When Tourists Check In and Locals Can’t Find Keys: Japan’s Housing Squeeze Gets Real

Makoto, a small-scale Airbnb host in Osaka, should be thrilled. His bookings are solid through next spring, rates are up, and the post-pandemic tourism boom everyone prayed for? It’s here, loud and clear. But instead of celebrating, he’s sweating. His lease is up in six months, and the landlord just dropped a bombshell: they’re selling. Not to another landlord, but likely to an overseas investment fund snapping up whole buildings. Makoto’s little income stream? Poof. Gone. And finding a new place for his family and his business in this market? He laughs, but it’s not a happy sound. “It feels,” he says, wiping his brow, “like we invited the world over for a party, only to realize we might not have a house left when it’s over.”

Welcome to Japan’s latest economic head-scratcher. On the surface, it’s a dream scenario: record-breaking tourist numbers are flooding back, wallets open, desperate to experience everything from neon-soaked Tokyo alleys to serene Kyoto temples. The yen’s historic weakness makes it a bargain bonanza for visitors. The government’s ambitious target of 60 million annual tourists by 2030? They might just smash it early. Fantastic news for hotels, restaurants, souvenir shops, and the national coffers, right?

Absolutely. Until you try finding an affordable apartment in central Kyoto, or a reasonably priced house near a major ski resort, or even just a long-term rental in a desirable Tokyo neighborhood. Because while tourists are checking in, a wave of foreign buyers is quietly checking out key chunks of Japan’s residential real estate. The very boom revitalizing one sector is strangling another: housing accessibility for locals.

The Numbers Don’t Lie (And They’re Kinda Staggering)

Let’s talk scale. Forget the dribs and drabs of pre-2020. In 2023, Japan welcomed over 25 million international visitors. That’s a full rebound and then some. Hotels are bursting, traditional ryokans are booked solid months ahead, and good luck finding a last-minute guided tour. The pent-up demand is real, fueled by that weak yen making your dollar, euro, or won stretch gloriously far.

Simultaneously, foreign money is pouring into Japanese property like never before. Real estate firms report foreign buyers accounted for a whopping 30-40% of luxury condo sales in central Tokyo last year, up from maybe 15% pre-pandemic. In prime Kyoto locations, particularly those charming old machiya townhouses tourists adore, international buyers are often the only serious players in bidding wars. One realtor in Niseko, Japan’s glitzy ski haven, chuckled darkly, “Local salaries simply can’t compete with offers coming in from Singapore, Hong Kong, or Australia. It’s not even a fair fight.” Data from firms like Jones Lang LaSalle (JLL) shows foreign investment in Japanese real estate (both commercial and residential) surged over 70% year-on-year in 2023. This isn’t just wealthy individuals snapping up a vacation pad anymore; it’s institutional investors, funds, and developers seeing Japan – with its stable politics, relatively low prices compared to other global cities (even after recent rises), and tourism potential – as a golden opportunity.

So What’s the Big Deal? Isn’t Investment Good?

Investment is good. It injects capital, can revitalize neglected areas, and boosts construction. The problem is the type of investment and the speed at which it’s happening, colliding headfirst with specific, long-standing weaknesses in Japan’s housing market.

1. The Short-Term Rental Gold Rush: This is the most visible friction point. Platforms like Airbnb and Booking.com exploded in Japan pre-pandemic. Post-pandemic, they’re back with a vengeance. Why rent an apartment to a local family for ¥150,000 a month when you can easily make double or triple that renting it by the night to tourists? Landlords and property owners are making a brutally rational economic choice: convert to short-term lets. This pulls thousands of units permanently out of the long-term rental pool, especially in high-demand tourist zones. Finding a decent, reasonably priced apartment near major attractions in cities like Kyoto or Kamakura has become a nightmare for locals. Young people, service workers essential to the tourism industry itself? They’re being priced out or pushed miles away, facing grueling commutes.

2. The “Buy and Hold” (Often Empty) Investor: Not every foreign buyer is turning their purchase into a mini-hotel. Many, particularly funds and wealthy individuals, are buying purely as a safe asset play. They see Japanese property as a stable store of value, especially with interest rates elsewhere looking shaky. The result? Perfectly good apartments and houses sitting empty for months or years on end. In a country simultaneously grappling with a shrinking population and a desperate need for housing in specific, growing areas (like tourist hubs), this is spectacularly inefficient. It’s like hoarding bottled water in a desert town experiencing a drought.

3. The Infrastructure Gap: Japan’s tourism infrastructure was creaking before the pandemic hit 60 million targets. There simply aren’t enough hotel rooms, especially in the mid-range and budget sectors. The rush towards short-term rentals filled a critical gap, but it did so by cannibalizing the residential housing stock. Building new hotels takes years and faces significant regulatory hurdles and NIMBYism (“Not In My Backyard” opposition). So, the pressure valve remains firmly shut, forcing more conversion of existing housing.

The Policy Tangle: Good Intentions, Messy Execution

The Japanese government isn’t blind to this. They see the tourism dollars, they want them. They also see the rising local discontent, the headlines about housing shortages. But their attempts to manage the situation often feel like trying to fix a leaky faucet while the bathtub is overflowing.

• The Minpaku Law (2018): This was the big attempt to regulate the short-term rental wild west. It introduced a national registration system and capped rentals at 180 days per year. Sounds sensible, right? Well, implementation has been patchy. Enforcement is uneven, loopholes exist, and crucially, many local governments imposed stricter rules or outright bans in residential zones due to noise and nuisance complaints. This further concentrated available minpaku in certain areas, exacerbating local housing shortages there, while making it harder for tourists to find any accommodation elsewhere. It solved some problems while creating others.
• Tax Twists: Japan’s tax code throws some bizarre curveballs. One infamous example is the potential “gift tax” liability for landlords offering rent reductions to family members. Yes, you read that right. If a landlord cuts a break on rent for, say, their child living in one of their properties, the taxman might interpret the discount as a taxable gift. This absurd disincentive pushes landlords towards the simpler, more lucrative path of tourist rentals or sales to deep-pocketed investors, rather than dealing with long-term tenants, even family. It’s a policy own-goal that actively hurts housing availability.
• The Digital Nomad Visa Irony: In a move dripping with unintentional humor, Japan recently launched a digital nomad visa program to attract remote workers. Great idea! Except… where exactly are these well-paid foreigners supposed to live long-term? The furnished apartment market catering to them is minuscule, and the regular rental market is notoriously opaque and difficult for non-Japanese speakers/non-permanent residents to navigate. They’ll likely end up in… you guessed it… expensive short-term rentals, further tightening that market. It’s like inviting someone to dinner but forgetting to set a place for them at the table.

Beyond the Cities: The Resort Town Squeeze

This isn’t just an urban Kyoto or Tokyo problem. The pressure is intense in Japan’s famed resort areas:

• Niseko (Hokkaido): Powder snow paradise. International buyers, particularly from Australia and Southeast Asia, have dominated the market for years. Local workers, from ski instructors to restaurant staff, struggle to find any housing within a reasonable distance or budget. Many are forced into crowded company dorms or grueling long commutes. The very people making the resort run smoothly can’t afford to live near it.
• Hakone (Near Tokyo): Famous for hot springs and Fuji views. Traditional family-run ryokans face pressure as investors buy up land and older buildings, sometimes converting them into luxury villies inaccessible to the average Japanese family or even mid-range tourist. Community character is changing as properties sit empty or cater only to the ultra-wealthy.
• Okinawa: Sun, sand, and… skyrocketing property prices fueled by both tourism demand and mainland Japanese buyers seeking a warmer retirement, alongside international interest. Local Okinawans, often with lower average incomes, find themselves increasingly priced out of their own islands.

So, What’s the Fix? (Spoiler: It’s Complicated)

There’s no magic bullet. Solving this requires a multi-pronged approach that acknowledges the benefits of tourism and investment while actively protecting housing access for residents:

1. Build More Appropriate Accommodation: Japan desperately needs a massive push to build more actual hotels, especially mid-scale and budget options. Streamline permitting, offer incentives, and tackle NIMBYism head-on with clear communication about tourism’s economic necessity. Freeing up the existing housing stock for residents requires providing viable alternatives for tourists.
2. Tweak the Rules (Wisely): Revisit the Minpaku Law. Could a tiered system work? Perhaps stricter caps or outright bans only in areas experiencing severe housing shortages, while allowing more flexibility in areas with surplus housing? Enforce existing rules consistently nationwide. And for heaven’s sake, fix the tax code absurdities like the “gift tax on rent discounts” – that’s just low-hanging fruit screaming to be picked.
3. Incentivize Long-Term Rentals: Make it more attractive for landlords to house locals. This could mean tax breaks for long-term leases, government-backed guarantees to reduce perceived tenant risk, or subsidies for landlords who maintain affordable units. Shift the economic calculus away from the short-term gold rush.
4. Target Vacant Properties: Japan has a staggering number of akiya – abandoned homes, mostly in rural areas. While not all are suitable, aggressive programs to match these properties (often requiring renovation) with people needing housing – locals or long-term residents like foreign workers or digital nomads – could help. Offer significant renovation grants or tax breaks tied to long-term occupancy. Turn blight into opportunity.
5. Data & Transparency: Better, real-time data is crucial. Governments need a clear picture of housing stock, vacancy rates (both long-term and short-term), and ownership patterns. This allows for targeted interventions instead of broad, often ineffective, strokes.
6. Community Involvement: Local governments need more power and resources to manage tourism and housing within their specific contexts. What works for Kyoto won’t work for a small onsen town. Empower them to set localized minpaku rules, manage tourist flows, and develop housing strategies that fit their unique needs.

The Human Cost

Behind the statistics and policy debates are real people like Makoto in Osaka. It’s the young couple in Kyoto giving up their dream of living near the historic district because rents are insane. It’s the restaurant owner in Niseko closing early because half his staff quit – they couldn’t find anywhere to live. It’s the older resident in Hakone feeling like their neighborhood has become a museum exhibit or a gated community for the wealthy foreign few.

Japan’s tourism boom is delivering undeniable economic benefits. But a boom that makes basic housing unattainable for the people who live and work in the very places tourists flock to is fundamentally unsustainable. It erodes social cohesion, strains local services, and risks killing the authentic charm that attracted visitors in the first place. Who wants to visit a Kyoto where all the real residents have been replaced by rotating tourist crowds and silent, investor-owned properties?

The challenge for Japan is navigating this paradox. Can it embrace the global interest – the tourists and the investors – without sacrificing the ability of its own citizens to put a roof over their heads in desirable locations? Can it harness the economic power of tourism to build a better future for everyone, not just shareholders and temporary visitors?

It’s a high-stakes balancing act. The world is watching, booking their flights, and yes, making offers on apartments. Japan needs to decide what kind of host it wants to be before the welcome mat gets pulled out from under its own feet. The clock is ticking, and the housing queue is getting longer by the day.