A Method for Estimation of the Amount of Subsidy to Accelerate Earthquake Proof Conversion of Rental Housing

Abstract

　If housing is not earthquake-proof, external diseconomies exist, for example, collapse of houses disturbs firefighting during an earthquake.　Lives must also be guarded against earthquakes.　20.7% of housing in Japan is not earthquake-proof.　Implementation rate of construction work for earthquake-proof conversions is only 3.5%.　Thus, there are needs for housing policies to make rental housing more earthquake-proof.　In this paper, we explore the cause of low rate of earthquake conversions of rental housing and provide a method to estimate the amount of subsidy needed to improve the situation.

　In particular, firstly, we develop a method to estimate consumers’ evaluation of earthquake-proof conversions of rental housing.　Secondly, we explore a way to judge a rental firm’s profitability of construction work to make rental houses earthquake-proof.　Thirdly, based on the above, we provide a calculation method to determine the amount of subsidy needed for earthquake-proof conversion of rental housing.　Finally, we examine factors that affect consumers’ willingness to pay for earthquake-proof conversion of housing.

　We deal with earthquake-proof conversion of rental housing, since firms that rent houses will carry out earthquake-proof conversion projects if net profit of this project is positive.　Therefore, subsidy can advance firm projects of earthquake-proof conversion of housing by covering the differences between profit and cost of the project.

　We apply the above methods to rental apartment buildings in the Tokyo Metropolitan area and Miyagi Prefecture, and found that although 84.41% of people replied that earthquake-proof conversion of housing is necessary, they will pay only less than 3,000 yen per month in addition to the present rent for earthquake-proof conversion of housing.　This shows the current situation that earthquake-proof conversion of housing is not profitable for rental firms, and that there is a need for subsidies to make houses more earthquake-proof in Japan.We construct a framework for subsidies of municipal governments for earthquake-proof conversion of housing.

JEL Classifications:R38, D12, H29