Kigo Blog

Japan’s Possible VR Solution For Empty Space

Vacation Rental Industry Updates

In a recent article, we discussed the Japanese government’s plan to triple the amount of foreign visitors over the next two decades. This is a change of huge proportions. So, how can you introduce 15-20 million more people into an already swollen infrastructure?

You use what’s already there.

In move that rides against the grain of governmental thinking in Europe, Japan is debating relaxing the regulation surrounding short term rentals so they can start to utilize the 8 million empty homes standing in the country.
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This should be the point. Instead of regulating against the existence of a thriving industry, regulate to ensure quality and safety. There are currently 11 million empty homes in Europe alone. This figure does not compute with the almost worldwide desire to attract tourism whilst reducing the use of resources, emissions and the last scraps of unused urban space. Which of the major European capital cities could argue that the building of new hotels in the city centre would be the most positive use of city space and would have the largest positive effect on the city population as a whole? Adding new buildings that will never be able to lived in by city residents seems like insanity for our most crowded and expensive cities.

 

Building of new hotels and resorts puts extremely localised pressure on infrastructure and concentrates the income from tourists to fewer businesses. The public feel the effects yet see fewer of the benefits from mass-influx tourism. Apart from the distribution of jobs, the influx of money from tourism will then be felt in very localised areas, around these hotels.

 

A 400-room hotel adds potentially thousands of new, and transient, residents to an area that will largely not extend further than a few city blocks. The majority of guests will have chosen the hotel partly because of the proximity of it to the attractions and sights that they want to visit. The streets between these locations will be well-trodden paths, filled with visitors. Tourists become the majority and the area becomes more like a theme park of nostalgia for when the city operated as more than a destination.

 

A vacation rental will host a family, at most. More likely to be in contact with businesses that only feel mild ripples from the tourism of the central areas. The nature of vacation rentals mean that tourism cannot be so concentrated as resorts or even hotel districts. Even popular areas will be less densely populated with non-residents. Not even the most expansive vacation rental businesses can boast hundreds of rooms in the space of a city block.

vacation rental Paris Hotels

Hotel Vs Vacation rental distribution in Paris, 2015.

 

If like Japan, cities want to encourage further tourism without damaging the integrity of their destination, a solution has to be found. Encouraging private ownership and use of empty homes by permitting regulated short term rentals seems like a solution that can do this. It puts ownership of property, and in turn the cities, back in the hands of the residents. Vacation rentals then encourage people to live in similar rhythms and patterns of residents. You live amongst the city, shop where people shop, go where they go. You are not buffeted through the corners in a tour. The natural flow of the city pushes you in new directions and each property has a different stream meaning the visitors are dispersed more equally around the city.

 

The current model of hotels funnels huge numbers of people into and city and focuses their impact onto the city whilst the profits are distilled to a laser, that reaches a handful of corporations. The vacation rental model is the inverse. The visitors and the benefits are spread over, like a fine mist. Enough to notice, but not disrupt the natural operation of a city and the people that live there.

 

This is what Japan is debating. Whether they can solve two problems at once.

Part of Japan’s strategy involves encouraging tourism into more rural areas. Without using empty housing and allowing people to open their homes to short term rentals, it seems difficult to imagine that hotels will gamble on building new outposts in areas previously untouched by tourism.

 

Permitting vacation rentals requires minimal investment. The properties are built. The people are ready and have the means to reach to their prospective guests. There is even a national database that lists rural properties at dramatically reduced rates. If people know that they have the option to supplement their income by using the value of their property it will help lead to a higher rate of home-ownership and fewer properties standing empty as money and natural resources are expended in order to build more lodging options for tourists.

 

The next point that empty housing brings up is that the areas where these properties sit have been built to cope with having people reside in them. Renting out a vacation property means that the occupancy levels remains in line with the original estimations. Not only is the local infrastructure designed to cope with these occupancy levels, local businesses rely on it. By allowing short term rentals, you are not stuffing in an extra layer of population that the people below are force to support, you are keeping occupancy at the levels that keep an area, and businesses thriving.

 

You can argue that there is disruption and the risk of antisocial behaviour, but with regulated and professional property managers, these cases are in the minority. To cite this, with infrequent and anecdotal examples, fails to acknowledge that living in a metropolis comes with a certain level of risk of this type of behaviour regardless of rental regulation. Whilst a vacation rental may cause disruption, there is no evidence that rates of disruption are higher than the usual come and go of a normal rental property. This comes down to property management. Regulation breeds professionalism. Prohibition breeds a black market.

 

Whilst short term rentals are often illegal, there is nothing to stop you adding a property to the growing list of empty dwellings. You can even benefit financially from doing so. When you can purchase property as an investment, whilst avoiding tax on liquid assets, people are going to continue to purchase property never intended to be a residence, for the owners or anyone else. By limiting vacations and not actively encouraging the use of empty space, regulation is not finding a solution to the mis-distribution of housing. What it is doing is punishing business owners, that may not even own multiple properties, but use management skills to generate revenue from third party owners. The next to suffer are people renting their sole property out for a few weeks of the year to supplement their income.

 

The truth is that vacation rentals offer a more egalitarian approach to distributing the wealth and disruption of short term rentals.  It is a modern-day crime that we allow buildings to stand empty:

 

[…] is the latest victim of what some have called “lights-out London” where absentee owners push up property prices without contributing to the local economy.

 

Whilst there are cities that have properties that are rented out minimally, by absentee owners with a vast network of properties, the majority are still rented by the primary owners or by businesses that collate these properties under the umbrella of one vacation rental business. The taxes on the property are paid, the guests bring income to local areas and the rental income is also taxed. To allow people to purchase multiple homes, yet not permit short term rentals accelerates the suffocation of our cities; punishing enterprise and commerce and encouraging avarice and the collection of private assets by the few.

 

What’s plain is that we have a crisis in which we prefer to leave buildings to be empty then rented out for less than the arbitrary minimum lengths imposed by increasing numbers of vacation regulations. Permitting vacation rentals will not solve the larger crisis of people being without homes. What it will do is lead to a more equal distribution of the wealth of tourism. It will be interesting to see how Japan decides to land on this issue and if they can use the vacation rental opportunity to house new visitors in a sustainable way and get more people into its empty housing stock.

If they are able to find an elegant solution, we may see destinations in Europe and America adopting a similar approach.

 

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