August 31, 2017 10:00 am JST

Japan Inc. looks to bring in talent, Japanese landlords turn it away

'Sorry, no foreigners' policy holding companies back from hiring

TSUBASA SURUGA, Nikkei staff writer

A real estate agency in Tokyo's Shin-Okubo district displays apartment listings, many with notes welcoming foreign tenants. (Photo by Tsubasa Suruga)

TOKYO Samith Hilmy, a 26-year-old student from Sri Lanka, was waiting anxiously at a real estate office in Tokyo as an agent went through the procedure of ringing the Japanese landlord of an apartment he was interested in renting.

Following an exchange lasting no more than 10 seconds, Hilmy said, the agent hung up and uttered the same three words he had heard from a dozen or so agents over a month of home hunting: "Sorry, no foreigners."

When Hilmy first arrived in April, his Japanese language school set him up in an apartment for six months in Shin-Okubo, a district in the capital's Shinjuku Ward. But he has to leave the place soon, and time is short.

He said he has also encountered some real estate agents that demanded a year's worth of rent up front as "insurance" in case he leaves without notice. "I felt like I was being treated like a criminal."

Hilmy's plight will be familiar to many foreigners in Japan. This year, the country released a national survey that highlighted the extent of housing discrimination foreigners face.

According to the study, released by the Ministry of Justice in March, out of 2,044 foreign residents who had sought housing within the past five years, 39.3% reported being turned down because they were not Japanese.

The impact is now being felt by employers. Japanese companies have been trying to make up for the shrinking labor force by looking abroad for workers. They want to create an inflow of talent, but housing discrimination erects a dam.

As of last October, Japan had 1.08 million foreign workers, up 58% from five years earlier, accounting for around 2% of the total workforce.

They have to endure the same humiliating phone call because some landlords worry about tenants from other countries flying the coop, so to speak.

A 63-year-old landlord in Tokyo who rented an apartment to a male Chinese student said that, after six months, neighbors reported two other men had moved in, "often making a racket late at night."

When confronted, the student pretended not to understand Japanese. "It made me more hesitant [to rent to foreigners]," the landlord said.

Hiroyuki Goto, CEO of Global Trust Networks, a guarantor service provider for foreign tenants, said not many landlords have actually had these kinds of experiences but the stories "have spread across the country, causing fear among landlords."

Total OA Systems -- a Tokyo-based IT consultancy with 200 or so employees, including in China and the Philippines -- plans to expand the number of its foreign engineers working in Japan from the handful it currently has.

The IT industry is suffering from a significant labor shortage, and the consultancy was acutely aware of the discrimination problem last year when it welcomed a systems engineer from the Philippines. To dodge any hassles, the company consulted a property agent that caters to foreigners, whom industry players describe as an "underwhelming minority" in Tokyo.

Even real estate agencies with experience helping foreigners run into the same problem: "Almost nine of 10 private housing units in Tokyo do not allow foreign tenants," said Masao Ogino, CEO of Ichii.

Tsuyoshi Yamada, a human resources manager at Total OA Systems, said insufficient support for non-Japanese employees could be a hurdle for the company's plan to bring in overseas talent.

"Even if we finally find a promising engineer," he said, "retention could become a problem."

Some companies are taking the matter into their own hands. YKK recently opened a small serviced apartment complex for its foreign employees 10 minutes' drive from its flagship plant in Kurobe, central Japan.

YKK's foreign employees used to live in other company dormitories or private housing rented by the company. YKK said it had not experienced landlords rejecting its foreign employees but feels its serviced apartments help workers avoid cultural quibbles with would-be neighbors.

More serviced apartment units would "allow [the foreign employees] to concentrate on their training from the day they arrive in Japan," a representative said.

Japan has no law prohibiting landlords from refusing applicants based on ethnicity or nationality.

But there have been efforts by industry players to tackle the issue. The Japan Property Management Association, a group of over 1,300 companies, in 2003 created guidelines that include advice for landlords and agencies in dealing with prospective foreign tenants.

For foreign tenants, the association created a guidebook, which describes the country's common housing rules in six languages. For example: "Living with people other than those stated in the rental agreement or sub-leasing the property are violations of the rental agreement."

At the local government level, Shinjuku Ward, which has the highest proportion of foreign residents in Tokyo, is a forerunner in trying to tackle housing rental rejections. In 1991, the ward specifically stated in an ordinance that it will "strive to resolve [tenant] discrimination" based on nationality.

As of Aug. 1, 42,613 out of 341,979 residents were not Japanese, more than 12% of the total.

The ward office provides a weekly consultation session on real estate transactions for foreign residents who are having trouble finding a place. In addition, it has set up a mechanism that offers help to residents in Chinese, Korean, English, Thai, Nepalese and Burmese.

According to a survey that Shinjuku conducted in 2015, of 1,275 foreign residents, 42.3% said they had experienced some form of discrimination in Japan. Of those, 51.9% felt discriminated against when looking for housing.

The justice ministry study underscores just how widespread the problem is, but it could be about to swell. The number of foreign residents in the country is trending up. At the end of 2016, it reached an all-time high at 2.38 million, 77% more than 20 years earlier.

Chizuko Kawamura, a professor emeritus at Tokyo's Daito Bunka University and an immigration policy expert, has proposed that the government set up a specialized body on multicultural initiatives that would make way for foreign resident support systems, from housing and education to medical access and employment.

"If our government cannot address the social needs of [foreigners] already living in Japan, we won't be able to support those coming into the country in the future," Kawamura said.

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