According to the internal affairs and communications ministry, Japan had a total of 62.41 million dwelling units as of 2018. Nomura Research Institute expects the number will increase to as many as 65.46 million in 2023.

Meanwhile, the National Institute of Population and Social Security Research has forecast that the number of households will peak at 54.19 million in 2023. Households have continued to increase despite a falling population because more people are living alone thanks to increased longevity and the rising number of unmarried people.

But as the number of households stops growing, “the number of excess housing units could rise further to 20 million or 30 million,” said Ken Miura, a professor at Kyoto University’s graduate school of engineering.

Japan suffered an acute housing shortage from the end of World War II through the 1960s, prompting the government to enact legislation to promote homebuilding. As a result, the shortage ended by 1973, but the construction of new houses continued at a pace of over 1 million units a year through the 2000s. “It was a remnant of the high-growth era. Despite an expected decline in population, the government did not change its policy and pushed the housing industry to build more homes,” Miura said.

Nomura Research Institute foresees a steep increase in the number of unoccupied homes after 2023, predicting it will hit 23.03 million units in 2038 if the pace of house demolitions slows. The pace did accelerate from fiscal 2013 to 2017, but if it goes back to the 2008-2012 level, “the issue of housing surplus would really come to a head,” said Akira Daido at the institute.

The housing glut has been compounded by weak demand for existing homes. Older homes are less popular with homebuyers because many do not meet earthquake and energy-saving standards. One industry observer said this is the result of the government and the housing industry prioritising quantity over quality.

In fact, 7 million of the 53.6 million occupied homes lacked sufficient strength against earthquakes as of 2018, according to a housing policy paper adopted by the cabinet in 2021. In addition, 34.5 million units that had cleared new earthquake standards failed to meet energy-saving guidelines.

Previously owned houses account for 14% of the market in Japan, compared to between 80% and 90% in the US and Britain. Unless their quality improves, the number of unoccupied houses will continue to increase.

There are two ways to reduce a housing surplus in a time of falling population. One is to boost demand for existing homes, but “it would not be easy to change the current market structure to one based on existing homes in Japan, where there is no tradition of appreciating and evaluating such homes, unlike in the US and Europe,” Miura said.

Still, elderly people and single-parent households often struggle to find homes, Miura said, and “if different sectors of the government such as housing and welfare learn to share information, existing homes can be put to more effective use.”

The other solution is to promote the demolition of vacant houses. “The government needs to foster an industry that specialises in home demolition,” said Nomura’s Daido.

Crassone, a Nagoya-based company that helps match owners of unoccupied houses with demolition specialists, has made more than 10,000 such arrangements. Using its data and expertise, Crassone in 2021 began helping local governments simulate the costs of tearing down vacant homes. About 30 municipalities have already signed up for the service, which has been named as a project eligible for financial and other support from the land, infrastructure, transport and tourism ministry for the second straight year.

Taxes are another issue. The property tax often increases when a residential lot becomes vacant. “The government needs to offer tax and other incentives to property owners if it wants to promote the demolition of vacant homes,” said Osamu Nagashima, chairman of real estate consultancy Sakurajimusho.

Unless the government takes the lead in dealing with the housing surplus, the number of vacant homes that are just decaying away will only continue to grow.