Tokyo plans zoning incentives to boost affordable rental housing

On January 11th, the Nikkei Shimbun reported that the Tokyo Metropolitan Government plans to introduce a new system as early as fiscal 2026 to encourage private developers to supply rental housing at below-market rates, responding to sharp rent increases in central Tokyo.

Under the proposed framework - believed to be the first of its kind in Japan - floor-area ratios (FARs) for condominiums and mixed-use developments would be relaxed in exchange for offering rents set at roughly 80 percent or less of prevailing market levels in surrounding areas.

With affordability becoming a growing concern in the city centre, the initiative is intended to improve living conditions for families with children and other households by using zoning incentives to steer private-sector development toward lower-cost rental supply.

Floor-area ratios determine how much total floor space can be built on a given site, and higher limits generally improve project feasibility and profitability for developers.

According to real estate research firm Tokyo Kantei, condominium rents in Tokyo’s 23 wards reached record highs for a second consecutive month in November 2025. Against this backdrop, the metropolitan government aims to encourage the construction of more affordable rental units and stem the outflow of child-rearing households to areas outside Tokyo.

Tokyo already operates several schemes that allow FARs to be increased - by roughly 200% to 500% in some cases - when developers provide high-quality housing in central districts or redevelop aging condominium stock.

Under the new approach, additional floor space would also be granted when developers supply rental units priced below local market levels, with the scale of the increase varying by location and by the specific programme applied.

In practical terms, on a site measuring 4,000 square metres, a 100% FAR bonus would permit an additional 4,000 square metres of floor area. If that extra space were used to build roughly 50 more units than originally planned, developers could lower rents for some apartments to 80% or less of market levels while maintaining overall profit margins comparable to conventional projects.

Proposed scheme graphic courtesy of the Nikkei Shimbun, edited by Patience Realty.

One of the more flexible elements under consideration would allow FAR incentives to be applied even when affordable rental housing is provided in a different building. Developers could qualify for relaxed zoning by constructing new lower-rent housing elsewhere within a nearby area or by renovating an existing building at another location, while still receiving the incentive on the original development site.

Across these measures, the underlying objective is to ensure that developers can remain profitable despite offering below-market rents, thereby accelerating the supply of affordable housing even in high-cost central districts.

Such housing is commonly referred to as “affordable housing,” an approach that has been more widely adopted in cities such as New York and London, where rent inflation has become a major social issue. Tokyo has so far lagged behind these cities but has recently begun expanding its own role in supplying affordable housing.

To that end, the metropolitan government plans to establish a public–private investment fund exceeding ¥20 billion, contributing ¥10 billion of its own capital and raising at least an additional ¥10 billion from private investors.

The fund will invest specifically in affordable housing projects. Four consortiums - including one involving Nomura Real Estate - have been selected as candidate operators, with around 300 units scheduled to be delivered in stages beginning in fiscal 2026.

Source: 

Nikkei Shimbun (Japanese only; paywalled)