Rejuvenation of the Housing Rental Market by Utilizing the Periodic Rental System

ABSTRACT

Utilization of the periodic rental system, which was introduced in 2000, has increased primarily with single family houses. There is still the problem, however, of difficulty in supplying long-term contract housing with comparatively cheap rent because, under the current system, renters have the right to terminate contracts mid-term.

We estimated a rent function targeting single family rental houses along the Tokyu Den-en-toshi line, and found that the rent of periodic rentals is cheaper compared to regular rentals. However, the longer the contract the smaller this difference becomes. The contract period where the rent of periodic rentals and regular rentals becomes the same is six to nine years, and it becomes clear that this is the contract period limit for the supply of periodic rentals.

To further rejuvenate the rental housing market in the future, long-term and relatively cheap housing should be provided by using the periodic rental system. This requires either the elimination of mid-term contract termination rights, or the inclusion of provisions in the contract for commensurate payment of breach of contract penalties in the case of mid-term termination.

If limits were place on mid-term contract termination rights, the risk of having no tenants for landlords would be reduced. With the premise of assured long-term rental, it should be possible for landlords to supply houses with comparatively cheap rent. For renters, a degree of freedom regarding mid-term contract termination would be lost, but it would also mean gaining the merit of comparatively cheap rent.