial street leading to the station a few hundred meters away. Remember that Japan's height limits depend on the width of the street bordering the building, so the wider the street, the taller the building:

Mixed use building, commercial on the first floor, residential over it

So this is 4-story, as the street is wider. The apartments are bigger than in previous examples around 65 square meters if my estimates are correct (700 square feet), likely 2-bedroom, or maybe even 3-bedroom, apartments.

And this is right next to the station:

Tall tower of "mansions"

Japanese call condos in taller buildings マンション, mansions, in a weird twist of the meaning of the word in English. You might notice how the density of this 10-story building is not much higher than the previous one, neither are the units seemingly bigger. What gives? Well, there's a huge parking lot behind the building, which the previous didn't have. Had the parking been integrated in the building, density could have been two or three times higher. Which showcases how surface parking caps density, at one point, the taller the building you build, the larger the parking lot becomes, negating density increases by increasing height.

How to make urban housing more affordable part 1: right-sizing, adequate supply and demand

This is the first of a series of articles of my reflections on how we can help reduce housing costs in cities. Again, this is just me thinking out loud...as loud as writing on the internet can be anyway.

The first thing I will point out is what I call "right-sizing". The point of it is to offer housing units that are just the right size and price for people.

The size of households vs the number of bedrooms

I'm in Canada, so I'll take Canadian figures. The first thing that determines how big an housing unit must be is how many people will inhabit it, and the most important point of this is the number of bedrooms in the unit. How does it look like in Canada, according to the census in terms of how many people there are by household versus how many bedrooms per dwelling unit? Here is the data for all of Canada:

Canada - comparison of number of bedrooms vs number of people per household

If we suppose that the "right size" of a dwelling unit is one bedroom per person, then we can see that the housing stock in Canada is currently oversized. There are around 3,3 million households made up of a single person, but just 1,6 million dwelling units with 1 bedroom, 1,8 millions if you include dwelling units with no separate bedroom. Households of one or two people lack housing that is the right size for them, while households with more than 2 people have a lot of choice.

But the reality is more complicated. Couples without children do not need 2 bedrooms, just 1. Fortunately, the census differentiates between couples with children, lone parents with children, and singles. It's not perfect, but if we suppose that each couple needs only 1 bedroom for themselves plus 1 bedroom per child, then we get the following graph showcasing the demand for bedrooms versus the supply of bedrooms.

Canada - demand vs supply of bedrooms per dwelling unit

In words, it means that fully half of Canadian households could make do with but one bedroom, yet only 15% of dwelling units provide this. This means that there are a lot of dwelling units with empty bedrooms in Canada right now, at least inasmuch as no one sleeps there. Nature abhors vacuum and so do homeowners, they'll find ways to fill these rooms, often with stuff.

So this goes for Canada, but what about cities?

Let's look at Montréal, because, well, represent!

Montréal - comparison of number of bedrooms vs number of people per household

Montréal - demand vs supply of bedrooms per dwelling unit

So it's still quite unbalanced. Even in Montréal, there is a lot more bedrooms than needed.

So we have more bedrooms than people, what's the problem?

I know. At first glance, that's not really a problem, is it? I mean, you have more space than you absolutely require, that seems like a good thing, right? Surely there are young couples who want empty bedrooms because they hope to fill them up soon, where it makes sense to have additional rooms.

However, the big problem here is that many, many people who are singles or retired couples with kids long gone that may desire smaller living arrangements, but can't find them. So what do they do then? Well, if they can't find housing that is just the right size for them, they will look for bigger housing than they need or, sometimes, even want. By doing that, they increase competition for bigger housing and make it harder for larger households to actually find housing they need.

So small households will buy housing that:

• Is bigger than they need
• Is more expensive than they would prefer
• Occupies more land than they would otherwise

This reduces density and forces bigger households out of desirable areas. This aggravates land shortages and thus pushes prices up for everyone. Even the bigger households who want large dwelling units end up paying for the lack of small studio and 1-bedroom apartments.

A special case, the older suburbs

One of the special cases of this dynamic is older suburbs. Often, suburbs built in a few years in the 60s or 70s used to be full of children as almost all the people who moved in were young families. But what happens when these families grow older? The housing stock in these suburbs is geared towards big families with one car per adult. So as the kids become teenagers and young adults, they are often placed in front of a dilemma:

• Keep living in your parents' basement to stay in your community
• Strike out on your own... which means living far away from your parents and old social network because there are few if any small apartments for young bachelors anywhere near them

This also create a dilemma for parents whose kids have gone away. Their big houses are now mostly empty, but they've lived a few decades in the area, have made friends and sometimes involved themselves in the community. And there are often little or no smaller housing opportunities around where they could move to while remaining in that community. The "wise planners" forgot to zone for it, oops. So a lot of retirees remain in huge houses, which also means that young families are kept out of these suburbs, prevented from bringing fresh blood there, since all the family-friendly houses are occupied by retired couples without children.

Here is an example of it, the suburb of my youth: Boucherville. A suburb of Montréal. Here are the graphs o housing supply and demand as I did previously for Canada and Montréal.

Boucherville - comparison of number of bedrooms vs number of people per household

Boucherville - demand vs supply of bedrooms per dwelling unit

So more than half of households are singles or couples with no child living with them, yet only 2% of dwelling units have just one bedroom, and 19% have 2. There is no equilibrium between supply and demand.

The result is that young families are forced to settle farther and farther to get affordable housing big enough for them, while there are tens if not hundreds of thousands of them in inner suburbs that are occupied by retired couples who stay there in large part because there is no smaller housing arrangement available to them in their community. There are some attempts at build such housing in Boucherville that I know of, but it runs against much opposition still. I know, my mother is involved in an attempt to build some.

Not just size, but prices too

A few articles past, I described how much of zoning is about socio-economic segregation, by imposing certain housing types in certain neighborhoods for uniformity, and these housing types have certain price tags attached to them. I gave this hypothetic city split in three zones:

Example of zoning and the prices of the housing they allow

Now imagine what happens to people who want housing worth between 150 000$ and 300 000$, people who are not quite rich, nor quite poor. They fall between the cracks of zoning, there is no housing in the area that corresponds to their purchasing power. These people are either forced to buy cheaper housing than they would like, which may mean renting actually... or to buy more expensive housing than they'd like. This is another problem that reduces housing affordability, the lack of a variety of housing at various price levels can often force people to buy housing that they would normally consider unaffordable.

Meanwhile, in Japan...

Japan is always interesting has a country that allows a lot of variations in residential supply through very lax zoning regulations. I found a website with a lot of real estate listings in Japan, suumo.jp and I've been exploring this. It is extremely interesting.

First, we often hear about how Tokyo is expensive, and it is. But at the same time, the number of small, affordable studio apartments for young people who are students or are still pretty poor is insane. Just in Tokyo, as in downtown and the 23 wards, there are 2 400 studios (one-room as they say) or 1-bedroom apartments vacant, all for less than 40 000 yen per month, so 400$ a month. Some as low as 150$. This is in the city itself, not even the suburbs. If I increase the criteria to 600$ a month, then I find 35 000 apartments.

If I look at Sapporo, which has the advantage of being the size of Montréal, there are 27 000 studios and 1-bedroom apartments for rent in a city of around 1,9 million people, 6 000 of which are available for less than 300$ a month (Japanese renting is a bit weird with non-refundable bonuses and "key money" for many apartments that increases the rent by 15-20% overall, but it doesn't change things much).  These are just the vacant apartments on this one site. Meanwhile, Montréal has 47 000 studio apartments overall, meaning vacant and occupied units altogether.

Still, it shows that the relaxed laws of Japan has led residential developers to provide housing for everyone, all the way down to poor students. Meanwhile, in North America and Europe, students frequently stubbornly stay with their parents while they study (guilty as charged), often resulting in huge commutes, or having to live with roommates to be able to afford the apartments too big for their means.

Conclusion

So if you care about affordability, it is important to make sure that small housing units can be built, whether as new housing or through subdividing existing housing (single-family to duplex for example) and that the housing stock is varied, appealing to all income levels. If you don't, you push people into buying bigger housing than they actually need, paying more than they would prefer to and taking more land than they would do otherwise, which makes all housing more expensive as you aggravate land shortages.

Housing supply and affordability

Some may not know this, but I consider myself pretty solidly left-wing. I know my blasting of zoning regulations might give another impression, but nonetheless. So I cringe every time one of my fellow left-winger says absurd things like "supply has nothing to do with housing affordability" or when they cheer on making "developers" pay and increasing their costs (as if being someone who decides to make a living out of providing housing for the community was intrinsically bad). It seems to me that the anti-gentrifiers are often just a different variant of NIMBYs and just as bad.

Now, I understand where it comes from. Left-wingers in general are skeptic towards market-based solutions, it doesn't help that certain things sold as "free market" were all about making the rich richer and the poor poorer. But being skeptic about market outcomes and denial about how the market works are two different things that some fellow left-wingers confuse. It is important to understand how the market works, how pricing works, even if you don't think it's the optimal way of doing things, you ought to understand it.

So I will try to explain in simple terms how exactly supply and demand works in the housing market. I'm going to try to avoid usual things like this very famous graph:

If you need me to explain this...

This is as much for other people's benefits as mine, I find I am better able to make sense of my own thoughts when I write them down and force myself to explain them clearly.

Some basic elements

OK, so in terms of housing, there are certain elements to consider:

• The current housing stock
• The households seeking housing
• The opportunities to increase housing stock

The first is evident, it's the current houses and apartments fit to serve as housing for people in an area.

The second is also evident, it's all the people seeking housing in an area, which is a variable of population, housing is a basic need, few people will willingly "opt out" of it.

The third is more complicated, it's all the empty lots, the decrepit buildings that can be replaced, or even the low density housing that can be replaced by higher density housing. It's all the various opportunities that exist that people can exploit to increase the number of housing units available to house people. 

Now, the first thing to consider is whether or not the current housing stock provides sufficient housing for the people who want to live in the area. If yes, then there is a balance. There is always some amount of housing available as people move, and prices will tend to be rather stable.

If there is more housing than there are people, then house owners will need to bid amongst them for buyers, because they don't want to leave empty houses for which they pay taxes. So as they compete, they will often use discounts and bonuses to get people to choose them instead of others, lowering prices over time. See Detroit, a lot of housing stock, but people don't want to live there anymore.

If there are more people than housing, then the situation is reversed. Each owner selling his property has many people who want to buy it. The owner is thus able to start a bidding war between the different prospective buyers. He will sell to the highest bidder, which will increase prices for housing. If you have a house and three people want to buy it, one is wealthy and offers you 500 000$ for it, one is middle-class and offers 400 000$ for it and the last one is poor and offers 300 000$ for it, to whom would you sell? Over time, as owners see the prices other properties sell at, they adjust their expectations, they know they can ask for more and so do just that.

The limit to prices: construction costs of new housing

Now, most large cities are in the third situation, a lot of people want to live there, and there is only so much housing to go around as the area is likely all built out. So what decides then how expensive housing gets? What limits housing prices is simply the cost to build new housing. If owners ask for a price for their housing that is higher than the cost to build a similar housing unit in the same area, then that housing unit will get built and sold for less. The cost of building new units is essentially what provides a ceiling to house prices.

Think about it, imagine you want to buy a house, and some guy will sell it for 400 000$. But there is a vacant lot next door, the lot is sold for 100 000$ and you can build a house just like the existing one for 200 000$ on that lot, for a total of 300 000$. Are you going to buy the existing house or buy the lot right next to it and build on it? Well, maybe not you, but developers will, they'll likely just undercut the existing house a bit and take the rest as profit, but over time, they will bring house prices down.

But if there is no vacant lot around, and the only thing you can do is buy a cheaper, rundown house and upgrade it or rebuild it to the standards of the existing house, and the whole operation is likely to cost you 500 000$, then you'll buy the existing house for 400 000$ (if you can). In fact, the home owner, if he realizes that the area is in a shortage situation and the cost of providing new housing is much higher, will likely raise his prices.

How to create affordability

So if you want to ensure cheaper housing, you need to do two things:

1. Increase the number of opportunities to build new housing, either through vacant lots or by allowing higher density construction
2. Reduce the cost of building new housing units

So everything that helps these two things create affordability. Everything that goes against them, like strict zoning forbidding higher density housing "to preserve the character of neighborhoods", like asking developers to jump through hoops to get building permits, like asking them to pay for parks and other public goods as a condition to getting building permits, etc... All these things create and aggravate a shortage situation and increase the costs of building new units, which means higher housing prices for everyone. And then the speculators will jump on the occasion to buy houses and lots, aggravating shortages and pushing the price of housing ever higher.

Trying to control the price of housing through rent controls and the like can effectively keep prices from raising on price-controlled properties, but it doesn't correct the shortage problem. You create two categories of people, those who are lucky enough to have had access to price-controlled housing and those who are forced into the market system which will pay much higher prices.