Is the secret of Tokyo being affordable that Japan lets its cities be messy?

Tokyo buildings -posted by Tokyobling

Last year Tokyo caused a stir in New Zealand housing affordability circles when Michael Reddell -the economist who frequently advocates for large cuts in New Zealand’s immigration rate -wrote an article speculating that Tokyo could be an example of a city which undertook successful urban planning reforms to achieve affordable housing. That Tokyo could be the rare example of a once expensive city that successfully managed the difficult political process of removing planning restrictions in order to achieve affordable housing.

Learning the secrets of Tokyo’s affordable housing has obvious benefits for New Zealand and Auckland in particular, given the difficulty we are having in providing affordable homes for New Zealanders.

Tokyo-Yokohama has a median house price to median household income ratio of 4.7, while Auckland has a ratio of 10.0 according to the Demographia 2017 International Housing Affordability Survey, which classified the Tokyo urban area as the following;

Tokyo-Yokohama is the world’s largest urban area (38 million).The metropolitan area covers all or part of four prefectures, Tokyo, as well as largely suburban Kanagawa, Saitama and Chiba.

Tokyo’s population growth is little different to London’s or San Francisco for the period 1995 to 2015, yet house price increases have been significantly different. NB Minato-ku is an inner-city part of Tokyo.

Michael was surprised to find that Japan’s stagnant/declining population is not true for Tokyo, so is not an explanation for Tokyo’s affordable housing. In fact Tokyo Precinct which goes across the central part of the metropolitan area has increased its population by 33% to 13.29 million since 1963 and residential space per person has doubled, meaning the residential built environment has nearly tripled in less than a lifetime! Graphs depicting this are in the ‘floorspace is a normal good’ section of a Successful cities understand spatial economics report.

In his article Michael described Japan’s property bubble in the 1980s and based on a Financial Time’s article, the contention was that removing planning restrictions in the 1990s -including for intensification, led to housing becoming more affordable. Unfortunately, the exact nature of these planning changes and how a political consensus was achieved was not described and these pieces of the story have been hard to find. So the full Tokyo affordable housing story is a secret –although the freedom to intensify does seem to be part of the story.

Removing regulatory constraints on intensification is consistent with advice from my favourite planning theorist -Alain Bertaud. He visited New Zealand in 2014 and wrote the following about how to provide affordable housing, given Auckland’s constrained land supply.

There are two ways to compensate for the constraint on land supply imposed by Auckland’s topography: 1. Increase the amount of land available to developers at the city periphery 2. Decrease the regulatory constraints which prevent a higher density of utilization in centrally located areas where demand is high

I agree with both of these statements and have gone to some effort to advocate for them. In particular, I like to advocate for more of the second option –removing restrictions on building within the city, in places where demand is high.

There are plenty of people demanding peripheral growth boundaries be removed –mainly they argue for reasons related to the ability to access lower priced land, which sends an urban land price reduction signal through the entire city market, thus stimulating the building of more affordable housing.

A lot of people advocating for the removal of peripheral growth boundaries do not seem to have any motivation to remove other housing supply restrictions. I do, I feel that it is important to advocate for a mix of restrictions to be relaxed –in both the up and out directions. As this advice allows more housing to be built within a city, which gives more choices, to more people, over what types of housing (terraces, apartments etc)and types of communities or locations within the city that people can live in. In other words, it allows for housing supply to better respond to the different types of housing demand.

The recently agreed to Auckland Unitary Plan will allow more intensification to occur. Which is important, as Auckland is the city in New Zealand with the greatest housing supply problems. I worry though that the Unitary Plan is weighted too much in the direction of high-rise apartments in a few locations and does not allow enough freedom for other types of housing intensification, such as, terrace housing.

It is my contention we should give much more freedom for small scale housing intensification in a much broader area of the city. I believe we should relax the rigid thinking/control of always directing where development should occur. I do not see the harm of leaving more intensification housing supply decisions -what housing type, what locations -to people on the ground to make. I believe these decision makers -the many, many thousands of Auckland property owners would naturally respond to the various types of housing demand. I think this sort of natural, organic process in most cases would have good outcomes and would help us to meet our various housing needs.

Incremental and organic building within a city was the logic behind a proposal I made last year to improve housing supply. I called it -reciprocal intensification property rights. This proposal is designed to facilitate co-operation between neighbours to allow more intensification in their adjoining properties. The economist Eric Crampton, wrote a short entry on his blog-site about the concept saying that it formalises neighbours’ Coasean bargains. Which basically means that reciprocal property rights would address the sequencing problems that currently discourage neighbours using the Resource Management Act to achieve this sort of intensification. My hope is that reciprocal intensification will be a step towards adding an incremental, freer, bottom-up process to city-building in New Zealand. Economist Peter Nunns writing for Greater Auckland in August 2017, wrote an update article on the legislative progress made on this concept.

It has been suggested that a hidden fuel powering Tokyo’s economy is the freedom given to Japanese city dwellers to incrementally upgrade ‘slums’ around government provided infrastructures, in an article titled -When Tokyo was a Slum (H/T Matt Robare on Facebook’s “Market Urbanism” group).

According to Metabolist architect Kisho Kurokawa, Westerners misunderstand Tokyo as informal and illogical because of their dualist notion of the city as divided into polar opposites: Urban and rural, formal and informal, order and mess. But Japanese culture, says Kurokawa, accepts that mess and order are inseparable: “The open structure, or receptivity, is a special feature of the Japanese city and one it shares with other Asian cities.” This is why the Japanese are so tolerant of urban forms that the West would see as “irrational” or “messy” — neighborhoods develop and slowly integrate with the larger urban system on their own terms. Tokyo was built with loose zoning rules to become a fantastically integrated mixed-use city, where tiny pedestrian streets open up to high-speed train lines.

Japan’s city-building freedom is not only important for supplying competitive and affordable housing -the argument is this freedom facilitates a diverse, broad ecosystem of small businesses too. Given the need for New Zealand to diversify its economy, adopting similar city building practices may be of benefit.

Unfortunately, proving the contention/theory that removing house building restrictions is a feasible way of achieving affordable housing for places that currently are unaffordable is not easy. Examples of this sort of successful housing reform are hard to find. In Tokyo’s case the story is only half told.

Recently a Canadian journalist made a video about housing affordability in Tokyo with some good information about Japanese planning rules and the video also included some comparative housing and land cost data. The video shows the average new Tokyo home can be bought for $300,000US or $414,000NZ -which is significantly cheaper than a new home would cost in New Zealand, especially Auckland. Usefully it shows video of what these homes and neighbourhoods actually look like. The video as a whole makes for interesting watching and fills out some of the Tokyo housing affordability story.

It indicates that intensification can be part of successful housing reforms.

Some may argue these sort of informal city building processes may be appropriate for high density Asian cities, but would not work for suburban New Zealand. The evidence indicates this is not true. Houston, a low density affordable US city liberalised its planning rules for housing intensification about 20 years ago for an area larger than Auckland’s isthmus, which has resulted in significant increases in affordable inner city housing. This can be seen in a recently published article with before and after pictures of intensification in Houston.

A similar question of whether to give more freedom to build low-rise intensification over a wide-spread area could be asked about Auckland. Under the Unitary Plan, it is estimated that nine times as many apartment dwellings will be commercially viable to build compared to terrace housing (P.17).

There are many different urban development models that cities take to build there way to affordable housing. They involve greater or lesser amounts of sprawl versus intensification depending on the spatial economics nature of their particular urban development system.

The degree in which a city is free to build up and out are collective decisions i.e political decisions. It is my contention this freedom has a significant influence on housing affordability. Meaning if this is correct, the degree that we collectively tolerate unaffordable housing and all its associated ills -homelessness, overcrowding and rising wealth inequality -is also a political decision.

I hope the unaffordable cities of the world, in New Zealand in particular, take a constructive approach to allowing more affordable housing to be built. I hope that comprehensive land use reform is an idea whose time had come -that the mood and opportunity for change becomes irresistible. I hope that housing optimists prevail over housing pessimists. I worry that if western democracies do not manage reasonable policy making reforms then the resulting loss of confidence leads to radical revolutions of the Brexit and Trump variety. I believe it is imperative that the politics of hope trump the politics of fear.