The Japanese Zoning System

by on August 19, 2016 at 12:04 pm in Economics, Law | Permalink

In Laissez-Faire in Tokyo Land Use I pointed to Japan’s constitutional protection of property rights and it’s relatively laissez-faire approach to land use to explain why housing prices in Japan have not risen in past decades, as they have elsewhere in the developed world. A very useful post at Urban kchoze offers more detail on Japan’s zoning system. Here are some of the key points.

Japan has 12 basic zones, far fewer than is typical in an American city. The zones can be ordered in terms of nuisance or potential externality from low-rise residential to high-rise residential to commercial zone on through to light industrial and industrial. But, and this is key, in the US zones tend to be exclusive but in Japan the zones limit the maximum nuisance in a zone. So, for example, a factory can’t be built in a residential neighborhood but housing can be built in a light industrial zone.

…[the] Japanese do not impose one or two exclusive uses for every zone. They tend to view things more as the maximum nuisance level to tolerate in each zone, but every use that is considered to be less of a nuisance is still allowed. So low-nuisance uses are allowed essentially everywhere. That means that almost all Japanese zones allow mixed use developments, which is far from true in North American zoning.

…[The] great rigidity in allowed uses per zone in North American zoning means that urban planing departments must really micromanage to the smallest detail everything to have a decent city. Because if they forget to zone for enough commercial zones or schools, people can’t simply build what is lacking, they’d need to change the zoning, and therefore confront the NIMBYs. And since urban planning departments, especially in small cities, are largely awful, a lot of needed uses are forgotten in neighborhoods, leading to them being built on the outskirts of the city, requiring car travel to get to them from residential areas.

Meanwhile, Japanese zoning gives much more flexibility to builders, private promoters but also school boards and the cities themselves. So the need for hyper-competent planning is much reduced, as Japanese planning departments can simply zone large higher-use zones in the center of neighborhoods, since the lower-uses are still allowed. If there is more land than needed for commercial uses in a commercial zone, for example, then you can still build residential uses there, until commercial promoters actually come to need the space and buy the buildings from current residents.

In addition, residential means residential without discrimination as to the type or form of resident:

…In Japan…residential is residential. If  a building is used to provide a place to live to people, it’s residential, that’s all. Whether it’s rented, owned, houses one or many households, it doesn’t matter.
This doesn’t mean that people can build 10-story apartment blocs in the middle of single-family houses (at least, not normally). As I mentioned, there are maximum ratios of building to land areas and FAR that restricts how high and how dense residential buildings may be. So in low-rise zones, these ratios mean that multifamily homes must also have only one to three stories, like the single-family homes around them. So in neighborhoods full of small single-family homes, you will often see small apartment buildings full of what we would call small studio apartments: one room with a toilet.>

In short, as the author concludes, Japan’s zoning laws are more rational, more efficient and fairer than those used in the United States.

More details in the post. Hat tip: Sandy Ikeda.

1 Dan Keshet August 19, 2016 at 12:15 pm

In the US, there’s a long history of people in high-nuisance zones fighting against low-nuisance residential uses because they (correctly) fear that over time, the residential users will gain political clout and begin to curtail the high-nuisance uses. In Austin, for example, a developer proposed building a mixed-use commercial / residential development in an area currently zoned industrial. The industrial users feared both that their rents would rise (because the residential was a higher value use in that location) and, more crucially, that once residents moved in, there would be political pressure to restrict industrial activities (e.g. no loud activities past 8 PM), pushing the industrial uses further and further to the edge of the city.

As long as it’s a reasonable fear that residential users will be able to wield power to limit industrial uses, industrial users will probably fight against residents nearby.

2 rayward August 19, 2016 at 12:15 pm

The main difference (between the US and Japan) is that zoning (land use policy) in Japan is determined at the national level, whereas in the US it’s determined at the local level. Since Cowen seems to prefer Japan’s approach to zoning (land use policy), I assume he opposes devolution as a general matter and supports the determination of public policy at the national level. I agree with Cowen. Having so many layers of government in the US, and with layers often very different and contradictory policies, is highly inefficient and anachronistic. Let’s abolish states in a first step toward greater efficiency. It would be a small step toward a much better world.

3 MOFO August 19, 2016 at 12:50 pm

Because he *might* sort of opposes devolution in one case, he must, therefor, opposes devolution in all cases?

Fail.

4 Sam Haysom August 19, 2016 at 12:56 pm

I support raywards relatives visiting him more often in the rest home.

5 rayward August 19, 2016 at 12:58 pm

Whoops – I mean Tabarrok. He posts so seldom that I sometimes miss that it’s his post – although he is the “regulation czar”. I would also remind readers that the bursting of the real estate bubble in Tokyo was on an entirely different order of magnitude than the bursting of the real estate bubble in the US and won’t be forgotten. Unlike in the US where it’s already been forgotten – Americans either are an optimistic bunch or have no memory (the former a function of the latter).

6 Dan Lavatan August 19, 2016 at 9:09 pm

Well there are two separate issues. One is devolving power to areas of no more than one block, the second is what those policies should be. In the US, we have developed power to mid-sized entities many, but not all of which, are incompetent. If we had a national policy in the US it would be even worse. Nobody could ever build again as each puddle is a ‘wetland’. But it would be better if more local entities, used the Japanese system until they get rid of zoning entirely like clearly superior Houston.

7 Cliff August 19, 2016 at 12:34 pm

The Japanese do not have to worry about crime

8 Jason Bayz August 19, 2016 at 1:30 pm

+1

This is a big issue. There’s a good reason why a neighborhood full of single family houses doesn’t want an apartment full of studios built near it.

9 Steve Sailer August 19, 2016 at 5:29 pm

Americans have replaced discrimination by race with discrimination by cost, which works pretty well, but, of course, it’s very expensive.

Here’s an idea: in the 1970s, Oak Park, IL saved itself from the ruin sweeping across the next door Austin neighborhood of Chicago by imposing a secret Black-a-Block quota on realtors: the maximum integration allowed was one black household per block. This stopped Oak Park from tipping all black.

Today, Austin is a war zone while Oak Park is a liberal paradise.

Why not investigate the usefulness of these kind of anti-tipping quotas?

10 Tatil Sever August 19, 2016 at 9:20 pm

Yeah, everyone knows recent engineering graduates or freshly minted middle school teachers wanting to move to studios in Palo Alto are a world of trouble. Can you imagine ten of them living in one building? Insanity!!!

11 Steve Sailer August 20, 2016 at 2:21 am

I get the impression that Mark Zuckerberg and the Widow Jobs like Palo Alto just the way it is.

12 Dave D'Rave August 22, 2016 at 2:29 pm

I used to live in Palo Alto.
It used to be a nice, Upper-Middle Class kind of town.
We should have passed a law against Mark Zuckerberg. . .

Too late now.

13 Jason Bayz August 20, 2016 at 3:21 pm

Oh of course, financial self interest is also a motivator.

One country that has managed to keep housing prices low is Germany, but it has been done through a non-free market process Alex Tabarok wouldn’t like:

http://www.forbes.com/forbes/welcome/?toURL=http://www.forbes.com/sites/eamonnfingleton/2014/02/02/in-worlds-best-run-economy-home-prices-just-keep-falling-because-thats-what-home-prices-are-supposed-to-do/&refURL=https://www.google.com/&referrer=https://www.google.com/

In Germany, a smaller fraction of their people own their own homes, giving local communities less of an incentive to try to drive up prices.

14 asdf August 19, 2016 at 12:50 pm

Alex doubles down on Japan zoning nonsense. Doesn’t discuss Japanese real estate bubble, deflation, demographics, or what housing starts really mean in the Japanese context. Throws out cherry picked data that ignores basic fact that Tokyo is as expensive.

I’ll repost from previous:

The more I investigate this, the more convinced I am that if zoning is the problem, no city in the whole world seems to have found a solution. Which means it may be a politically intractable problem, and Alex doesn’t offer many ideas for solving the gordian knot.

We can say three things:

1) Top Tier cities are accumulating vast amounts of wealth, and real estate has become a kind of lottery ticket where you might bump into the right person and they become a millionaire. Obviously, people are willing to pay a lot for such lottery tickets. The already rich people don’t care about the price of real estate, or as people who already own are chill with it.

2) Nobody seems to have solved the problem of how to built vertically over land that is already built on in already crowded cities. All of the zoning success stories all seem to be about building out, not up, on virgin land in Sun Belt cities starting out with lower density levels. That’s a different problem to solve then what places like SF face.

3) Due to history many top tier cities also have geography that was once beneficial but now a hinderance. SF is a peninsula with mountains. NYC is an island. Almost every city has some river, coast, or some other geographical feature that becomes a commuting bottleneck. By contrast the booming cities of the Sun Belt are mostly just flat land as far as the eye can see.

We can bitch about zoning all day, and I can certainly see cases I don’t like, but not a lot of realistic political solutions, and little thought as to how much can really be accomplished here. The last time SF built enough housing to keep up with demand was 1941! So many NIMBYs in 1941.

Meanwhile, here in Baltimore they are using Section 8 to try and flood surrounding suburbs with people from the ghetto to make way for gentrifiers. This ruins the value of middle class people’s homes. I’d sure like to ability to zone out “affordable housing” if it means keeping my neighborhood and schools safe. If you go take a look at a map of SF area prices I think you’ll find lots of pockets of low rents…who lives there. Home much incentive do people have to make sure such people don’t end up moving in next to them.

15 Tatil Sever August 19, 2016 at 9:32 pm

Correction: SF Bay Area has hills, not mountains. If Hong Kong is any guide, those little hills would present little difficulty for building up.

I’m all for zoning so that Bay Area doesn’t turn into Houston, but any city that approves ugly strip malls, but refuses to allow a few stories on top to turn them into mixed residential/commercial areas is not trying to preserve “the character of the town”, it is trying to artificially inflate housing values for those who had won the lottery a decade or more ago at the expense of the new generation in the short term and the local economy in the long run.

16 Dave August 19, 2016 at 12:54 pm

It seems that the problem is really multi, unrelated (by DNA, interests, or otherwise) ownership of the same space or area. An owner or group of owners, with absolute property rights, with similar interests will get along and cooperate. Democracy over property rights always leads to one group punishing the other (as Dan noted in the first comment).

17 Milo Minderbinder August 19, 2016 at 1:16 pm

Once again if you want to let the market decide land-use by repealing zoning, you need to allow court enforcement of racially restrictive covenants and a repeal of the 1968 Fair Housing Act (and similar state statutes).

18 msgkings August 19, 2016 at 5:02 pm

This comment doesn’t make a lick of sense. Do you “need to” do that? Nope.

19 Mark August 19, 2016 at 2:25 pm

Thank you asdf and Milo Minderbinder for making it clear that the foundation of the American zoning system is racial bigotry.
We are all grateful.

20 Warren August 19, 2016 at 2:46 pm

Obviously the answer is to make everyone and every business move into a single million-story building.

21 Beth August 19, 2016 at 3:03 pm

This article suggests that the peculiarities of real estate economics in Japan mean that housing has little resale value, and entirely depreciates in 15 years. http://www.archdaily.com/450212/why-japan-is-crazy-about-housing If true, that would explain both why there is little zoning (no incentive to pass laws to protect housing values) and why housing values haven’t risen significantly. I defer to the Japan experts though.

22 Tatil Sever August 19, 2016 at 9:23 pm

The house, as in the actual building, depreciates fast. The land doesn’t.

23 Hoosier August 20, 2016 at 11:24 am

In Japan people generally don’t like to move into someone else’s house. It’s completely different from the US. People don’t put a ton of money into their homes either. Going to home depot and building a deck, or refurbishing your kitchen just isn’t done that much.

People don’t invite guests over as much as here and don’t feel the need to impress. I went to some house parties while living in Japan, but generally they were bohemian types that had lived abroad or hung out with foreigners.

24 Li Zhi August 19, 2016 at 4:22 pm

I know nothing about Japanese real estate markets. I DO know that selecting date ranges which have less that an entire period (ie boom-bust cycle) are exactly what cherry-pickers do. As is conceded in the links, the boom ’86-’91 in Japanese housing was followed by structural changes and I’d be MUCH more interested in comparing the increases from ’85 to ’15 rather than ’95-’15. Change ’85-’15 (de re: google) Population Japan 5%, USA 34%. GDP JP 297% US 417%. So, any apples to apples comparison is unlikely to be meaningful.

25 Paul Ball August 19, 2016 at 4:26 pm

Wow imagine if the UK or the US did this!

26 Tarrou August 19, 2016 at 10:18 pm

Sailer and others touch on the key issue. Zoning is only one of many ways in which mostly white liberals try to keep themselves protected from their political allies. It’s all well and good handing out cash and prizes, but do you really want your kids in school with a demographic 29 times more violent than average? Japan, as a monoracial, monocultural nation state, does not have these issues. The political will to rationalize housing decisions is there, because no one is all that scared of who moves next door. A vast multicultural, multiracial “diverse” society does not have these luxuries. Most of the “melting pot” don’t want to live near each other, and wherever they can seize the local levers of power, they can prevent this. Whites keep blacks out with zoning restrictions and cost increases, blacks keep whites and hispanics out with crime and pogroms. When the blacks win, it’s called white flight, when the whites win, it’s called gentrification. Personally, I blame all those rural white republicans.

27 Steve Sailer August 20, 2016 at 2:36 am

Thomas Edsall has a good column in the NYT, “Hillary’s Unruly Coalition,” about how the Democrats hi-lo coalition has some stresses.

The big picture is that the Democrats want inner city blacks to move to the suburbs and small towns and whites to move to the inner cities. Dispersing blacks will make the Democrats more competitive in House and state legislature races — the 1992 Voting Rights Act promotes Republican gerrymanderers clumping blacks together into very Democratic districts that will elect black candidates, which allows the Republicans to win a lot elections narrowly in the rest of the state.

And the Democrats want whites to move from the suburbs and small towns to the inner cities, which will make a lot of money for Democratic-connected real estate interests, and, in the long run, will depress white fertility and make whites more liberal and less positive toward the “family values” GOP.

Rahm Emanuel has been executing this plan in Chicago over the last 25 years, tearing down public housing projects. The one flaw in the plan has been that the displaced blacks from Chicago’s demolished projects get into gang wars with the other blacks whose turf they move on to, which is bad for Chicago property values in general.

28 Tarrou August 20, 2016 at 7:16 am

I read that article, and while it had some interesting data tidbits, overall it wasn’t anything new.

And the worry about the coalition is concern trolling. Fear and hatred of whites is a lot stronger than we give it credit for, and all the stronger for being so far-fetched. It’s about status. White liberals use racism as a status game, while to blacks it is ego defense. And trust me on this, the two strongest motivators in the world are status and ego defense. Not money, nor science, nor anything else will change this phenomenon, at least not in the next thirty to fifty years.

Machiavelli said it best, and first. Love (or altruism) is a good motivator in good times, fear is a great motivator all the time.

29 ohwilleke August 22, 2016 at 8:45 pm

Maximum nuisance zoning is more common than the alternative in U.S. municipalities for the most part. But, most U.S. zoning systems very tightly distinguish between different types of residential zoning and that distinction is where most of the mischief arises.

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