Let them rent mansions: Compensation for disaster victims will barely make a difference
For seven weeks now people from all over the world have been donating money to various charities to help the victims of the March 11 earthquake and tsunami. According to NHK’s morning consumer affairs show, “Asaichi,” as of April 25 ¥1.7 billion had been collected by Japan Red Cross and other charity organizations. After going through four stages of bureaucratic processing the money was supposed to start reaching victims on April 27. In the first wave of payments, affected households would receive ¥350,000 for each family member who died or is declared missing. If the family completely lost its home in the disaster, it would receive an additional ¥350,000. If the home was partially destroyed, the amount would be ¥180,000. Families who have been evacuated from the area surrounding the Fukushima No. 1 nuclear reactor receive ¥350,000.
That cash will certainly help, but as explained in an earlier post the burden of rebuilding shattered lives mainly falls on the central government, which will only compensate homeowners and businesses by so much. And as explained in another post, earthquake insurance, like supplemental medical insurance, is not designed to cover entire losses. Basically, benefits provide a little extra money, something to live off of while a homeowner or business owner decides whether or not he wants to go through the grueling process of starting over from scratch, which means borrowing money. NHK interviewed a Sendai family whose 4-year-old home was spared from the tsunami but nevertheless condemned by the local government because the landfill under it had subsided to the point where the foundation was at risk. They still owe more than ¥20 million on their 30-year mortgage and though they have earthquake insurance the benefits will cover, at most, only half the balance; which means they have to come up with the other half of the loan themselves. Then, presumably, they have to take out a new loan if they want to buy a new house. According to one financial planner on the show, they’d be better off renting, “but, of course there are financial disadvantages to renting,” she added. Obviously, in this case, there are even bigger disadvantages in owning.
The couple will also receive money from the central government, but it amounts to very little. Local governments are in charge of assessments to determine how the central government compensation will be spent on damaged housing. A suburb of Sendai that was mostly devastated by the tsunami is basically winging it. According to initial guidelines that took into consideration the extraordinary power of the tsunami, families with completely destroyed homes would receive ¥1 million, those with “large-scale” damage would receive ¥500,000, and everyone else would receive nothing. A home was deemed completely destroyed if the water reached the ceiling of the first floor. Homes that qualified for “large scale” damage were those where the water reached to one meter above the floor of the house. However, once the inspectors started inspecting they realized the arbitrary nature of these guidelines, which didn’t take into consideration other factors such as the age of the house, the initial condition, or its overall size. Consequently, they started adding variables, such as damage to the roof, damage to external walls, and damage to the foundation. These various forms of damage were assessed by percentages — for example, 20 percent of the roof was broken — and added together. If the variable damages amounted to more than 40 percent, the house could qualify for “large scale” damage compensation, even if the water didn’t reach one meter above the floor.
In addition to the money from charitable foundations (gienkin) and government compensation for death and loss of property (shienkin), there are other financial recourses for victims of disaster, but each one must be addressed separately, and that takes time. People who have become unemployed due to disaster can receive “exceptional unemployment benefits” of between 50 and 80 percent of their “basic salary” for 90 to 330 days, depending on their age and how much they have paid into the unemployment insurance system. They can also ask the government to compensate them for wages earned but not yet paid. They can apply for public assistance, as well as for temporary exemptions from paying national health insurance premiums or nursing care or day care or high school tuition. And, of course, they can receive loan guarantees from the government, but in most cases they still have to secure the loan from a bank. One couple in their 60s interviewed by NHK lost their coffee shop to the tsunami in Kamaishi, Miyagi Prefecture. They need ¥30 million to rebuild and though they can get a loan because they’re disaster victims, first they would have to pay off the remaining balance on the loan they took out for the first coffee shop. One of the show’s hosts asked the financial planner if a bank would really lend money under such circumstances. It was obviously a rhetorical question because she didn’t answer it.