Land-use conversion and residential recentralization: Evidence from Japan's real estate bubble in the 1980s

Xu, Hangtian (2020): Land-use conversion and residential recentralization: Evidence from Japan's real estate bubble in the 1980s.

Abstract

Central cities in metropolitan areas are attractive to both residents and businesses, but there is insufficient space to accommodate both. As a result, residential and commercial properties compete for land. By examining the long-term impact of a real estate bubble on the land-use pattern of Tokyo and Osaka from 1980 to 2017, we find that fluctuations in land prices have influenced demand for commercial land relative to residential land, which in turn has affected residential choices. During the period of rising land prices, land developers favored commercial development over residential purposes, which increased the daytime population in central cities and at the same time reduced the residential population. However, during the economic downturn, with the reduction in demand for commercial space, houses were favored by land developers and there was a recentralization of residents. The causal estimates show that the mechanism we propose can explain approximately 40 percent of the population growth in central Tokyo and Osaka after 1995. In addition, these land-use conversions led to changes in the housing structure in terms of building height and house size. Our evidence provides a new explanation for the recent changes in central neighborhoods observed in many advanced economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: residential choices; land-use conversion; gentrification; real estate bubble
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location

References

Ahlfeldt, Gabriel M. and Daniel P. McMillen (2018) Tall buildings and land values: Height and construction cost elasticities in Chicago, 1870–2010. Review of Economics and Statistics 100, 861–875.

Akashi, Tatsuo (2007) Urban Land Use Planning System in Japan (2nd Edition). Tokyo: Japan International Cooperation Agency and the MLIT.

Baum-Snow, Nathaniel (2007) Did highways cause suburbanization? Quarterly Journal of Economics 122: 775–805.

Baum-Snow, Nathaniel and Daniel Hartley (2019) Accounting for central neighborhood change, 1980–2010. Working paper: The University of Toronto and Federal Reserve Bank of Chicago.

Boustan, Leah P. and Robert A. Margo (2013) A silver lining to white flight? White suburbanization and African-American homeownership, 1940–1980. Journal of Urban Economics 78: 71–80.

Boustan, Leah P., Robert A. Margo, Matthew M. Miller, James M. Reeves and Justin P. Steil (2019) Does condominium development lead to gentrification. NBER Working Paper 26170.

Boustan, Leah P. and Allison Shertzer (2013) Population trends as a counterweight to central city decline, 1950–2000. Demography 50: 125–147.

Brooks, Leah and Byron Lutz (2016) From today’s city to tomorrow’s city: An empirical investigation of urban land assembly. American Economic Journal: Economic Policy 8: 69–105.

Brueckner, Jan K. and Stuart S. Rosenthal (2009) Gentrification and neighborhood housing cycles: Will America’s future downtowns be rich? Review of Economics and Statistics 91: 725–743.

Brueckner, Jan K., Jacques-Francois Thisse, and Yves Zenou (1999) Why is downtown Paris so rich and Detroit so poor? An amenity based explanation. European Economic Review 43: 91–107.

Couture, Victor and Jessie Handbury (2017) Urban revival in America, 2000 to 2010. NBER Working Paper No. 24084.

Cuberes, David, Jennifer Roberts, and Cristina Sechel (2019) Household location in English cities. Regional Science and Urban Economics 75: 120–135.

Fujita, Masahisa, Tomoya Mori, J. Vernon Henderson, and Yoshitsugu Kanemoto (2004) Spatial distribution of economic activities in Japan and China. In: Henderson, J. Vernon and Jacques-François Thisse (eds), Handbook of Regional and Urban Economics 4: 2911–2977. Amsterdam: The Elsevier.

Fujita, Masahisa and Hideaki Ogawa (1982) Multiple equilibria and structural transition of non-monocentric urban configurations. Regional Science and Urban Economics 12: 161–196.

Garcia-López, Miquel-Àngel (2010) Population suburbanization in Barcelona, 1991–2005: Is its spatial structure changing? Journal of Housing Economics 19: 119–132.

Glaeser, Edward L. and Joseph Gyourko (2005) Urban decline and durable housing. Journal of Political Economy 113: 345–375.

Global Property Guide (2019) Japan’s housing market is a picture of stability (March 16, 2019). Retrieved: https://www.globalpropertyguide.com/Asia/Japan/Price-History.

González-Pampillón, Nicolás, Jordi Jofre-Monseny, and Elisabet Viladecans-Marsal (2019) Can urban renewal policies reverse neighborhood ethnic dynamics? Journal of Economic Geography, forthcoming. DOI: 10.1093/jeg/lbz011.

Guerrieri, Veronica, Daniel Hartley, and Erik Hurst (2013) Endogenous gentrification and housing price dynamics. Journal of Public Economics 100: 45–60.

Hamnett, Chris (2003) Gentrification and the middle-class remaking of inner London, 1961–2001. Urban Studies 40: 2401–2426.

Hirayama, Yosuke (2005) Running hot and cold in the urban home-ownership market: The experience of Japan’s major cities. Journal of Housing and the Built Environment 20: 1–20.

Hirayama, Yosuke (2006) The End of Tokyo (Tokyo No Hateni) (in Japanese). Tokyo: NTT Shuppan.

Hirayama, Yosuke (2017) Selling the Tokyo sky: Urban regeneration and luxury housing. In Ray, Forrest, Sin-Yee Koh, and Bart Wissink (eds.), Cities and the Super-Rich: The Contemporary City. New York: Palgrave Macmillan.

Kanemoto, Yoshitsugu (1997) The housing question in Japan. Regional Science and Urban Economics 27: 613–641.

Kobayashi, Masahiro (2016) The housing market and housing policies in Japan, ADBI Working Paper Series No. 558.

Lehrer, Ute and Thorben Wieditz (2009) Condominium development and gentrification: The relationship between policies, building activities and socio-economic development in Toronto. Canadian Journal of Urban Research 18: 82–103.

LeRoy, Stephen F. and Jon Sonstelie (1983) The effects of urban spatial structure on travel demand in the United States. Journal of Urban Economics 13: 67–89.

Liu, Crocker H., Stuart S. Rosenthal, and William C. Strange (2018) The vertical city: Rent gradients, spatial structure, and agglomeration economies. Journal of Urban Economics 106: 101–122.

Lucas, Robert E. and Esteban Rossi-Hansberg (2002) On the internal structure of cities. Econometrica 70: 1445–1476.

McKinnish, Terra, Randall Walsh, and T. Kirk White (2010) Who gentrifies low-income neighborhoods? Journal of Urban Economics 67: 180–193.

Nakamura, Koji and Yumi Saita (2007) Land prices and fundamentals. The Bank of Japan Working Paper Series No. 07–E–8.

Hideo, Nakazawa (2014) Tokyo’s “urban regeneration” as the promoter of spatial differentiation: Growth coalition, opposing movement and demographic change. The Chuo Law Review (Hogaku Shimpo) 121: 1–31.

Owens III, Raymond, Esteban Rossi-Hansberg, and Pierre-Daniel Sarte (2017) Rethinking Detroit. NBER Working Paper No. 23146.

Rosenthal, Stuart S. (2008) Old homes, externalities, and poor neighborhoods: A model of urban decline and renewal. Journal of Urban Economics 63: 816–840.

Rosenthal, Stuart S. and Stephen L. Ross (2015) Change and persistence in the economic status of neighborhoods and cities. In Duranton, Gilles, J. Vernon Henderson, and William C. Strange (Eds.), Handbook of Regional and Urban Economics 5: 1047–1120. Amsterdam: The Elsevier.

Seko, Miki (2019) Housing Markets and Household Behavior in Japan. Singapore: Springer Nature Singapore Pte Ltd.

Shimizu, Chihiro, Koji Karato, and Yasushi Asami (2010) Estimation of redevelopment probability using panel data: Asset bubble burst and office market in Tokyo. Journal of Property Investment & Finance 28: 285–300.

Shimizu, Chihiro and Kiyohiko G. Nishimura (2007) Pricing structure in Tokyo metropolitan land markets and its structural changes: Pre-bubble, bubble, and post-bubble periods. Journal of Real Estate Finance and Economics 35: 475–496.

Shimizu, Chihiro, Kiyohiko G. Nishimura, and Tsutomu Watanabe (2009) Residential rents and price rigidity: Micro structure and macro consequences. RIETI Discussion Paper Series 09–E–044.

Smith, Neil (1979) Toward a theory of gentrification: A back to the city movement by capital, not people. Journal of the American Planning Association 45: 538–548.

Su, Yichen (2018) The rising value of time and the origin of urban gentrification. Working Paper: Stanford University.

Tabuchi, Takatoshi (2019) Do the rich and poor colocate in large cities? Journal of Urban Economics 113: 1–10.

United Nations (2019) World Urbanization Prospects (The 2018 Revision). New York: The United Nations.

Xu, Hangtian and Si Wang (2019) Urban redevelopment and residential location choice: Evidence from a major earthquake in Japan, Journal of Regional Science, forthcoming. DOI: 10.1111/jors.12424.

Zhang, Beibei (2017) Housing development in post-war Japan: Historical trajectory, logic of change, and the vacancy crisis. Working Paper: The University of Waterloo.