Tyler is stirring the pot over at Marginal Revolution, asking whether Tokyo’s low rents are a YIMBY success or just a productivity failure: low productivity and low immigration keep demand down. He calls the latter “NIMBYism”. That framing doesn’t hold up very well, but we can discard it and think about the substance of the question.
This article was written by Salim Furth and originally published by Market Urbanism.
Let’s at least clarify the factual issues.
Are Tokyo wages low?
Is Tokyo cheap?
Is Tokyo building & growing?
Clearly, yes. Not at the rate of, say, Cairo, but faster than developed-world megacities.
So: Is Tokyo YIMBY or NIMBY?
Should we copy Japanese institutions?
There are lessons to be learned – but the West could not broadly adopt their institutions wholesale even if we tried. As I argue in my review of The Making of Urban Japan, the particular policy mix we associate with Tokyo or Japanese land development is a historical accident.
Japanese land use is a delicately-balanced synthesis of centralized and scattered power. If you take away an essential story or lesson, it should be the contingency of outcomes. It works because the central planners were powerful enough to preempt local government but not powerful enough to sideline landowners. It works because local governments encouraged modernization but never had enough funding to execute urban renewal. It works because otherwise strong property rights coexisted along with Land Readjustment. It works because the postwar US and Japanese authorities did not fully enforce their own edicts. It works because of the mini-kaihatsu loophole.
It works because a very specific sequence of institutions rose and declined over a very eventful century, and none of them had the time, power, or money to fully execute its vision.
Update: Demand curves
As I point out above, arguing that Tokyo’s low prices indicate low demand or high supply isn’t a great approach because the prices aren’t all that low. But we can take a stab at comparing demand across cities if we assume a common price elasticity of demand – that is, how much the population would grow if prices fell. With a bunch of assumptions, I produced this little chart, showing how low prices would have to fall to bring their populations up to that of Tokyo.
I’m not confident in the Japanese data, which are mostly for new builds, but it looks like the Tokyo metro detached home price is around ¥43m, or $289k. That would put it somewhere between the first-tier and second-tier US cities. All models are wrong, but this one suggests that the demand curve for Tokyo would fit into the U.S. distribution reasonably.
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