A shrinking town needs fewer new houses, not cheaper ones

For twenty years Mikurane sold detached houses on the edges of towns in northern Kanto, Tohoku and Hokuriku. The model was simple and, for a long time, sound. We bought farmland or former factory land on the outskirts, laid roads, drains and a park, and sold lots with houses to young families who wanted more space than the town centre offered, at prices below those of the nearest city. Fourteen of those estates were still selling in 2022. By then the model had stopped being sound, and the way it failed is worth describing, because I believe many companies outside housing are repeating the mistake.

Selling lots into a falling population

When sales slowed in the late 2010s, our response was the natural one for a developer: lower prices, add incentives and keep selling. That kept the estates moving at about 160 lots a year across all fourteen. It also meant we were competing for a shrinking pool of young families with every other builder in the same towns, and with the existing houses that elderly owners were trying to sell or simply leaving empty. Roughly one dwelling in seven in Japan is now vacant, and in many of the towns where we built, the share is higher.

Each lot we sold at the edge of a town added roads, drains and bus stops that the municipality would have to maintain for fewer people. Each family that moved to our estate often left a vacant flat or house in the older part of town. We were not creating households. We were moving them outwards, and cheaper new houses did not slow that movement. They hastened it.

The financial picture had the same shape. Our 2,100 unsold lots were carried at ¥31.2 billion, which at our selling pace represented thirteen years of inventory. Holding them cost money every year, and the eventual loss was only being postponed. In November 2022 our board approved my recommendation to sell 1,650 lots in the ten estates that depended on cars, keep the four within walking distance of a station, and recognise an ¥8.6 billion impairment in the year to March 2023.

What a station district can carry

The other half of the decision was where the capital should go. We chose three regional core cities, Sendai, Kanazawa and Kumamoto, and in each a district a few minutes' walk from a principal station. We have invested ¥64 billion there in 1,180 homes, mostly smaller condominiums and rental flats suited to older couples, people living alone and young families who would rather not depend on a car, with clinics, a childcare centre and shops at street level.

Many municipalities are trying to concentrate housing and services around their stations and main bus routes. Our plans align with that intention where it exists, but our investment case does not rest on any particular policy. It rests on a simpler observation: where people can walk to a clinic, a supermarket and a train, demand from households that are giving up their cars, or never had one, holds up even as the surrounding region shrinks. The Kanazawa building, completed in January 2026, was 94 per cent sold within three months.

What a station district can carry depends on more than land. In Kumamoto we mixed condominiums for sale with rental flats for older residents who want to leave a large suburban house and live closer to a clinic, and a local operator runs a daytime care centre on the first floor. Roughly a third of the early buyers there came from detached houses in the same prefecture, many of them in the kind of estates we had stopped building. That is the purpose of the strategy: a household moving inwards releases a house that a younger family may buy cheaply or that the town may eventually clear, instead of adding one more lot at the edge. It also creates a duty. When older owners sell suburban houses to buy from us, some of those houses will not find buyers, so we now point sellers to municipal vacant-house programmes and to local builders who renovate older homes, rather than pretending the problem has gone away.

Station districts are not a universal answer. Land there costs more, buildings must be taller and more complex, and construction risk is greater. They also concentrate investment in places that are already relatively strong, which raises a fair question about towns that have no such district. A developer cannot settle that question alone. What it can do is stop making the problem worse by building at the edges of those towns.

What a developer owes the places it leaves

The hardest part of leaving was not the impairment. It was the residents. About 3,900 households had bought into estates that we had described as growing communities, with parks, meeting halls and more neighbours to come. When we stopped selling, those descriptions became ours to account for.

We committed ¥40 million a year for ten years to maintain the parks and meeting halls in the estates we left, and we offered the remaining lots first to local builders and to municipal housing programmes that could use them. That was the minimum. In one estate, residents learned of our decision from the local press before our letter had reached them, and their association's anger was justified. If I were doing it again, I would speak to residents first and agree the maintenance commitment with them rather than announce it.

The lesson reaches well beyond housing. Supermarket chains, banks, clinics and utilities with networks across declining regions face the same temptation: to defend volume at the edges by cutting price, when the edges are where costs rise fastest. A smaller footprint, invested where people can still gather, will often serve those towns better than a larger one that slowly empties. It requires a company to say plainly where it is leaving, what it will continue to support and for how long.

I have spent enough time in shrinking towns to know which kind of company does the most harm there. It is rarely the one that leaves and says so. It is the one that stays half-heartedly, lets its commitments decay without announcement, and leaves residents to discover from the state of a park or the timetable of a bus that nobody intends to come back.