Government housing allowance ignores market realities

February 22nd, 2010 by Philip Brasor & Masako Tsubuku

The is the kind of rental the government probably has in mind

The is the kind of rental the government probably has in mind

One of the economic countermeasures adopted by the previous administration of Taro Aso that has been retained by the Democratic Party of Japan was the allowance for people who had lost their housing as a direct result of having lost their jobs. In most cases, the reason they lost their housing was because the place they were living in was either owned or subsidized by their employers. The DPJ plan originally earmarked ¥70 billion for this allowance, and an additional ¥30 billion has been set aside for it in the supplemental budget.

Local governments started accepting applications for the allowance last October. Rent subsidies last for six to nine months and the amount of the allowance depends on the location and other factors. For Tokyo residents, it comes to ¥69,000 a month for a “family” and ¥53,700 a month for a single person. The allowances would be handled by the welfare ministry in collaboration with local governments.

The ¥70 billion that has been set aside was calculated to cover 320,000 people. However, during the first three months that applications were accepted only 11,518 people applied and about 7,900 of them have so far qualified for the allowance. Local governments blame poor communications for the low demand, but there’s another, more significant reason why people aren’t flooding welfare offices to apply: They know it won’t mean anything.

First of all, unless the applicants are still living in the residences they lived in when they were working — which is unlikely and, in any case, doing so would probably disqualify them since the subsidy is basically for people who’ve been kicked out — they will have to find new housing. And unless that new housing is public housing — again, unlikely, because there’s usually a waiting list for public housing — they will have to rent from a landlord, and landlords normally demand security deposits and gift money. Real-estate agents demand some money, too. These costs are not covered by the allowance, only the rent. In addition, very few landlords will be inclined to rent to someone whose source of income is guaranteed for, at longest, nine months. The government apparently assumes that the person will find a job by then, but what if he or she doesn’t?

As with many measures enacted to help people cope with the recession, this one is merely a stopgap, and as such isn’t very realistic. In order to actually make a difference, the government needs to revise the whole welfare system so that a safety net is in place.

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