Tokyo’s Adachi ward looks into recent spread of share houses

Adachi is the first ward in Tokyo to begin an investigation into the recent proliferation of share houses. A local government investigation carried out between May and October identified 313 share houses in the ward. As many as 70 were previously being managed by Smart Days, a now-defunct share house developer.

The developer spruiked share houses as an investment opportunity to hundreds of buyers over the past few years. Projected and ‘guaranteed’ returns were over-inflated while the properties were sold well above their market value. Investors, many of whom were not in a position to obtain finance, managed to get no-money-down loans from Suruga Bank based on falsified income statements and falsified property documents. The scam was laid bare earlier this year after Suruga abruptly ceased lending to Smart Days, causing the developer to file for bankruptcy in May 2018. Investors were left highly over-leveraged with under-performing share houses.

The ward’s investigation included an assessment not only of the conditions of properties, but also looked into their rents, layouts and occupancy rates. 94% of the share houses had mortgages with none other than Suruga Bank.

The average share house had 12 rooms with an average room size of just 7.25 sqm (78 sq.ft). Occupancy rates were sitting at around 40% with typical monthly rents ranging from 30,000 ~ 40,000 Yen plus 10,000 ~ 20,000 Yen in utilities.

None of the share houses were found to be in violation of construction codes, however they were often lacking in basic conveniences such as closets in the bedrooms, bicycle parking and garbage disposal areas.

It is expected that many of these poor-performing share houses may hit the market as investors try to offload them. In an effort to avoid illegal use of these properties, such as operating unlicensed short-term accommodation, the ward is seeking the cooperation of local real estate agencies.

Adachi is also proposing a revision to their Ordinance for the Construction and Management of Multi-unit Dwellings which will be submitted to a local government meeting in March 2019 with plans to have it implemented by July. The current ordinance applies to buildings over 3 storeys and with over 15 rooms. The revision would reduce the minimum requirement to 2 storeys and 10 rooms. Minimum room sizes may also be increased from 7 sqm to 9 sqm, with requirements for bicycle parking and garbage disposal.

Source: The Yomiuri Shimbun, November 8, 2018.