Why nobody pulls them down

Foreign buyers usually arrive at Japanese vacant houses through the pictures, and the question that follows is always the same. If these buildings are worthless, why is the country full of them?

The answer is a tax rule, and it is worth understanding before anything else.

Land in Japan carries a fixed asset tax and, in many areas, a city planning tax. Where the land is used for housing, the base those taxes are calculated on is reduced sharply.

The reduction is conditional on a home standing on the land. Demolish the building, clear the site, and the condition fails. The tax on land you now cannot use goes up rather than down.

There is the whole mechanism. An old house you will never live in, never rent and never sell is cheaper to keep than to remove. So it is kept, and it stands there, and it deteriorates. Multiply that by a few million households across several decades and you have the situation that produced the listings you have been browsing.

The law written to break it

Legislation on vacant properties came into force in 2015. It allowed a municipality to designate a building as a specified vacant property where it risked collapse, posed a hygiene problem, damaged the landscape or was otherwise unsuitable to leave standing. Once a formal recommendation was issued, the residential land reduction could be withdrawn.

That broke the arithmetic. Keeping the building was no longer automatically cheaper.

The limitation was timing. Nothing could be done until the property was already in a bad state, by which point the costs of fixing it were large.

An amendment took effect on 13 December 2023 and added a category one stage earlier: the poorly managed vacant property. A municipality can now give guidance, and then issue a recommendation, at the point where neglect creates a risk of the building becoming a specified vacant property in future. A recommendation at this earlier stage removes the residential land reduction just the same.

The threshold for being caught moved a long way down.

What counts as poorly managed

Each municipality applies its own judgement against national guidance, but the states cited are along these lines:

• Part of a wall or window corroded or damaged, with a risk of something falling
• Weeds and dead vegetation left unmanaged, in a state that attracts pests
• Rubbish scattered or left standing on the grounds

Read that list again. None of it describes a ruin. It describes a house that nobody has visited for a couple of summers.

If you live on another continent and return once a year at most, reaching this condition takes no particular neglect. It takes an ordinary amount of distance.

The process has four stages

One distinction matters here. For a property in the poorly managed category, the process runs as far as the recommendation, and that alone is enough to remove the tax reduction. Orders, penalties and administrative execution apply once a property has been designated a specified vacant property, which is where a poorly managed one ends up if nothing is done.

Understand the last stage precisely, because it is commonly misread as the authority solving the problem at public expense.

The municipality appoints a contractor, has the building demolished, and sends you the bill. You do not set the price. You do not obtain competing quotes, choose the contractor, or choose the timing. Every decision you would have had if you had arranged the work yourself has been made by somebody else, and demolition is not cheap.

The 2023 amendment strengthened this end of the process as well. It provided for execution in urgent cases without the preceding steps, and made it easier for municipalities to recover the costs.

What happens to the tax

When a recommendation removes the reduction, the base reverts. For small-scale residential land, a base cut to one sixth becomes a base of the whole, so the land tax can rise to something in the order of six times what it was. Where city planning tax applies, its reduction goes at the same time.

In practice the increase is not exactly six times, because adjustment measures moderate how quickly a tax bill can move. No figures appear here for that reason, and because assessed values and rates differ. What does not change is the shape of it: the burden rises to a multiple of what it was, and it stays there every year until the condition is put right.

The part that is specific to owning from abroad

Everything above applies equally to owners living in Japan. The risk that belongs to overseas owners lies in how any of it would reach you.

Guidance, recommendation and order are all delivered in writing, in Japanese, by post. Where the registered address is overseas, that is where they are sent. Slow to arrive, unreadable on arrival, and unclear in what they require even once translated. The process continues on its own schedule throughout.

The tax change is quieter still. Nothing announces that the reduction has been withdrawn. Next year’s tax notice is simply a different number. And that notice is also in Japanese, also by post. Unread, it looks exactly like nothing having happened. How Japanese tax correspondence reaches an overseas owner at all is covered in the tax paperwork nobody mentions before you buy.

Two further changes in 2023 are worth knowing about. Municipalities were given the ability to request owner information from utility companies and similar bodies, so being difficult to trace is no longer the protection it was. And a mechanism was added allowing a mayor to petition the court to appoint an administrator for a property where the owner cannot be expected to manage it.

The authorities have the means to find you, and a route that does not require your cooperation.

Avoiding all of it is not difficult

Every measure described here attaches to the condition of the property. A building nobody lives in but somebody looks after does not get designated.

What is actually required:

• Vegetation and garden trees kept under control
• No rubbish or scrap accumulating on the grounds
• No damage to walls or windows that could fall on anybody
• The building secured and not open to entry
• A record showing the above is checked periodically

That is a level maintained by somebody attending a few times a year. Set against a demolition bill you had no part in agreeing, or a tax that multiplies and stays multiplied, the comparison is not close.

The difficulty is not the work. It is whether there is anybody in Japan to do it. Keeping the grounds in order also removes most of the exposure described in when your Japanese property injures somebody else, since the conditions that attract a designation and the conditions that cause an accident are largely the same conditions.

If you are about to buy one

Some inexpensive vacant houses have already received guidance, or a recommendation. Buy the property and you take on its condition, its position in the process, and the tax treatment that goes with it.

Three things to establish before you offer:

1. What condition are the building and grounds in now, against the criteria above?
2. Has the municipality issued any guidance, recommendation or order in respect of this property?
3. What would it cost to bring it to a condition that will not attract one?

The second is a question for the municipality. Without answers to all three you cannot tell whether the price is low or merely small, which is the distinction drawn throughout what a cheap Japanese house actually costs.