Reconstruction vs. long-life maintenance. What is the fate of your apartment?

The condominium market is facing a dilemma – to rebuild or to maintain.

The Japanese Government has enacted laws promoting both long-life construction methods and reconstruction. While there is the Basic Act for Housing and the Law on Promoting the Spread of Long-term Housing to ensure and improve stable housing and to promote the construction long-lasting buildings, there are also laws such as the Apartment Reconstruction Facilitation Law to enable and support building reconstruction.

As a result of the 1995 Hanshin earthquake, a total of 108 condominiums had to be rebuilt. What was surprising was that the average age of these buildings was just 26 years. So far no buildings have had to be rebuilt following the 2011 Tohoku earthquake. However, out of the nation’s stock of 5,620,000 condominiums (as of 2009), a total of 1,100,000 buildings are built to the old earthquake standards (kyu-taishin). This is a ratio of 1 out of every 5 condominiums. It has been 30 years since the new earthquake standards (shin-taishin) were introduced.

If the path of promoting long-life buildings is to be followed, measures to undertake earthquake-retrofitting of older structures is necessary. However, when considering the costs vs. the results, the argument for reconstruction cannot be avoided. The Cabinet Office, Ministry of Justice and the MLIT undertook a survey of residential management companies in 2008 to find out the considerations behind reconstruction. From the results, a total of 49% of the management companies responded that they were considering reconstruction of their condominiums due to ongoing and increasing building repair costs. As the replacement of water pipes can cost tens of millions of Yen, they may ignore any water leaks as the urgent need to rebuild is more advantageous.

40% report additional financial burdens

So how many nationwide cases of condominium reconstruction are there? Excluding those from the Hanshin earthquake, there have only been 149 reconstruction projects nationwide as of March, 2010.

Despite 1 out of every 9 households residing in a condominium apartment, there have been very few realized cases of reconstruction. From the survey conducted by the Cabinet Office, Ministry of Justice and MLIT, management companies who decided against reconstruction gave the following reasons as to why (duplicate answers included):

  • Problem with cost: 55.9%
  • Not satisfied with relocation: 35.3%
  • Repairs to the building would be satisfactory: 27.9%
  • Anxiety about a change to living environment: 19.1%
  • Anxiety about success of reconstruction project: 17.6%
  • Not satisfied with the reconstruction plans: 11.8%

As expected, the cost burden is the greatest barrier to reconstruction. From the same survey, apartment owners of buildings that were to be reconstructed were asked to reply with the approximate financial burden they faced. Of the buildings that had already implemented reconstruction plans, a total of 37.3% of respondents had almost no financial burden as the surplus floorspace could be sold to developers. Of the 41.3% of respondents that did face reconstruction costs, the following are the results of the financial burden faced by each apartment owner:

  • Less than 5,000,000 Yen: 9.7%
  • Between 5,000,000 and 10,000,000 Yen: 19.3%
  • Between 10,000,000 and 15,000,000 Yen: 8.7%
  • Over 15,000,000 Yen: 12.8%
  • No response: 19.3%

If the apartment owner has the cash then there is generally no problem, but those who cannot find the funds are usually required to obtain financing. This then creates a situation where it is necessary to assess whether each apartment holder is able to obtain financing. In the planning stages for reconstruction, it becomes essential to obtain personal information from the apartment owners in regards to their current incomes and outstanding debts.

For your own apartment it is essential to have a long term vision of its fate.

So what is the best fate for your own apartment? While this is a difficult question, it is easier to find possible solutions by examining the different types of deterioration that can occur. There are three different types of building degradation. It is common to think of physical deterioration to the building structure, but there is also degradation of the building’s function as well as on a social level.

The three types of building deterioration:

1. Physical: Water leaks, carbons dioxide and other chemical leaks, wear and tear, can all cause damage to the building and its equipment. Eg. corrosion to water pipes can reduce their function. Water proofing may also decline causing water leaks.

2. Function: New advancements in construction methods can make an older building outdated. Eg. buildings may not have broadband internet facilities, or may have inadequate base isolation or vibration control construction.

3. Society: As lifestyles become more diversified, the level of standards and types of demands will change. Eg. Apartments that are too small or a building with an old or dated exterior.

The Suwa 2 Chome Housing Estate (built 1971) in Tama City’s Newtown area, has started a reconstruction project with an expected completion date of 2013. The 40 year old complex did not have an elevator and the apartment sizes were very small. The decision to rebuild was not because the complex was unlivable or overly deteriorated, but because standards of living have increased and the new building would match these standards.

On the other side of the scale is an apartment building built in 1968 in Chiba City which is now on its third large scale repair project. An analysis of the soundness of the structure’s concrete showed that the “60-year concrete” actually has a useful life of 80 years. The results of the analysis showed that the concrete has not deteriorated as much as expected and the residents agreed that with adequate and ongoing repairs, the building could be inhabitable for another 37 years.

The above are two very different cases which illustrate the different visions of apartment owners. Following the 2011 Tohoku earthquake, it is important for management associations to consider risk management. It is also important for apartment owners to develop a clear vision of what they expect from their apartment in the future – do they prefer the long-life preservation of the building or do they prefer reconstruction? Apartment owners need to have a clear idea of the building’s fate so that repair fees can be used effectively and so that residents obtain the best use out of their building.

Source: The Nikkei Shimbun, July 4, 2011.

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