Tuesday, Nov. 1, 2011

By PHILIP BRASOR and MASAKO TSUBUKU

In September, real estate developer Tokyo Tatemono started to demolish the Suwa Ni-chome apartments in the western Tokyo region of Tama. The Suwa danchi (housing development) was an integral part of Tama New Town, which opened in 1971. Of the various "new towns" built in the late 1960s and '70s by the government to create integrated living-working communities on the outskirts of major cities, Tama's was the most celebrated. News footage of families moving into the 50 sq.-meter apartments, which sold for about ¥5 million, are used whenever a TV show wants to illustrate Japan's postwar re-emergence as a developed country.

Condos that have been around the block: A 2010 photograph of Tama New Town's Suwa danchi housing development in western Tokyo, which is currently being re-developed into new condominiums. KYODO PHOTO

The new towns, however, never fulfilled their destinies. People didn't flock to them in the numbers envisioned, and companies didn't relocate in their vicinity, so residents still had to commute to the city.

Also, Japan's hard-won first-world status didn't include upward mobility, that idea of the middle class continually trading up to larger homes. In Japan, most homeowners remain in the first place they buy for the rest of their lives, so present inhabitants of new towns tend to be elderly, their buildings superannuated.

After destroying the Suwa danchi's 640 units, Tokyo Tatemono will build seven buildings of either 11 or 14 stories, comprising 1,250 units ranging in size from 50 to 90 sq. meters. Ninety percent of the former residents have opted to move to the new buildings, which will be finished in the autumn of 2013.

Hiroko Uchida (not her real name) moved into Suwa in the late 1980s.

"We bought our apartment during the bubble period for ¥30 million," she says. "Initially it was as an investment."

At that time it was taken for granted that all Japanese real estate, even tiny apartments built by the government in uniform five-story buildings without elevators, would increase in value forever. Uchida and her husband, now retired, rented out their apartment while they and their two children lived in another one closer to his workplace. After the bubble burst, however, the value of the apartment dropped.

Suwa owners who agree to move into a new unit equal in size to their former one do not have to pay anything. The vast majority, however, are moving into larger units and will pay the prorated difference. Market prices of the new apartments range from ¥29 million for 70 sq. meters to ¥39 million for 90 sq. meters.

Press coverage of the new town's demolition has been almost as big as it was for the opening in 1971 — and for the same reason. The new towns ushered in the first mansion, or condominium, boom. Today, between 12 and 14 million Japanese live in condos. The land ministry estimates the life span of older buildings as being 30 to 40 years, which means this first wave will soon have to undergo extensive renovations or demolition and rebuilding. Only 162 rebuilding projects have been carried out in Japan so far, and Suwa is the first large-scale one.

The media have called it a success, though it should be noted that not all of the ¥23-billion cost for rebuilding will be paid for by owners trading up and new buyers. The central government is partly subsidizing the project, thus indicating its importance as a model for future housing development.

The biggest obstacle to rebuilding such buildings is consent. In 2002, Japan's Shared Property Law was revised so that condominium boards could proceed with rebuilding projects if at least four-fifths of the owners in a building agreed. Previously, such matters were governed by the Civil Code, which said 100 percent agreement was needed in any decision involving shared properties.

However, condo boards are typically understaffed. Originally, the land ministry ordered that only resident owners could serve on boards. But many condo owners don't live in the units they own; they rent them out. So, in June the land ministry revised the rules to allow nonresident owners to serve on boards, but apparently that isn't enough.

One board member recently told the Asahi Shimbun that he couldn't secure approval for a quake-proofing assessment of his building because "if the owners found that the building needed work, then they would have to go through with it." It's as if someone decided against having a cancer screening because he didn't want to take the chance of having to undergo treatment.

The land ministry now wants to allow third parties to become board members in order to help the process along. These third parties are expected to be representatives of the real estate industry, in particular developers. It's impossible to carry out a condo rebuilding project without the involvement of a developer, since in order to protect their investments owners have to increase the number of units in a new building and then sell them to pay for demolition and reconstruction.

Developers, though, will not get involved if there is nothing in it for them. Tokyu Fudosan has put off its project to rebuild part of Senri New Town in Osaka Prefecture, which is even older than Tama's, because the recession has made it less potentially profitable. The main issue is the size of the land, since a new structure will require more to make rebuilding worth it. In Suwa's case it was easy because the land occupied by the danchi is huge, but with condos situated in large cities where space is at a premium, it might not be. Also, municipal zoning laws have changed in the last 40 years, so while one solution is to build upwards by adding more floors, local governments may not issue building permits if the new structure violates capacity or right-to-sunshine regulations.

And what about owners who vote against rebuilding? If 80 percent of the owners agree to rebuild, theoretically they buy the "rights" to these dissidents' units. Various media have reported that the 10 percent who didn't go along with the Suwa rebuilding received ¥11 million each. There is a vocal minority on the Internet that claims the rebuilding push is a racket, another means for stimulating the economy and propping up the construction industry. In any event, there is a glut of condos. Half the country's 5.7 million units were built in the last 15 years. Attention is finally being paid to the current stock: replacement, not addition.

Most likely the reason the Suwa 10 percent voted against rebuilding is that they are old and don't want to move. While the new buildings are going up, the owners have to live somewhere else for two years. Uchida was lucky. She entered a lottery for a low-rent, publicly subsidized apartment and won. She and her husband will pay only ¥20,000 a month until their new condo is ready. The government's been good to her.

If you're buying an old condo, here's what to keep an eye out for 1981: This is the year that present earthquake-proofing regulations went into effect. About 1.46 million condos currently occupied or on the market were built before these standards were implemented. That doesn't mean every building completed in 1981 or shortly after does meets the standard. Shūzenhi: This monthly fee goes toward a fund to pay for future major repairs of common facilities, such as replacing elevators. It's in addition to the kanrihi fee to the building management company for upkeep and maintenance, but despite what many condo owners think, it is not usually sufficient for rebuilding projects. While some condo owners associations set the shuzenhi low to attract buyers, large-scale repairs are expensive, which means the fund may not be enough to pay for them. Haikan(plumbing): The feature of older condos that always needs to be replaced is plumbing, and since pipes are embedded within the walls and floors of the buildings the work can be very expensive. Newer buildings no longer use metal pipes, which easily rust and clog over time, and some have started placing the plumbing outside the walls to make them easier to maintain and fix. Shoyūken (right/title): The "title" to a condominium means you own the physical apartment and a very small portion of the land the building sits on, unless the condo owners are leasing the land.

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