We’re (not) Number 1! How These Countries Surpass the US in Housing


Part 1: Japan

American exceptionalism is a gift and a curse. On the one hand, the belief that the United States is singularly suited to solve the world’s problems gives us the confidence to tackle big issues and helps foster incredible breakthroughs- like ushering in the information age or tackling complex challenges related to renewable energy, more efficient transport, or logistical hurdles like delivering more than half a billion packages a year to consumers ala Amazon.

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On the other hand, a fervent and unquestioning belief in exceptionalism is by definition myopic, and a lack of interest or understanding of the successes of other nations can hurt us- socially, politically, and economically. This lack of vision and refusal to adopt “foreign” solutions is also present in the American approach to housing. Countries from Finland to France have made profound strides in creating affordable housing for their residents, and while every country is different, stakeholders in the United States should at least have an understanding of how these problems are solved or mitigated overseas. In this series, I want to take a look at three countries who have succeeded where we have failed-and look at ways that we can adopt and adapt these strategies to improve the housing picture in the United States.

Japan’s Progress on Affordable Housing

Tokyo is the heart of the Japanese economy, as well as a cultural center that rivals any world city. The city possesses the palace and grounds of the Meiji Emperor, some of Japan’s most famed retail and entertainment districts like Ginza and Harajuku, as well as the headquarters of global corporate behemoths like Honda, Sony, and Mitsubishi. Tokyo is Washington DC, New York City, and Philadelphia rolled up into a single mega-metropolis. Land in Japan isn’t exactly plentiful- the island nation sits on an area the size of California with roughly 3x the population. Despite all of these variables that contribute to upward growth in the cost of housing, average rents in Tokyo are substantially lower, and housing is far more accessible than in many areas across the United States- particularly high cost of living coastal cities that mirror Tokyo’s economic progress- cities like Los Angeles, San Francisco, and New York City- all of which have substantially higher median rents compared to Tokyo:

Average Rent (One Bedroom Apartment)

San Francisco: $3,600

New York City: $2,650

Los Angeles: $2,362

Tokyo: $1,121

National Median Price (US): $1,216

National Median Price (Japan): $774

As you can see, despite the cost of living in Japan being 16.76% higher than in the United States, rent in Japan is 35.82% lower on average than in the United States, with an even greater difference between similarly appointed tier-1 cities in each country. So what gives?

Most of the disparity comes from the way Japan approaches new housing construction. Housing construction data for Tokyo and various parts of the US showed that in 2014, Tokyo constructed more than 140,000 new units of housing, while the entire state of California constructed roughly 80,000- despite having almost 4 times the population!

It really all comes down to zoning. Tokyo housing authorities utilize simple zoning which allows for by-right development, as opposed to the American model which requires each individual build site to get planning permission from government. Japan uses a system of 12 levels, which are segregated based on the amount of noise, traffic, and other nuisances permitted within a geographic area like a neighborhood or city. For instance, a strictly residential zone might allow the least amount of nuisance, while an industrial zone, with all the pollution and activity that entails, would be at a higher level.

This means that property developers in Tokyo work under a much more flexible regime than their counterparts in the United States- they can build in places we can’t, as long as they do not run afoul of the allowed nuisance regulations within a given zone. In practice, this means housing pops up everywhere, rather than being in sequestered dead zones with rows and rows of single-family homes and apartment blocks. The market can dictate how much housing is needed, rather than local officials, who often fail to provide adequate housing for fear of running afoul of voters, driving down property prices, increasing traffic, etc.

The Takeaway: Japan’s combination of loose zoning rules and a market-based approach accounts for their heightened ability to provide quality, affordable housing for their citizens.

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