Why Are Japanese Homes Disposable? (Ep. 157)

Listen now:
(Photo: Jacob Ehnmark)

(Photo: Jacob Ehnmark)

In most countries, houses get more valuable over time. In Japan, a new buyer will often bulldoze the home. Why? That’s the question we try to answer in our latest Freakonomics Radio podcast, “Why Are Japanese Homes Disposable?” (You can subscribe at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)

Jiro Yoshida, a professor at Penn State University who specializes in real-estate economics, tells us that, per capita, there are nearly four times as many architects in Japan as in the U.S. (here’s data from the International Union of Architects), and more than twice as many construction workers. There is also a huge demand for new homes. When you put all those numbers together, it sounds like a pretty typical housing boom — and yet Japan has a shrinking population and a long-stagnant economy.

It turns out that half of all homes in Japan are demolished within 38 years — compared to 100 years in the U.S.  There is virtually no market for pre-owned homes in Japan, and 60 percent of all homes were built after 1980. In Yoshida’s estimation, while land continues to hold value, physical homes become worthless within 30 years. Other studies have shown this to happen in as little as 15 years.

Does this make  sense? Not according to Alastair Townsend, a British-American architect living in Japan, who is perplexed — and awestruck — by the housing scenario there:

TOWNSEND: The houses that are built today exceed the quality of just about any other country in the world, at least for timber buildings. So there’s really no reason that they should drop in value and be demolished.

In the podcast, we look into several factors that conspire to produce this strange scenario. They include: economics, culture, World War II, and seismic activity.

Richard Koo, chief economist at the Nomura Research Institute, has argued in a paper called “Obstacles to Affluence: Thoughts on Japanese Housing” that whatever the rationale behind the disposable-home situation, the outcome isn’t desirable:

KOO: And so you tear down the building, you build another one, then you tear down the building, and you keep on building another one, you’re not building wealth on top of wealth…And it’s a very poor investment. Compared to Americans or Europeans, or even other Asian countries where people are building wealth on top of wealth because your house is [a] capital good. And if you do a certain amount of maintenance you can expect to sell the house at a  higher price. But in the Japanese case once you expect to sell it you expect to sell at a lower price 10 or 15 years later. And that’s no way to build an affluent society.

All that said, economists continue to debate whether a house is such a great investment in the U.S. One more burst bubble and maybe we’ll all start thinking about the Japanese model.

(Special thanks to Gavin Hayes and Paul Earle at the U.S. Geological Survey for helping us sort through earthquake data.)


One fact not noted by Koo in his article on Obstacles to Affluence is that the term of the typical Japanese home mortgage is 100 years. While this lowers the monthly payments, it also assumes that future generations will inherit not only the house but also the mortgage...


During the bubble this was true apparently but no bank, anywhere in Japan , would enter into that type of mortgage today or for the last 30 years for that matter. This idea has been perpetuated but as a holder of a mortgage in Japan in one of the more expensive cities in central Japan, I've seen first hand that this is simply a myth.

Gareth Andrews

There's something this piece conspicuously fails to address.

Until some point relatively recent, at least, the Japanese were engaging in multi-generational residential mortgages.

So, something is unexplained here.

Shane L

Three thoughts on this.

First, with Japan's earthquakes, typhoons, volcanoes, tsunamis and the like, I presume architectural technology is moving fast and always improving the resilience of buildings. Thus a new building is going to use the best technology and be most safe in case of a natural disaster. Maybe buyers fear that a 20-year-old building will be unsafe, and they would rather tear it down and build a cutting-edge, safe modern building?

Second, I have read that the Japanese yakuza gangsters have some ties to construction and perhaps to some politicians. I was struck in Japan by how heavily concrete is used: concrete river beds, concrete sea barriers, concrete paths twisting among even fairly low-density farms. Anecdotally I've heard it implied that criminal ties to corrupt politicians helped to feed a public construction boom (perhaps as part of government stimulus packages during the 1990s), monopolised by yakuza-affiliated construction companies. So perhaps this has a role here too? Could there be government policies that make destruction and rebuild favourable, secretly to help crime-affiliated construction companies?

Finally, I remember reading that the important Shinto shrine at Ise is destroyed and rebuilt every 20 years. I felt that this indicated a different attitude to authenticity to that prevailing, I think, in Western Europe. Here in Europe an authentic building is old. The stones in a castle are the same stones that were there a thousand years ago. In Japan, perhaps because earthquakes and typhoons keep shaking things down, a wooden shrine that is only a few years old could be considered authentic because it is a part of an ancient tradition of renewal. The wood is new, but the pattern is old. So perhaps this has a role too, if there is less concern about protecting old structures out of some sense of preserving the ancient and authentic.



What wasn't mentioned is the obscene amount of waste of resources. Where is this lumber coming from? I doubt they reuse the lumber, so what happens to the broken carcass of the demolished house? In the eternal quest for the new and fresh, are they being responsible when they discard the old and stale?

Sam Watson

As an architect and builder who owns both one newish Japanese house and one 50-year-old house. 

Freakonomics misses some important points

1. Tax incentives and industrial policy have been deliberately calibrated to foster the industrial house manufacturers since the War (Daiwa, Misawa, Sekisui et al). One incentive that Americans enjoy that is absent in Japan is the mortgage interest deduction. Instead of this, Japanese get life insurance tax breaks, and this is an indication of the priorities of the industrial policy. 

2. The asset value of a property has always been considered to be in the land, not in the structure. That is, as long as land prices were rising, nobody cared about the house value. Now that land prices seem to be in permanent decline, this notion is no longer valid. 

OTOH, there is a recent counter-trend in the industry to formulate policies that will foster the notion of “asset value” in housing. This can occasionally even be seen in advertisements in the media. And this is partly what is behind the “Century House” initiative. 

3. Negative equity — with depreciating houses and falling land prices, going into negative equity is a normal situation. This has a tremendously depressing effect on sentiment and economic confidence in households. Moreover, as it’s impossible for entrepreneurs to put their house up for collateral on a new business loan, the startup culture is inhibited. It's like a wasting disease, and IMO this is the most important point.

A comment on construction. In a Japanese custom house, anything you want you can get, provided you know how to ask for it. If you properly supervise the builder, they will build it properly. The work will be very neat and precise and very sharp looking. Carpenters take great pride.

In a spec house, quality is another matter, just like in America. Nevertheless, regardless of the build status, new houses are required to get at least three on-site inspections during construction, and the builder must provide a 10-year third party defect warranty.


Dave S

So basically, Japan does with houses what most Americans do with cars: pour a lot of money into something that immediately and relentlessly depreciates, culminating in its destruction and replacement. Both are lifelong mechanisms for the middle-class to blow its wealth... if the Japanese custom of throwaway houses leads them to geographic and economic joblock, the American version of this story has its own pathologies for society too, namely overconsumption of land (i.e. urban sprawl) and a constant state of daily stress (i.e. all-day traffic jams).

Potato, potahto.


I listened to the podcast this morning, and had two thoughts on the topic:
1. The statement in the podcast to suggest that the demolition and re-building of houses in Japan was a waste of money didn't recognise a differential in the value of the lot value versus the detached dwelling value. That is, if we consider the market is acting rationally and that purchasers are informed, then the inference of irrationality or waste doesn't hold up. A purchaser in Japan will value the block more than the dwelling, and so a larger portion of the purchase price would be ascribed to the land component as compared to other markets.
2. The link to the activity to the broader performance of the economy. The conclusion suggested that Japan's economic under-performance was perhaps contributed to by this practice. The logic didn't hold for me on this aspect on the basis of the economic activity (and multiplier effect) inherent in construction. The expenditure to build a house and associated costs generates revenue through the economy, so perhaps the argument is reversed - that without this stimulus, the Japanese economy would be faring worse given the declining demographic trends in aging population, inflation / deflation, 0% interest etc.



The article says that there are nearly four times as many architects per capita in Japan as in the US, but in the link provided it says that there are 127,370,000 people in Japan and 307,558 architects, which means there are 414 people for ever architect, while in and the US there are 316,024,000 people and 105,596 architects, which is one architect for every 2,992 people. Doesn't this mean that there are over 7 times as many architects per capita in Japan?

Phil Persinger


Your math is correct, according to my calculator. Since he's on the PSU business school faculty, perhaps Prof. Yoshida's figure refers to the ratio of architects actually making a living from their practices.


At least it saves Japanese people from the Western middle-class trap of living in a state of endless renovation. Here in Australia, the vast majority of over 35s males spend almost every moment outside of their actual paid jobs doing maintenance and renovation on their houses. Meanwhile the wives look after the kids and watch home renovation shows on television. If labour and architectural design costs were cheaper this whole activity could be outsourced and people could invest their time into other, perhaps more useful pursuits.


My wife is from Japan and we subscribe to TVJapan, so we stay fairly current on the country and culture.

To say that most (or even many) of the homes are only built to last 30 or 40 years is not entirely accurate. Certainly not from the point of view taken by the broadcast anyway. The impression given is that the Japanese build "disposable" homes and this is even proven by given an example of a temple being demolished and rebuilt every 20 years.

Many of the newer homes in "tract" might very well fit into this model, but I even doubt that as my sister-in-law is getting ready to add on to her 30 year old home near Tokyo.

A clearer explanation might be that so many homes were not built to earthquake standards and had to be either remodeled or rebuilt. Many owners likely chose to rebuild as retrofitting, especially in a tight urban environment can be very expensive.

Additionally, there have been a tremendous number of homes destroyed by earthquakes, mudslides and other disasters that had to be replaced, which can distort the statistics as well.

Japanese homes were not painted typically, like our homes on the coast, because the patina of aging wood was desirable. They also believed that the insides of their homes, like themselves, were more important than the outer appearance.

As far as the temple goes, the sequence is this. . . . .they build an exact duplicate next to the old one, then transport the diety in a sacred ceremony to the new home and then disassemble the old one. Much of the components are saved or reused where possible as they are made from sacred trees.

The purpose of the rebuild isn't because the temple is falling down. . . rather, it is to protect the skills used to build the temple. They ONLY use the OLD Techniques for the construction and the skills are passed down from one generation to the next. Each family gets to fully participate in two, or possibly three, builds of the temples.

They show a great appreciation for quality, endurance, practicality and style.



I really enjoyed the podcast but there was one question that I was hoping would be answered that wasn't. If Japan's economy has been stagnant for 15 years, how can people afford to buy a house, then tear it down and pay for a new house to be built? Do Japanese banks take that into consideration when they give out loans?


This program missed a few key points of Japanese history that add to the depreciation of home value in Japan. During the Tokugawa period people were limited in the amount of wood that they were allowed to put into their homes. Instead the homes were built out of what today would be considered inferior. As a result the homes that were built for many years simply did not last as long as they do today. Building techniques improve much faster than society can change. Traditionally these old homes were made out of components that could be easily replaced when needed or put into a new house after being cleaned, refinished or otherwise adjusted for reuse.

Today also many builders that I've dealt with are building homes that are designed to last 100 or more years and people in my neighborhood fairly frequently repaint their houses, home centers where people buy things to maintain their homes are a booming business. Reporting on this was really quite shallow and limited most likely to what is happening in downtown Tokyo so doesn't really reflect what its happening in Japan overall.