[kspaans]

One component of the problem is that "housing" isn't a free market. More specifically, if you buy a plot of land in nearly any city or town, you aren't free to build whatever you want (e.g. building a duplex or small apartment building). The housing supply is centrally controlled by the local (and possibly other levels of) government, via zoning rules and building codes. Property owners tend to vote more than renters or future residents, so they generally vote for a more controlled supply of property which helps to keep prices on an upwards trend.

What seems to help with this Japan is that zoning and building codes are top down from the highest level of government, so they can adjust supply according to flows of people. E.g. Tokyo builds as many units of housing as people who move into the city. (Among other differences.)

[koboll]

>What seems to help with this Japan is that zoning and building codes are top down from the highest level of government

This is the only way to effect a society where housing is "not an investment". Otherwise you're looking at local governments that are wholly captured by a constituency tilted toward, effectively, cronyist voters furiously determined to keep their property as valuable as possible.

[seanmcdirmid]

Rents in Tokyo aren’t really that cheap on a square meter basis, just the size of unit you can rent is much smaller. Housing is actually more expensive to buy than many American cities (comparing equivalent sizes).

[kspaans]

Fair point, but people tend to demand less space right? Is the average-sized rental affordable for the average income in the city? I've heard the relative affordability is better than most of the Western world.