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Forum Report
Land Rights and Responsibilities in the Twenty-First Century

Tags: Land , Depopulation , Tax

Yamanome, Akio
Masuda, Hiroya
Katayama, Ken’ya
Yoshihara, Shoko

November 06, 2018

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From left: Shoko Yoshihara, Ken'ya Katayama, Akio Yamanome, and Hiroya Masuda
From left: Shoko Yoshihara, Ken'ya Katayama, Akio Yamanome, and Hiroya Masuda

With the Japanese government gearing up for major reforms to address the structural causes of the country’s unclaimed-land crisis, the 112th Tokyo Foundation for Policy Research Forum (July 17, 2018) brought together a diverse group of experts to discuss directions for land law and land management in the age of depopulation. The following is an abridged record of that discussion.

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SHOKO YOSHIHARA: Japan’s land registration system has come under scrutiny in recent years, as communities around the country grapple with the problem of missing landowners and unclaimed land. Land is considered unclaimed, or of “unknown ownership” (shoyusha fumei), when authorities are unable to identify the current owner or owners on the basis of official property registries, which are frequently out of date. The inability to track down the owners of unused property has hobbled efforts to proceed with post-disaster reconstruction and remove derelict structures on abandoned property. Moreover, things seem destined to get worse as Japan’s population shrinks and land values drop. Mr. Masuda, can you give us a snapshot of the problem based on the work of your study group?*

A Problem the Size of Kyushu

HIROYA MASUDA: We estimated that in 2016 the combined area of unclaimed land in Japan was 4.1 million hectares, more than the entire area of the island of Kyushu. In the absence of effective countermeasures, we would expect that figure to reach about 7.2 million hectares—close to the area of Hokkaido—by 2040.

forum participants.pngEconomic losses due to unclaimed land are climbing as well. In 2016 alone, such losses totaled about 180 billion yen. Based on projected growth in unclaimed land and other factors, we’ve estimated that the cumulative cost to the economy between 2017 and 2040 will reach 6 trillion yen. But that’s a fairly conservative projection. The Cabinet Office estimates the total value of Japanese land at about 1,140 trillion yen. If we assume that about 20 percent of Japanese land is unclaimed, losses could reach as high as 200 trillion yen.

YOSHIHARA: Fortunately, recognition of the problem has spread, and in the past two years in particular, politicians and policymakers have been studying various options for addressing it. These options can be roughly divided into two categories. The first consists of short-term measures to facilitate the use and management of land that is currently unclaimed. The second consists of more fundamental, long-term reforms aimed at addressing the underlying issues and preventing the problem from escalating.

Representative of the first category is a new law passed on June 6 this year, which establishes special measures to facilitate the public use of unclaimed private land. Meanwhile, deliberation has begun on more basic, long-term reform of Japan’s property-rights laws and land registration systems, in accordance with the 2018 Basic Policy on Economic and Fiscal Management and Reform [adopted by cabinet resolution on June 15]. The government’s plan is to release an outline of proposed changes by the end of 2018, with a view to passing reform legislation in 2020.

The kinds of reforms envisioned are far-reaching. A systemic overhaul of this sort should be based on a sound understanding of the roots of the problem and a clear vision of how we want to treat our land going forward. With that as a foundation, we can work together to find and share acceptable solutions and ensure meaningful change at the local level.

MASUDA: To my mind, there are five key background issues that policymakers need to consider when addressing the problem of unclaimed land. The first is falling land values. Japan’s population is shrinking, and with the exception of prime commercial real estate in the biggest cities, it’s hard to see how land values are going to recover in the years ahead. The second is the fact that a huge amount of land belonging to Japan’s baby-boomers is going to be bequeathed to their heirs in the coming years, and unless those inheritances are registered, the number of unclaimed plots is going to skyrocket. A third issue is the fact that so many landowners and land heirs live in the cities, far from the rural plots that they own.

A fourth consideration is the fact that local government staff is shrinking. By 2040, the number of administrators nationwide is expected to be down to half of what it is now, and municipalities simply won’t have the human resources to go tracking down property owners. So, modernization and consolidation of land-ownership records should be considered a high priority. And a final point to bear in mind is that Japan’s population decline is going to accelerate in the years ahead. Under the circumstances, we may need to make changes not just to our land-registration system but also to our basic land-use policies. That might include new zoning laws that limit the land available for residential use, while at the same time enhancing the efficiency of land use in those areas.

In view of these considerations, I would say that the most important task to complete by 2020 is a revision of the Basic Act for Land to clarify the responsibilities of landowners. Article 29 of the Constitution protects private property rights, and that’s certainly important, but we also need to consider the implications of Article 12, which states that the people “shall refrain from any abuse of these freedoms and rights and shall always be responsible for utilizing them for the public welfare.” As we discuss changes in our basic land laws, I think we need to rethink our concepts of property rights in the light of Article 12.

I would also note that progress on the nationwide cadastral survey [launched in 1951] has almost ground to a halt. Obviously, we can’t complete the survey without cooperation from local authorities, but the central government is going to have to provide more funding in order to get the job done.

Legal Questions

YOSHIHARA: Dr. Yamanome, can you talk about some of the legal issues that need to be addressed?

AKIO YAMANOME: I’ve organized my thoughts under eight headings.

First: Unanswered questions on public use of unclaimed land. The special measures law passed in June 2018 will allow prefectural governors to grant local entities the use of vacant, unclaimed land parcels for projects that promote the welfare of the local community. But the period of use is limited to ten years. That can be extended another ten years, but what happens if there’s still no sign of the owner after twenty years? Should the entity holding the land be granted the title at no cost? Or should we first require a deposit to compensate the legal heirs? Then again, perhaps we should just extend the maximum period of use to thirty years—or even indefinitely—while leaving the title as is? These are some of the tricky questions raised by the new special-measures law. I think we need to gather a lot of public input before formulating a long-term solution.

Second: No more voluntary registration. I still hear people arguing that they shouldn’t have to register their land if they don’t want to. I say that we can’t permit that kind of thinking any longer because it undermines the entire land registration system. However, that brings us to the next topic.

Third: Should people go to prison for failing to register? It’s one thing to say that registration of inherited land should be mandatory, but how do you enforce that? Should we put people in prison for neglecting to register land they inherited? Would the public stand for that? Or should the law simply state that “every effort should be made to register inherited land.” That’s one possible solution, but a provision like that is unlikely to bring about substantive change unless combined with tax provisions.

We can also make it the legal responsibility of land holders to document their right to the land. This is something that definitely needs to be done, and it will probably involve amendment of the Basic Act for Land.

Fourth: Is the registration and license tax double taxation? Japan has a national “registration and license tax,” which currently applies to the re-registration of inherited land. The tax is calculated as a percentage of the value of the land, but since inherited land is already subject to the inheritance tax, isn’t it double taxation to impose a registration tax as well?

Fifth: Japan’s outdated land law. Japan’s Basic Act for Land was passed in 1989, at the height of the asset bubble, and it’s full of anachronisms. For example, Article 4 prohibits speculative land transactions. Today, neglected, unused land is a much bigger problem than speculation. I think it’s urgent that the government acknowledge and address the burden of land ownership and maintenance in an era of falling land values. We need to correct these anachronisms and craft a basic land law that sets forth a new land policy adapted to an era of falling values. That brings us to my final topic.

Sixth: Addressing the burden of land ownership. As land values decline, a growing number of landowners are looking for ways to abandon their title. Who will take the land off their hands and assume responsibility for maintaining it? I get the feeling there are a lot of people who object to having their taxes used for the maintenance of land that other people have abandoned.

One way to approach the problem might be to shift the focus of the discussion from the ethics of abandoning one’s title to new ways of approaching the maintenance of land. Until now, we’ve been debating the issue on the premise that abandoned land needs to be managed or maintained in such a way that it can be utilized to the full. I think we should consider limiting the scope of active land maintenance by restricting residential use to certain areas while enhancing the usability of that land, as Mr. Masuda suggested. Land with no apparent utility could be left to revert to nature, providing it doesn’t pose a danger to the public.

Seventh: Why do people discuss land issues? This is something to which we should give renewed thought. I’m sure all of you who are here today are eager see the issue resolved in a manner that will have a positive impact on society.

Eighth: Encourage positive input from the media. The problem of unclaimed land is something that needs to be considered by society as a whole. In that sense, seen from a broader perspective, the issue relates to how we seek to nurture democracy in Japan. The media has a crucial role to play, and I hope it will provide new, important insights that will contribute to the resolution of this issue, instead of pandering to public opinion.

Land as a Public Good

YOSHIHARA: What are some of the challenges that municipal governments have been grappling with in connection with these land issues? Our next speaker is Mayor Katayama of Niseko, Hokkaido, which is regarded as an exemplar of citizen participation in local planning and development.

KEN'YA KATAYAMA: Niseko, a town with a population of about 5,000, has embraced the principles of participatory self-government in the belief that self-determination based on citizen involvement is the only path to survival for a small, remote municipality like ours.

Niseko Mayor Ken'ya KatayamaSound environmental policy is vital to the economic sustainability of a resort community like Niseko, not to mention the individual needs of our residents. The town of Niseko has enacted rigorous statutes to protect the environment, beginning with a basic environmental ordinance and an ordinance for protection of the local scenery. We also have strict laws aimed at conserving groundwater and protecting our water supply and watershed, with penalties attached. Thanks to these initiatives, we’ve been designated an Environmental Model City and an SDGs [Sustainable Development Goals] Future City by the central government. Moreover, our restrictions on development essentially eliminated reckless and unethical land speculation.

Reviewing the history of local land issues, we should probably start with the nationwide development boom set off by the government’s 1972 plan to “remodel the Japanese archipelago.” The boom created conditions that encouraged more and more local farmers to sell off their land. Another turning point came in 1986, during the economic bubble, when swindlers began selling unusable property using deceptive advertising and false promises of infrastructure development. These are wilderness tracts that have gained nothing in value since then.

When we first passed the ordinances to protect water resources, we sent out notices to  all the registered owners of the properties to which the statutes applied, since there were penalties attached. A full 38 percent of the notices were returned to us as undeliverable. The titles had never been transferred to the owners’ heirs. I think in many cases the children didn’t even know their parents owned that land.

The total land area under Niseko’s administration is 19,713 hectares. Just over 55 percent of that land is taxed, and for the most part we know who the owners are. Most of the remaining, untaxed land is publicly owned, but there are also 1,708 hectares of untaxed private land [8.7% of the total land area], and of that, about 444 hectares are unclaimed [2.3% of the total]. We haven’t tried to track down the owners, and we frankly don’t have the resources to do so.

By the way, there’s been a lot of talk in the media about foreign investors buying up land around Niseko, but the amount of land registered to owners with domiciles overseas is just 0.6 percent of our total land area.

When it comes to private land that has gone unclaimed for years, it seems to me that if the property lends itself to public use, and the municipal government wants to use it, the title should be transferred to the municipality. It’s not realistic to ask the local government to invest taxpayer money in a site if usage rights are going to end after a certain number of years. I think Japan needs to revamp its land policies to reflect the concept of land as a public good and a national asset. Why should the law protect the property rights of phantom owners who never claim their inheritance? That’s something I would like to see changed.

YAMANOME: Your position that the municipal government should be given the title to unclaimed land strikes me as perfectly reasonable. And yet, there’s a lot of disagreement about that among local governments. Some argue, like you, that they should just be given the title to such land, but others have reacted to the idea with hostility, worried that the central government is trying to saddle them with responsibility for unusable land. A lot of municipal governments already have their hands full trying to address local needs with dwindling budgetary and human resources. Local perspectives vary according to the circumstances they face.

Going forward, I think it’s vital that the government avoid giving the impression that it wants to impose a mandatory one-size-fits-all system on the country’s municipalities. It needs to come up with a flexible system that local communities can adopt or not as they see fit. Your presentation helped me realize just how much work we have to do to design a system acceptable to as many municipalities as possible.

Options for Unwilling Land Heirs

YOSHIHARA: The discussion so far has focused on what to do with unused land of undetermined ownership, but related to this problem is the lack of a system for relinquishing the title to unwanted land. I think we need to consider creating such a system and establishing entities for the purpose of taking control of unwanted land.

MASUDA: The second phase of our research project on land issues has been examining Hiroya Masuda, adviser, Nomura Research Institute, and adjunct professor, Graduate School of Public Policy, University of Tokyoconcrete options for systems, such as land-bank programs, whereby private property could be transferred to designated public or quasi-public entities in cases where the owner was unable to maintain or sell it.

But such entities wouldn’t be able to accept all donations unconditionally. So, should they accept only land with the potential to cover the costs of maintenance and development? Or should they also accept land that’s not going to pay for itself? We need to establish clear criteria, and that’s the key challenge.

Meanwhile, local governments are growing increasingly reluctant to accept land donations. One reason is the growing danger of natural disasters like landslides. We need to start taking such hazards into account in our land use and management. A hands-off approach to land maintenance is certainly appropriate in some instances, but it needs to be well thought out.

Toward a Consensus on Mandatory Registration

YAMANOME: With regard to registration, I think the first steps are to build a national consensus in favor of re-registering inherited land and make that the legal responsibility of the owners. The next step is to figure out what specific procedures and measures are needed, from a practical standpoint, to ensure compliance.

Current law requires owners to register the homes they build on their land. Violators can be fined a maximum of 100,000 yen for failing to register in such cases, but no one enforces the law. Prosecuting all the violators would take more resources than it’s worth. Besides, a fine of 100,000 yen may not be much of a deterrent for some landowners.

Finally, there are tax incentives and disincentives to consider. At the very least, we should defer the registration and license tax for a certain amount of time to lower the initial costs of registration for land heirs. The registration tax is only 0.4 percent of the land’s assessed value, but there are other expenses involved as well, and together they constitute a real deterrent to registration. In any case, there’s a lot more work to be done figuring out how to mobilize and coordinate various elements of our tax system to promote registration of inherited land.

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YOSHIHARA: Today’s forum has highlighted some very important issues and policy considerations. I think it has really underscored the need to proceed deliberately and thoughtfully when designing systemic reforms to meet the needs of our rapidly changing society. Thank you all so much for your participation.

 

*See http://www.kok.or.jp/project/research.html

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