"10% of Senior Housing Construction Costs Covered by Government..." Japan's Bold Support [Senior House]

[12]"If You Build Senior Housing, Subsidies" Japanese Government Encourages Private Sector

Japanese Government Implements Subsidy and Tax Reduction Policies
Supports Both New Construction and Remodeling of Senior Housing

8,300 New Middle-Class Senior Housing Units Supplied Over 13 Years

Chain Brand of Middle-Class Senior Housing Created by Insurance Companies Emerges

A communal dining hall prepared at the senior service housing "Minnanoie Horinouchi" located in Odawara City, Kanagawa Prefecture, Japan. Photo by Park Yujin

'Grapes', 'Senpo no Ie S', 'Ravi Residence'. These are famous elderly housing brands in Japan. All are service-provided senior housing for middle-class elderly. Combined, these three brands have 146 housing facilities scattered across Japan. They are brands operated by Sompo Care, a subsidiary of Sompo Group, a major Japanese non-life insurance company. Established in 2018, Sompo Care is the leading company in the elderly housing industry, also operating nursing homes and day care centers. The rapid expansion of elderly housing by this private company was largely due to government subsidies in Japan.

Subsidies Covering Up to 10% of Construction Costs

Like South Korea, Japan also experienced a severe shortage of welfare housing for the middle-class elderly in the past. The Japanese government judged that providing options for middle-class elderly who need care but have nowhere suitable to go was an urgent priority.

The Ministry of Land, Infrastructure, Transport and Tourism of Japan, equivalent to South Korea’s Ministry of Land, Infrastructure and Transport, implemented policies of 'subsidies' and 'tax reductions' to build service-provided senior housing for middle-class elderly. Thanks to strong government support, about 8,300 service-provided senior housing units have been established nationwide in Japan over the past 13 years since 2011.

A bathhouse installed in 'Teresa Care Home,' a middle-class elderly housing located in the suburbs of Tokyo, Japan. Photo by Park Yujin

First, the Ministry of Land, Infrastructure, Transport and Tourism provided tax support covering up to 10% of construction costs to private companies. For a 10 billion yen project, the government helped with up to 1 billion yen. For double rooms suitable for couples, subsidies of about 1.35 million yen (approximately 12 million KRW) per unit were provided. For single rooms with a private area of 25㎡ (7.5 pyeong), subsidies were up to 700,000 yen (about 6.2 million KRW) if below that size, and up to 1.2 million yen (about 10 million KRW) if above. If built as a 'zero-energy house' producing energy independently through solar or wind power, the subsidy limit increased by 1.2 times.

Subsidies were also provided when remodeling existing housing into service-provided senior housing. When removing walls to create communal dining rooms, eliminating thresholds at entrances or bathrooms, or replacing window sashes to reduce heating costs, the government covered 30% of the total cost each time.

Previously, the Japanese government regulated that only social welfare corporations or non-profit organizations could build elderly housing. However, as the elderly population rapidly increased, the market was opened to private companies as business entities starting in 2011. Raisuke Iwana, chief researcher at Mitsubishi UFJ Research and Advisory and advisor to Japan’s Ministry of Health, Labour and Welfare, said, “Subsidies likely had a significant impact on the substantial increase in service-provided senior housing.”

Property Tax and Acquisition Tax Also Reduced

Tax reductions focused on property tax and acquisition tax. For five years, local governments reduced property tax by between 50% and 80% according to ordinances. Acquisition tax was reduced on the land area equivalent to twice the indoor floor area of the building.

Measures were also put in place to prevent companies from receiving these benefits and then changing the building’s use. Businesses receiving subsidies must register and operate the building as service-provided senior housing for at least 10 years. Rent ceilings must follow local government regulations and be adjusted to not differ significantly from rents of nearby housing.

Moon Sung-taek, CEO of ‘Gongppa TV’, a senior housing specialized YouTube channel with over 2 million subscribers, explained, “In Japan, government support accelerated the industrialization of middle-class senior housing. Private companies entered and revitalized the senior housing sector, which had previously been operated mainly from a social welfare perspective and highlighted only as ‘nursing facilities.’”