Discussion Paper No.

577

ANALYSIS OF AGE DISCRIMINATION
IN THE RENTAL HOUSING MARKET IN JAPAN:
AN APPROACH USING A FAIR HOUSING AUDIT

Masayuki Nakagawa

March 2003

The Institute of Social and Economic Research
Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan

Analysis of Age Discrimination in the Rental Housing Market in Japan:
An Approach Using a Fair Housing Audit *Masayuki Nakagawa**
Abstract
A fair housing audit is an important tool for measuring racial and ethnic
discrimination in housing market, so they are widely used for policy purposes in
the U.S. Each audit consists of a visit to a real estate agent by a minority
individual and a majority individual with equal qualification.
This paper applies this survey technique to age discrimination in Japaneserental housing market. Using data from the 2001 Osaka Audits, this paper
analyzes the level and causes of the discriminationencountered by elderly

home-seekers, and argues the relation between age discrimination and residential
segregation of elderly. The estimated level of discrimination is high: The numberof available housing units about which elderly home-seekers are told is 30
percent fewer than the number of available housing units about which young
home-seekers are told. Econometric tests suggest that stereotyping about elderly
renters’ ability to pay and rental terms, and young people’s preference for aneighborhood of young inhabitants influences agent behavior. And age
discrimination and inflexibility in the housing market for the elderly are probablereason for residential segregation of elderly.

*The author would like to express his gratitude to Professor Fumio Ohtake at Osaka University, whogave valuable comments during the writing of this paper.

This work has been supported by agrant-in-aid for Category (C) fundamental studies from the Ministry of Education, Culture, Sports,
Science and Technology's subsidy budget for scientific research (No. 13630054).
**Associate Professor, Institute of Social and Economic Research, Osaka University, Ibaraki,
567-0047, Japan. E-mail: nakagawa@iser.osaka-u.ac.jp

1. Introduction
1.1 How is discrimination viewed in Japan?
The Constitution of Japan provides in Article 14 that "All of the people are equal under
the law and there shall be no discrimination in political, economic or social relations
because of race, creed, sex, social status or family origin." According to this principle,
a variety of legislative measures have been taken to eliminate discrimination 1).
But it is a frequently observed phenomenon that when people perform a service forothers, they treat individuals differently, which is seen as unequal treatment.

On theother hand, there is not much discussion about the fact that such unequal treatment ispermitted to a certain extent both in practice and from an institutional standpoint. In
addition, it is argued that the common juristic view and judicial precedents construe"equality under the law" in the constitution as permitting different treatment to a certain
degree, rejecting absolute equality, and seek a criterion for judging whether unequal
treatment is allowed or not based on "reasonableness." And, to test this reasonableness,
it should be determining whether, within the scope of the basic principle of people's
equality, the treatment is appropriate or not based on morals, justice, fitness for the
purpose and other factors, considering age, inherent elements, and occupation of theindividual concerned, special personal relationships and other circumstances (Sato
1981). This test of reasonableness can be paraphrased as determining whether thedifferent treatment is based on a criterion that is independent of other reasonable factors,
and whether the extent of variation is proper in light of morals, justice, fitness for the
purpose and other requirements.

In other words, in Japan, the existence ofinstitutionally non-admissible discrimination is recognized, and political intervention isdemanded to eliminate discrimination,if:* Selection is made using a particular attribute of a group (i.e. sex, age, race) as acriterion for judgment that is independent of other reasonable attributes, and* As a result, it is considered that a particular group of the people has great
disadvantages and inequalities.
Because of this, careful judgment is required in legislative action for political1interference against discrimination.

There are often cases where discrimination basedon variations in a group to which individuals belong seem to exist when a selection ismade reasonably according to the specific attributes of individuals, but the distributionof such attributes differs from group to group. But, political intervention banning
discrimination in such a case may distort resource allocation or prove ineffective.

In

the case where there is discrimination based on reasonable economic factors, such as
statistical discrimination, which results in gaps in outcomes between two groups, thepolicies needed are not prohibitive controls against discrimination, but policies that deal
with allocation problems brought about by, or externalities arising from, such different
outcome.

Checking * and * above is also important when choosing such a basic policy

stance.
1.2 Enactment of the Act for Stable Living of the Elderly and the purpose of thispaper
As a result of aging and increasing nuclear families, elderly singles, and elderly
couples are increasing. But, in Japan, it has generally been said that the elderly havedifficulty finding and getting rental housing. Actually, some questionnaires to realestate agents and elderly people have revealed that there are many cases where agentsrefuse to rent housing units to the elderly.

To deal with such age discrimination in therental housing market, the Act for Stable Living of the Elderly (hereinafter referred to as
the "SLE") was enacted in April 2001.

In addition to various subsidy measures for theprovision of barrier-free houses (houses with specifications and facilities devised for theelderly), this law tries to improve the housing level of the elderly through, for example,
a registration system of private rental houses for elderly tenants and a system forguaranteeing liabilities for rents of the elderly 2).
In the enactment of the SLE, a policy theme of age discrimination has been
introduced on the basis of the results of these questionnaires.

But past investigations

and research in Japan have not shown clearly whether age discrimination really exists in
the rental housing market and the reasons for discrimination if it does exist.
Traditional methods of analyzing the existence of discrimination using questionnaires

2have the following problems: first, these methods cannot reveal whether there arestatistically significant differences in house renting between the elderly and other age
groups, and whether observed refusals to rent housing units are because of age or otherfactors, such as income.

Second, there is no guarantee that real estate agents' answers

to the questionnaire are honest and correct.

Third, because real estate agents candiscriminate against the elderly without it being noticed, it is likely that the degree of
discrimination shown is less than the actual level in the outcome of the questionnaire tohome-seekers.
The audit study is a method developed in the U.S. to detect racial discrimination in the
housing and labor markets, and can address the problems of the questionnaires
mentioned above.

This paper reports the results of a pilot investigation of age

discrimination in the rental housing market the author conducted in 2001. Throughthis pilot investigation, the author examines the existence of age discrimination in therental housing market in Japan, and extracts some policy implications from the dataobtained.
This paper is organized as follows: Section 2 explains the features of a fair housing
audit using specific cases, and summarizes the methodology adopted by the pilot
investigation.

Section 3 explains the situation of age discrimination in Japan using two

indexes: "incidence of discrimination" and "severity of discrimination."

Section 4

conducts econometric tests using data obtained by a fair housing audit to examine theexistence of age discrimination.

Section 5 tests hypotheses about the causes of

discriminative behavior by housing agents.

Based on the results of the tests up to

Section 5, Section 6 analyzes relations between age discrimination and residential
segregation using simple search models. Section 7 tests hypotheses about causes ofsegregation.

Finally, Section 8 summarizes some policy implications derived from theanalyses in the preceding sections.
In the following discussion, both statistical discrimination for reasonable reasons anddiscrimination based on prejudice, ageism, etc., are collectively treated as"discrimination," and these two types of discrimination are distinguished whereverneeded.

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The conclusions reached are as follows:* In the rental housing market in Japan, the volume of information on housing provided
to elderly home-seekers is less than that provided to young home-seekers by about30%.
* The hypotheses about reasons for age discrimination that were supported by the datacollected were: the hypothesis that those whose income is likely to decrease in the
future are discriminated against (future income hypothesis); the one that in thesituation where the landlord’s right to cancel a rental agreement and to raise rents is
restricted by the Japanese Tenant Protection Law 3), tenants expected to stay for a longtime are discriminated against (tenancy period hypothesis); and the one that theelderly are discriminated against in a neighborhood of young inhabitants (community
preference hypothesis).

However, the data did not support the hypothesis that the

behavior of real estate agents anticipating the elderly's preference for rental houses
results in age discrimination (elderly preference hypothesis).
* In Japan, moderate residential segregation, where elderly inhabitants are concentrated
in a particular neighborhood, is observed.

The young people’s preference for aneighborhood of young inhabitants (that is consistent with the community preference
hypothesis) and inflexibility of rents in the housing market for the elderly are probablereasons for this.

2. Outline of a fair housing audit
2.1 Background
Behind the enactment of the SLE in April 2001 is the policymakers' recognition thatage discrimination exists in the rental housing market.

As far as the provisions of thelaw are concerned, this housing discrimination against the elderly is not regarded as
discrimination that fails to meet the standard of reasonableness, and so must be ended
by some prohibitive controls 4).

But, what the policymakers used as specific evidence

for discrimination were the results of the following questionnaires:
ⅰA questionnaire sent to 637 landlords by the Real Estate Transaction Modernization

4Center Foundation ("Report of Investigation on Rationalization Policies for theHouse Renting Industry," March 1997), which revealed that 50% of the landlords
surveyed limited qualifications of tenants, of whom 60% refused to admit elderly
people living alone.
ⅱ A questionnaire sent to 117 property management companies by the Japan Property
Management Association ("Report of the Investigation on the Situation of Elderly
Tenancy," April 2000), which showed that about 30% of elderly home-seekers
were unable to rent a housing unit in almost all cases, and that about 40% of housing
units they handled were those that the owners refused to rent to the elderly.
ⅲ A visit survey conducted by the Housing Bureau, Ministry of Construction, on 331
elderly people living in private rental houses (April 2000), which found that about
17% of the elderly surveyed experienced problems renting a house, of whom 5%
were refused because of age.
While detection of discrimination through these questionnaires can be done at a
relatively low cost, this method has a number of problems as noted already. The
problems of the methods of using questionnaires for a discrimination study are
examined here more concretely for each of the three questionnaires above.
First, questionnaires such as ⅰand ⅱabove, where those in a position to discriminate
are the respondents, have the problem that: "there are cases where honest and correct
answers cannot be expected from those in a position to discriminate."

This method is,

however, considered to be relatively effective where there are no institutional controls
against, and no psychological resistance to the existing discrimination.
laws directly prohibit age discrimination itself.

In Japan, no

Therefore, it is not considered that

there exists bias toward underestimating existing discrimination due to institutional
reasons, but there is still a possibility that the respondents do not give correct answers
for fear of affecting their reputation. Thus, more objective methods should be used for
examining the existence of discrimination.
Questionnaires given to those who are likely to be discriminated against, such as ⅲ,
offer effective information as to the discrimination that the respondents can be aware of.
But, in general, those subjected to discrimination cannot tell whether the reason for5being unable to rent a house is the nature of their group, their income, availability of aguarantor, or other attributes.

There are many forms of discrimination that thosediscriminated against cannot recognize as discrimination, such as "A tenant has alreadybeen determined for the unit," and "Because we have no units that suit your conditions
other than the advertised unit."

Also, because the visit survey is conducted on theelderly who live in rental houses, problems with selection bias may have arisen.
Although it is not used in the drafting process of the SLE, there is another method bywhich discrimination is detected by comparing the outcomes of different groups, suchas wage gaps between sexes, using an econometric technique.

But this method also

has a shortcoming: it provides little information on policies to be introduced because it
can identify neither the magnitude of the impact of discrimination on the outcome noran act that is apt to cause differences of outcomes 5).
Considering what is discussed above, to plan suitable policies against discriminationand to manage their implementation properly, there is a need for an investigation
method that can:* Detect variations in treatment based on the groups to which individuals belong,independently of variations based on other factors;* Detect such variations irrespective of the intentions of the respondents; and* Identify the discriminative acts to be covered by the policy
An audit study, which has been developed in the U.S., meets these conditions.

For

example, a fair housing audit, one of the audit study, is a method which attempts todetect discrimination in the housing market by training a pair of individuals, who differ
from each other only as to the attributes to be observed, such as race, so that they candeal with the questions from and answers to a real estate agent in the same manner,
causing the pair to visit a real estate agent in close succession and recording thetreatment they receive, and then processing the recorded data statistically.
Because a fair housing audit explicitly control all factors other than the target attributefor the investigation, such as income and family structure, the differences ofoutcomes(e.g. restriction on renting houses)can be construed as one only due tovariations in the group to which the auditor belongs.

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This characteristic is reinforced

by testing hypotheses using data on the attributes of housing units obtained by a fairhousing audit.

As discussed more specifically in Section 5, the test for hypotheses

using microdata of housing units that are available and not available to home-seekers
makes it possible to analyze the possibility that those attributes that cannot be matchedand observed, such as future income, tenancy period, and preference for housing, bringabout differences in the outcome.
With regard to age discrimination, which is the purpose of this paper's investigations,this means that a fair housing audit can achieve the following detections and tests,
regardless of the intention of those in a position to discriminate:ⅰ Detection of housing discrimination: differences in the number of units available
because of age can be detected;
ⅱ Detection of steering by real estate agents: using attribute data of housing units,biases related to the quality of units that are available according to age (e.g. only
low-rent housing units, inferior housing units and units in a neighborhood with ahigh ratio of elderly population are offered to the elderly) can be detected; andⅲ Tests of hypotheses: the test of hypotheses as a result of the task mentioned in ⅱ
can confirm the factors behind housing discrimination mentioned in ⅰ .
Ultimately, it becomes possible to test the reasonableness discussed in Section 1.
If honest and correct answers can be expected, even questionnaires can provide resultsfor ⅰ.

However, to produce the results for ⅱ and ⅲ, microdata are needed on units

that are "available" and "unavailable” to the elderly in the search process of rental
housing.

Because a fair housing audit can collect these data, it is regarded to be a very

effective investigation method for detecting discrimination and studying its causes.
Considering the facts described above, the author conducted the 2001 Osaka Audits in
March 2001 as a pilot investigation.

The investigation technique used for this audit isoutlined below.
2.2 Investigation method(1) Formation of audit pairs

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The author formed three audit pairs, each composed of an elderly person in his sixties
6)

and a young person in his thirties, selecting them from among 17 candidates obtained

from public employment agencies, advertisements in regional information magazinesand notices posted in the college campuses, and gave such attributes as workers to theyoung auditors and pensioners to the elderly auditors. The same conditions wereattached to other attributes: e.g. unmarried men 7), income is five times the rent ofadvertised housing units, preferred units are those with the same floor plan and nearest
station as those of advertised units, and desirable rent is the rent of advertised units
plus/minus ¥10,000.

By training the audit pairs using anticipated questions andplanned answers, the author prepared them for negotiations with real estate agents to bemade in the same manner.

(Table 1 lists the expected questions that the pairs would

have to answer when they visit a real estate agent and sample answers, which the author
used in the training).

(Table 1. inserts here)(2) Selection of advertised housing units and real estate agentsThe author conducted a fair housing audit for 115 random samples of advertised
housing units chosen from among those for single-member households in Osaka andseven cities in the Hokusetsu area (e.g. Ibaraki, Takatuki, Toyonaka, Suita, Settsu,
Minoo), which were placed in a housing information weekly magazine ("Housing
Information Weekly, Rental House Edition" published by Recruit Co.) 8).
(3) Visits by auditors to the real estate agentsThe author asked either the elderly or young member of the pairs to visit the real estateagent selected, and to negotiate with the agent using the basic scenario for questions: "I
saw your ad and visited you.

Can I rent the advertised unit?", "Can I inspect the unit?","Please show me similar units that are available." and "Can I inspect the similar units
that are available?"
Then the other auditor of the pairs visited the same real estate agent, and followed the8same basic scenario. To avoid random environmental changes (e.g. the unit that isavailable to the first auditor became unavailable to the other auditor because an actual
rental contract was signed for the unit by other home-seekers before the latter's visit,
thus making the housing market condition for the second auditor different from that of
the first auditor) as much as possible, the auditors were asked to visit the agent on thesame day.
(4) Preparation of a report and interviews with auditors
The author asked the auditors to report using the prescribed form (Table 2) and theninterviewed them directly.

(Table 2. inserts here)

3. Descriptive statistics on age discrimination
Based on the data of the 2001 Osaka Audits, this section describes the differences intreatment between elderly and young home-seekers, and the magnitude using two
indexes: "incidence of discrimination" and "severity of discrimination."
3.1 Incidence of discrimination
The incidence of discrimination is the measure usually used for describing
discrimination based on data obtained by a fair housing audit.

The simple grossmeasure of the incidence of discrimination is the ratio of those real estate agents whogive minorities unfavorable treatment to the total number of real estate agents.

The

simple net measure of the incidence of discrimination is the simple gross measure minus
the ratio of those real estate agents who treat majorities unfavorably.
The simple net measures of the incidence of discrimination in the 2001 Osaka Audits
for “excluded” that means complete withholding of information about available units,“availability of advertised units,” and “availability of similar units,” were as small as
1.75%, 8.77%, and 6.09%, respectively, and insignificant (Table 3). By contrast, amuch higher incidence of discrimination (about 40%) was observed for the number of9housing units that were available, is statistically significant at the 1% level.

In otherwords, this suggests that although the most blatant forms of housing discrimination
against the elderly, such as denial of access to information about available housing units,
is relatively rare, the probability that they encounter real estate agents who would givethem too little information is larger than that for young home-seekers by about 40%.

(Table 3. inserts here)

3.2 Severity of discrimination
The severity of discrimination is an indicator introduced to detect the magnitude of
discrimination (Yinger, 1986).

As for the number of units that are available, forexample, the simple gross measure of the severity of discrimination is calculated bymultiplying the simple gross incidence of discrimination by the average differences
between the elderly and young home-seekers in the number of units that are available
from real estate agents who restrict renting to the elderly, i.e. the expected value of
discrimination the elderly face.

The figure obtained by deducting the simple grossmeasure of the severity of discrimination for young home-seekers from this value is thesimple net measure of the severity of discrimination.

In other words, because thesimple net measure of the severity of discrimination is the expected value of too few
units being available for the elderly minus the expected value for young seekers, itshows the expected value of differences in housing units that are available between
elderly and young home-seekers in the rental housing market.
The data obtained in the 2001 Osaka Audits (Table 4) reveal that elderly home-seekers
not only have a higher possibility of encountering real estate agents who take adiscriminatory attitude, but also face a greater degree of discrimination, compared toyoung home-seekers, and that the former can get less information on housing units thanthe latter by 1.26 units.

The average number of units that are available for young

home-seekers is 4.70 units, which means that the amount of information elderly
home-seekers can obtain is less than that provided to young home-seekers by about 30%.

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Section 4 reports the method and results for testing this discrimination.

(Table 4. inserts here)
3.3 Differences in treatment by real estate agents
Using data from questions asked by real estate agents , Table 5 shows the incidence of
discrimination concerning the questions: "Did the agent ask you about the availability ofa guarantor, your income and occupation, your housing needs and your age?" and "Didthey suggest a second contact in the future?"
No large differences are observed for those indicators that are considered to represent
sales efforts on the part of the agent, such as the suggestion about a second contact in
the future and the question about the home-seeker’s housing needs.

On the other hand,considerable differences arise between elderly and young home-seekers as to guarantors,
income, and occupation, indicating that real estate agents have a great interest in theelderly's rent-paying ability and their ability to cope with an unexpected event, and thatthey positively try to get this type of information. The latter differences are statisticallysignificant.

(Table 5. inserts here)

4. Test of hypothesis about existence of age discrimination
4.1 The model and estimation strategy
This section tests a hypothesis about the existence of age discrimination concerning
the number of units that are available, by applying an econometric technique for data of
the 2001 Osaka Audits. Here, the method Yinger (1986) adopted to the 1981 Boston
Audits is used.

The model is as shown in Equation (1) below:

A ai = α1 + β1 R i + λ a + µ i + ε ai

(1)where,

11Aai: number of units available that auditor i was provided by real estate agent a,Ri: dummy variable that is 1 if the auditor i is an elderly person, and 0 if the auditor
i is a young person,

λa: error component shared by teammates, such as agency characteristics andmarket conditions,µi: error component not shared by teammates, such as auditor characteristics otherthan R,ε ai: error component arising from the combination of the real estate agent and theauditor, such as auditor i's order of meetings with agent a.

Yinger (1986) points out that if ordinary least squares (OLS) is applied to a model withan error structure like (1) above, the standard error for the estimate of β, has an
upward bias, which is caused mainly by λa.

Thus, it is considered to be appropriate

to employ instead the fixed-effects model or the random-effects model for real estateagents.

In this paper, the generalized least squares (GLS) is used for testing

hypotheses 9).
4.2 Test result of hypotheses about the existence of age discrimination
The GLS estimation result for discrimination about the number of units that areavailable is expressed by Equation (2) below:(Number of units that are available)ai = 4.696 - 1.261 (dummy for the elderly)i(2)(0.267***) (0.263***)R2 = 0.769 10), number of samples: 230
Note: Figures with *** are significant at a 1% level.

Figures in parentheses are the standard errors of the coefficient, and both significantly
differ from 0 at the 1% level.

Also, the sign of the dummy variable for the elderly issignificantly negative, which is consistent with the hypothesis that there is age
discrimination regarding the number of units that are available.

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According to the levelof discrimination, while young home-seekers were offered 4.696 units on average,
elderly home-seekers were offered only 3.435 units, which is less than young
home-seekers by 1.261 units.
The above discussion reveals that in the rental housing market in Japan, elderly
home-seekers are provided with less information about available housing units than
young home-seekers by about 30%, and that the existence of discrimination is tested
at the statistically significant level.

5. Test of hypotheses about causes of age discrimination
5.1 Hypotheses
This section examines the causes of age discrimination observed in the rental housing
market in Japan.

Using part of the "reasons that the elderly were unable to rent a

housing unit" mentioned by property management companies in the "Investigation on
the Situation of Housing of the Elderly" (Japan Property Management Association,
April 2000) 11), the following four hypotheses were built about the motives of landlords
and real estate agents practicing age discrimination.
(1) Future income hypothesis
Even if they have sufficient income when they move into a housing unit, the elderly
are likely to have lower incomes in the future (because of their employers' restructuringplan, illness, etc.).

This hypothesis predicts that while landlords tend to restrain

themselves from providing housing units to elderly tenants in general to avoid the riskof arrears of rent, only the owners of rental units with a rent that is low enough forelderly people to pay from their pensions, their fixed and reliable income source, offer
housing to them.
(2) Tenancy period hypothesis
The elderly tend to stay in rental housing units longer than young tenants("Investigation on the Situation of Housing of the Elderly"). This hypothesis predicts
that because the Japanese Tenant Protection Law puts restrictions on cancellations of13

lease contracts and on increasing rent by a landlord, landlords are generally apt tocontrol themselves in offering units to elderly people. They are especially negative
about those units with a long remaining life and a high opportunity cost arising frominability to raise the rent, that is, newly built housing, and that the owners of inferior
units are the only providers of housing to the elderly.
(3) Community preference hypothesis
The elderly are liable to suffer from physical problems, in which case, unless they canhave proper home care, their conditions may become serious, sometimes resulting indeath.

In such an event, the landlord will face the risk of other tenants in the samebuilding (e.g. the room next to the event room) who do not want to live in their houses
any longer, or of the declining value of his rental property due to a bad reputation.
Moreover, because of differences in life style, elderly tenants are apt to have problems
with young ones("Investigation on the Situation of Housing of the Elderly").

For thesereasons, if he admits elderly people to a community where young inhabitants are themajority, the landlord may face many complaints and lose tenants 12). This hypothesis
predicts that for the reasons stated above, it is only landlords in a community of elderly
people who provide housing to the elderly.
(4) Elderly preference hypothesis
Real estate agents offer elderly home-seekers units according to considerations of their
physical strength and preferences. This hypothesis predicts that because of this, theunits that are available to elderly home-seekers are limited only to barrier-free units andunits on the first floors of apartments, while no units with equipment and structures thatare unfit for elderly tenants are offered.
5.2 The model and estimation strategy
The hypotheses in 5.1 are tested using Model (3) below:

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Prob(avati =1)
j= Prob (α 2+β 2Ri+Σγ2j Χatj +Σδ2j Ri (Χatj −Χ ) +D at+λa+µi+ε ai>0)(3)= F(α 2+β 2Ri+Σγ 2j Χjat+Σδ 2j Ri (Χajt −Χj) +Dat)
where,
avati : index that is 1 if, when auditor i visits agent a, unit t in a's file is available to i,
and 0 if such unit is not available to i,
Ri: dummy variable that is 1 if auditor i is an elderly person, and 0 if i is a young
person,Χ atj : value of attribute j of unit t in agent a's file; attribute j used here is rent, age,floor space, floor number of the housing unit, or ratio of elderly population in thecommunity,

Χ

j

Dat

: average of attribute j,: dummy variable of the ward, city, town, or village where unit t in agent a's file
is located.

The four hypotheses tested here all predict the provision of too little information, and abias ("steering") toward housing units with particular qualities offered, to elderly
home-seekers.

More specifically, the future income hypothesis predicts the steering of

the elderly to low-rent units, the tenancy period hypothesis to inferior units, thecommunity preference hypothesis to units in a community of elderly inhabitants, andthe elderly preference hypothesis to larger units 13) and units on lower floors.

Thus, thesign condition of the coefficients expected from each of the hypotheses is as shown in
Table 6.

(Table 6. inserts here)
The correlation between floor space and rent was as high as 0.7255 and might cause
multicollineality.

Thus, the test of the future income, tenancy period and community15

preference hypotheses adopting rent, age of the housing unit or ratio of elderly
population in the community as attribute j and the test of the elderly preference
hypothesis adopting floor space and floor number as attribute j were conducted andreported separately.
5.3 Test of future income, tenancy period, and community preference hypotheses
The test result for future income, tenancy period, and community preference
hypotheses is shown in Table 7.

The sign condition of the coefficient related to age isminus, suggesting that age discrimination exists. The negative coefficient of the crossterm about rent and the positive coefficient of the cross term about age of the housing
unit and ratio of elderly population in the community are consistent with the result
predicted by the first three hypotheses in Table 6 (i.e. steering to low-rent units, inferior
units, and units in the elderly community).
The constant term and the terms other than those related to rent and the ratio of elderly
population in the community are significant at the 10% or less level. From this it ispossible to understand that future income, tenancy period, and community preference
hypotheses were supported by the results.

(Table 7. inserts here)
5.4 Test of the elderly preference hypothesis
The test result for the elderly preference hypothesis is shown in Table 8.

Here again,

the sign condition of age is negative, while the coefficient of the cross term about
floor space is negative, and the coefficient of the cross term about floor number ispositive.

This indicates that information about smaller housing units and units onhigher floors are provided to elderly home-seekers, which is the opposite to thatpredicted by the elderly preference hypothesis. Moreover, all the explanatory variables
except age were insignificant, so this hypothesis was not consistent with the data 14).

(Table 8. inserts here)16

6. Segregation of the elderly and discrimination
Based on the result of the analysis in the preceding sections, this section analyzes thesegregation of the elderly, which has been caused by age discrimination.

6.1 describes

the segregation of elderly people observed in large cities in Japan, and then 6.2 outlines,
using a simple search model, the conditions of cases where discrimination against
minorities in a majority neighborhood causes segregation.
6.1 Residential segregation of the elderly in large cities in Japan
In the U.S., blatant segregation in which white people and Afro-Americans live
separately in their own communities has been a serious social issue.

The indicators formeasuring the level of this racial concentration include the index of dissimilarity(hereinafter referred to as the "D index"), the index of segregation, and Gini index.
In this subsection, the D index, which is most commonly used indicator, is employed
to describe the residential segregation of the elderly in Osaka and Tokyo. The D index isdefined by the following equation:D=∑T p − piii

2Tp (1 − p )where, Ti and pi are the total population and the ratio of minorities in a subarea i, while
T and p are the total population and the ratio of minorities in the entire area. The
higher the segregation level of minorities is, the greater value the numerator has, and thedenominator is the maximum value where a complete racial concentration (situation
where Afro-Americans and white people are completely segregated) exists.

Thus, thehigher the level of segregation is, the closer to 1 the value of the index is.
Table 9 shows the result of a calculation of the D index using population data by age
group and by 13,048 cho and chome (small administrative divisions of a city) in Osakaand Tokyo, which were obtained in the Population Census of Japan in 1995.

The

values of the D index for population 65 years and over are much higher than those forother age brackets, which clearly show the trend of elderly people's residential

17

segregation.

In addition, Osaka and Tokyo have a common pattern in which the Dindex slowly declines in the 35-44 year group or the 45-54 year group, and thensuddenly rises in the group of 65 years and over.

In short, moderate residential

segregation is observed only for the elderly in Japan.

(Table 9. inserts here)
6.2 Model of residential segregation
This subsection uses the model of Courant (1978) to show the situation of the housing
market that is theoretically consistent with segregation observed only in the elderly.
Because of the limitations of the data used in the preceding sections, the discussion of
the housing market in Japan concerns only rental housing market.
(1) Model of Courant (1978)
Consumers' search behavior in the housing market is determined by a comparison
between utility already obtained and utility expected to be obtained by a further search.
Let us assume that a consumer has already been provided with information about ahousing unit that would produce utility v0.

By comparing that unit with the expectedutility of a unit to be obtained by a further search at cost c, this consumer will judge
whether he continues the search or not.

The maximization of the utility in this casecan be expressed by the equation:
v0V = max−c + (1− F(v0))E(v | v>v0) + v0F(v0)

where, v is the utility of the unit, f(v) is v's distribution function, F(v) is f(v)'s cumulative
distribution function, and E(v) is v's expected value.

In this case, the consumer will

have the maximum utility if he adopts the strategy of stopping his search when he gets
unit with v0 utility that realize the following equation:v

c = ∫ (v − v0 )dF
v0( j = 1, L, n)18

In other words, he will continue his visits to real estate agents until he can get a unit thatwould equalize the expected value of obtaining greater utility from a further search andthe cost of the additional search.

Such a level of utility where the search is stopped(optimal stopping point for search) is expressed as v*.

v is the highest level of utility

to be obtained under a restricted budget.
Here, assume that a city has n small communities that have the same search costs,
price of housing attributes, and distribution of housing attributes in common but havedifferent ratios of minority population.
majorities against minorities

Also assume that there is discrimination by

and that landlords

deciding to sell or rent units to minorities.

obey the majorities' wishes whenIn this case, the probability αj thatminorities conducting searches encounter discriminative landlords is a decreasing
function of the community's ratio of the minority population.

In other words, assume

that the more minorities there are in a community, the fewer discriminative landlords
there will be.

If community j is ordered by α1 < α 2 L <α n , the maximization of utility

by minorities who have already found a unit producing utility v0 is expressed by
Equation (4) below:

v0−c +(1−α )(1−F(v ))E(v | v>v ) +(1−α )v F(v ) +α v 

1
0
0
1 0
0
1 0 
V = max
LLLLLLLLLLLLLLLLLLLLLLL −c +(1−αn )(1−F(v0 ))E(v| v>v0) +(1−αn )v0F(v0) +αnv0 



(4)

As is evident from Equation (4), the consumer will continue his search until he can findv*j that satisfies Equation (5) below in community j:v

c = (1 − α j ) ∫ * (v − v *j )dF
vj( j = 1, L , n)(5)

In this case, the expected value of the n row at the end of Equation (4) and each
community's optimal stopping point for search v*j of Equation (5) are the decreasing
functions of αj . It means that the search in community 1, where the probability of19encountering discriminative landlords is lowest, would dominate searches in all othercommunities. In other words, if the price of housing attributes and the distribution of
housing attributes in a community are identical, only a lower utility is obtained bysearches in all communities other than community 1 because of greater discrimination.
Thus, minorities would conduct their searches only in community 1, where the minority
ratio is the highest.
Then suppose that lower-price housing attributes with the same distribution as
community 1 are supplied in community j(j≠1), and give the utility distribution incommunity j facing minorities with (1-αj)f(v+Dj), where Dj is the utility derived fromprice differences. Here, the utility of the price difference satisfying the following
equation is denoted by D*j:v+ D jc = (1 − α j ) ∫v1*

(v − v1* ) f (v + D j )dv( j = 2, L, n)(6)where, v1* is the optimal stopping point for search in community 1. D*j is the utilityof price difference that brings the same optimal stopping point for search in community
1 with least discrimination even in community j(j≠1). If this price difference exists
between communities 1 and j, search behavior in the two communities will produce thesame expected utility. In such a case, minorities will conduct a search in communityj(j≠1), too. By contrast, if the price difference only produces lower utility than D*j,minorities will conduct a search only in community 1.
(2) Search behavior of elderly and young home-seekers

Courant (1978) did not conduct any explicit analysis of majorities' search behavior.
But, his model presupposes discrimination by majority inhabitants against minorities
searching for housing units in their community, and is thus consistent with the searchbehavior of majorities having a preference for a community with a low minority ratio.
Using the model of Courant (1978), the search behavior is described below, assumingthat young home-seekers have a preference for a community of young inhabitants,
because of the reasons shown in the community preference hypothesis tested in the20

preceding section 15).
In the 2001 Osaka Audits, 67% of the 395 units offered to elderly home-seekers were
offered only to elderly home-seekers, whereas 76% of the 540 units offered to young
home-seekers were offered only to young home-seekers. Considering this fact, thehypothesis that the housing market for the elderly and that for young people are
separated is added here.
First, the elderly's search behavior is described. While the same variables used in themodel of Courant (1978) are employed for the Equation (7) shown below, o is placed on
the right top of each term to show that the term is for the elderly. Also, the city is
divided into communities 1 to n in descending order of the ratio of elderly population.
And αoj, the probability that elderly home-seekers encounter, in the community j (j=1～n), the landlords of units that they are unable to rent, is assumed to be a decreasing

function of the ratio of elderly population in each of these communities. That is, it isassumed that the more elderly people live in a community, the less discriminative
landlords are. Here, v1o* denotes the optimal stopping point for search in community
1, where the ratio of elderly population is highest and age discrimination is least.
From Equation (6), it is evident that if elderly home-seekers conduct their searches in acommunity other than community 1, the price difference producing utility Do*j thatsatisfies Equation (7) below must exist between communities j and 1:
v o + D oj

co = (1 − α oj )∫ o*v1(vo − v1o* ) f o (vo + Doj )dvo

( j = 2,L, n)(7)

Next, young home-seekers' search behavior is described. Here, the disutility of thecommunity environment for young inhabitants (compared to the utility level incommunity n where the ratio of the elderly population is lowest), which increases
according to the ratio of the elderly population, is denoted by -DUj.

Younghome-seekers will face utility distribution of f y(vy-DUj) in each community (y on theright top of the terms shows that they are the terms for young home-seekers). Like thepreceding cases, the disutility of the community j’s environment is expressed by -DU1≦…≦-DUn in descending order of the ratio of elderly population. Here, by the same21

process of Equations (4) and (5) shows that if the price of the attributes is the same, asearch in community n dominate searches in all other communities. In other words,
young home-seekers search for housing units only in community n where the ratio of
the elderly population is the lowest and that is rated by young home-seekers as having
the best community environment. Using the same process as that used for obtaining
Equation (6), we can show that if young home-seekers conduct their searches in acommunity j (j≠n), there should be a price difference between communities n and j
producing utility Dy*j that satisfies the following equation :v y + D yj − DU j

c y = ∫ y*vn(v y − v ny*) f y (v y + D yj − DU j )dv y( j =1,L, n −1)

Here vny* denotes the optimal stopping point for search in community n with the lowest
ratio of elderly population and the highest score in the rating of the community
environment.
(3) Characteristics of the housing market and selection patterns of residence

The situation of the housing market that reflects the elderly's search behavior describedabove is shown in Figure 1.

(Figure 1. inserts here)
Assume communities 1 and 2 exist in a city and that the elderly, who are searching for
a new residence, desire to live in either of the two communities. The demand and supply
curves of the two communities, which have the same ratio of elderly population andhave no difference in the number of discriminative landlords, are expressed as D01 andD02, and as S01 and S02, respectively. In this case, N01 and N02 elderly people will
become new inhabitants, at the same rent, in communities 1 and 2, respectively. If theratio of the young population rises in community 2 and discriminative landlords
increase, resulting in a shift of the supply curve (S02→S12), elderly home-seekers will22

stop their search in community 2 and conduct a search only in community 1, because asearch in community 2 produces lower utility level, as is evident from Equation (4). If
the rent is flexible in both communities, an upward shift of the demand curve (D01→
D11) in community 1 and a downward shift of the demand curve (D02→D12) willcontinue until a premium r11 - r02, related to the difference in the number of
discriminative landlords between the two communities, is created 16). As a result, N11
and N12 elderly people will newly move in the communities, respectively (① in Figure
1).
On the other hand, if the rent is fixed at the original level of r01 = r02, elderly
home-seekers do not make a search in community 2, as is evident from Equation (4) and(5), because any premium, reflecting a difference in discriminatory landlords between
two communities, is not created in the rent. Thus, the shift of the demand curve
continues until all new tenants are concentrated in community 1 (D0→D11’, D02→D12’)(② in Figure 1). In addition, because this level of rent does not increase housing
supply, an excess demand of N02 will be created, causing a great loss of welfare. The
same description is possible for the housing market reflecting the search behavior ofyoung home-seekers, too.

(Table 10. inserts here)
Table 10 summarizes the patterns of search behavior and resultant residence selection
where young people have a preference for a community of young inhabitants for twocases: the case where the above-mentioned premium r11 - r02 is created reflecting
restrictions on renting to elderly people and community preference of young people,
because the rent is flexible, and the case where the rent is fixed at the r01 = r02 level,
because there exists some form of inflexibility. In this case, the observed tendency of
the residential segregation of elderly people will arise not merely in the case where
young people have a preference for a community of young inhabitants, but also in thecase where there is some form of inflexibility of rent only in the housing market for the23

elderly.

7. Test of premiums regarding discrimination and community preferenceThis section analyzes the flexibility of rent in the housing market for the elderly andfor young home-seekers, which is used in the categorization in Table 10, by estimating arent function. The data used are the 2001 Osaka Audits employed in Section 5.
In the case where young people have a preference for a community of young
inhabitants, it is expected that, if there is no control, a premium is placed on rent in thecommunity with a high ratio of elderly population in the market for the elderly
home-seekers and rent in the community with a low ratio of elderly population in themarket for young home-seekers. This expected fact is tested by the rent function ofunits available to elderly and young home-seekers, using the data of the 2001 Osaka
Audits.
The rent function for the housing market for the elderly is specified as follows:oln RE ato = α 3 + β 3 ln X ato + ∑ γ 3n ln Ynat
+ Dato + ε at(8)nwhere, REoat is the rent of the t-th unit that real estate agent a offers to an elderly
home-seeker, Xoat is the ratio of the elderly population in the community where the unit
is located, and Yo1at, Yo2at, ～ YoNat are the attribute variables of the unit, which are
specifically the time distance to the center of the city, time distance by foot to thenearest station, floor space, floor number, and age of the unit.

Doat is a dummy

variable of ward, city, town or village. If the rent in the housing market for the elderlyis flexible, and a premium is put on the rent reflecting restrictions on renting, a positivecoefficient is expected for the ratio of elderly population.
On the other hand, in the estimation of a rent function for the housing market foryoung home-seekers using the same model, if the rent is flexible, a negative coefficientis expected for the ratio of elderly population, because a premium is placed on the rent,
reflecting young home-seekers' community preference.

24

Table 11 shows the result of estimating Equation (8) by OLS.

(Table 11. inserts here)
First, as for units offered to elderly home-seekers, the sign condition of the coefficient
related to the time distance to the center of the city, time distance by foot to the nearest
station, floor space, floor number, and age of the units are consistent with the
expectation, and are estimated to be significant at the 1% or 5% level, except the time
distance to the center of the city. On the other hand, the coefficient of the ratio of theelderly population has a negative sign, which is the opposite to the sign condition
expected when the rent is flexible. Moreover, no significant estimate is obtained forthis ratio.
The sign condition of all coefficients of variables in the rent function of units offered
to young home-seekers are consistent with the expectation, and are estimated to besignificant at the 1% or 5% level, except the time distance to the nearest station. The
sign condition of the coefficient of ratio of elderly population is consistent with the
expectation that a premium is created in the community where the ratio is low, and issignificant at the 5% level.
As noted above, the test result obtained is that only the "premium on units offered toyoung home-seekers in the community with a low ratio of elderly population" isstatistically supported. This suggests the possibility that while rent is flexible in themarket for young home-seekers, there is some inflexibility of rent in the market for theelderly, which is consistent both with the test result for steering regarding the ratio of
the elderly population discussed earlier (community preference hypothesis) and with theresidential segregation observed only in the elderly analyzed in Section 6.
The outcome above can be interpreted as follows: as shown in Section 5, there issteering of units available to elderly home-seekers to inferior units (tenancy period
hypothesis), which is caused by the risk of a long tenancy period of elderly tenants.
Therefore, it is expected that the market for the elderly is mainly composed of oldapartments having many existing tenants, and that for young home-seekers is newly

25

built apartments inhabited only by new tenants. In the rental housing market in Japan,
the Japanese Tenant Protection Law imposes strict restrictions on rent increases forexisting tenants. If an inflexible rent for existing tenants affected by the law exists inthe same apartment, the landlord is likely to be careful in introducing a rent system thatis different from the existing one, and the rent in the market for the elderly may become
inflexible.

8. Conclusion
As discussed thus far, a fair housing audit is a very effective method for detecting
discrimination. The 2001 Osaka Audits produced the statistically significant result thatelderly home-seekers have the possibility of encountering real estate agents who will
provide them with too little information, which is higher than young home-seekers by
about 40%, and that elderly home-seekers are offered fewer units than those offered toyoung home-seekers by 30%.

This result is roughly consistent with that of thequestionnaires conducted before the enforcement of the SLE (2001), when no
institutional limitations were imposed on discrimination in renting housing units and the
respondents probably had not much psychological resistance to such discrimination.
In addition, using the micro data for housing units, steering of elderly home-seekers byreal estate agents to low-rent, inferior units and units in an elderly community was
detected, and the test of the hypotheses showed the possibility that housing
discrimination against the elderly is caused by the risk of a future decrease in theirincome and of their long tenancy period, and by young people’scommunity

preferences.
These results suggest that a fair housing audit can, without reliance on the goodwill of
respondents, detect discrimination in the housing market and reveal its level, andspecify the causes of discrimination.

In particular, specification of causes of

discrimination is the advantage only this method has, because it can collect microdata ofunits "offered" and "not offered" to elderly home-seekers.
The policy implications of this paper are to urge the adoption of experimental methods
for the planning process of urban housing policies in Japan, and to introduce new26

housing policies.
In this paper, future income, tenancy period, and community preference hypotheses
were tested significantly, whereas the elderly preference hypothesis was not supportedby the data. This indicates, first, that age discrimination in the rental housing market isdriven by the economically reasonable behavior of landlords and real estate agents, andthat greater emphasis should be placed on improving the market environment than on
anti-discrimination controls. It is also suggested that improvement of housing stock,such as promoting the supply of larger housing units, is no final solution to age
discrimination, that for decrease in the risk of future rent-paying ability of the elderly, arent guarantee system provided for by the SLE will be effective in solving the problemof age discrimination, and that the spread of a fixed-term house lease system 17) will
have a great effect on eliminating age discrimination.
This paper also shows that age discrimination as a reasonable behavior of landlords
and real estate agents causes, steering of the elderly to low-rent and inferior units andresidential segregation, which is observed only for elderly inhabitants. This suggests
the possibility that inferior residential areas with densely built wooden rental housing
and deteriorated low-rise housing, where many elderly people live and which are
dangerous from the standpoint of disaster prevention, were not created naturally withthe aging of population but are being produced in the trading market process of housing
units. As noted, the lowering disaster prevention quality of cities has probably been
accelerated by the existence of age discrimination in the trading market. This indicatesat the same time that disaster prevention quality can be improved by taking proper
measures for this market.
More specifically, creating an environment, where the price adjustment function iseffective through a fixed-term house lease system or other means, should be the basis ofanti-discrimination policy. In addition, we should promote measures to cope with risks
in the physical conditions of the elderly and to increase the community's acceptance ofelderly people, such as safety support in cooperation with welfare policies andreinforcement of the system for making contact in case of emergency.

We should also

study policy means such as housing vouchers supplied only to those who move into a27

community with a low minority ratio, which were adopted for the Moving toOpportunity Demonstration, a policy experimented in the U.S.

28

(References)
Courant, P.N.(1978), "Racial Prejudice in a Search Model of the Urban Housing Market," Journal of
Urban Economics 5, pp.329-345.
Farley, J.E. (1984), "P* Segregation Indices: What Can They Tell Us about Housing Segregation in
1980?," Urban Studies 21, pp.331-336.
Fix, M., G.C. Galster and R.J. Struyk (1993),"An Overview of Auditing for Discrimination," in M.
Fix and R. J. Struyk eds., Clear and Convincing Evidence, Urban Institute Press, pp. 1-67.
Hori, H. (1998), "Tendency toward Closing Wage Differentials between the Sexes and Its Causes,”
Monthly Journal of the Japan Institute of Labour, No.456, pp.41-51 (Japanese)
Nakagawa, M. (2001), "Measuring Age Discrimination in Rental Housing Markets Using a Fair
Housing audit," Urban Housing Sciences, No. 35, pp.21-26 (Japanese)
Nakagawa, M. (2002), "How to Detect Discrimination: An Approach by a Fair Housing Audit"
Planning Administration, No.72, pp.50-59 (Japanese).
Nakagawa, M. (2002), "Analysis of Residential Segregation of the Elderly," Urban Housing
Sciences, No. 39, pp.19-24 (Japanese)
Sato, K. (1981), Constitution, Seirinshoin Shinsha (Japanese).
Tuner, M.A. (1993), "Limits on Neighborhood Choice: Evidence of Racial and Ethnic Steering in
Urban Housing Market," in M. Fix and R.J. Struyk eds., Clear and Convincing Evidence, Urban
Institute Press, pp.117-163.
Yinger, J. (1986), "Measuring Racial Discrimination with Fair Housing Audits: Caught in the Act,"
The American Economic Review, Vol.76, No.5, pp.881-893.
Yinger, J. (1993), "Access Denied, Access Constrained: Results and Implications of the 1989
Housing Discrimination Study," in M. Fix and R. J. Struyk eds. Clear and Convincing Evidence,
Urban Institute Press, pp.69-112.
Zoloth, B.S.(1976), "Alternative Measures of School Segregation," Land Economics, Vol.52, No. 3,
pp.278-293.

29

Table 1. Expected questions from real estate agents and sample answers used in theauditor training for the 2001 Osaka Audits
Floor plan/space: (one room and kitchen/one room,
dining room and kitchen; similar level toadvertised unit)
Parking space: (not required)
Contract type: (personal contract)
Other conditions: (none)○ Applicant
Name: (real name)Principal/agent: (principal)
No. of tenants: (1)Present address: (present address, rental cell
phone no.)Place of work: (pensioner for elderly
home-seeker; researcher in university foryoung home-seeker)○ Desirable rent; (the rent of advertised unit
plus/minus ¥10,000)○ Desirable area: (within the city or ward of○ Reason for move: (change in family size for
elderly home-seeker; independence fromparents for young home-seeker)○ Desirable unit

advertised unit)○ Nearest station: (same as advertised unit)○ Desirable moving-in date: (early April)○ Information source: (Housing Information Weekly,Type of unit: (apartment)

Rental House Edition)

30

Table 2. Report form for the auditors used in the 2001 Osaka Audits① Housing unit (attach related data)
Location:
Floor plan/space:
Distance from nearest station:
Structure:
Date of completion:
Rent, etc.:② Date of visit___________ __, 2001__:__ to __:__ (hours)③ Visitor (auditor)④ Service of real estate agenti.

Was it possible to rent the advertised unit?
Yes ( ) No ( )(If "No," specify the reasons.)
ii. Was it possible to inspect the advertised unit?
Yes ( ) No ( )(If "No," specify the reasons.)iii. Did the agent offer you any conditions different
from advertised conditions?
Advertised conditions of unit:
Conditions actually offered:iv. How many similar units did the agent offeryou?
__ units (attach related data)

31

v. Was it possible to inspect similar units?
* Yes for all units ( )* Yes for except ( ) units ( )(Specify the units not available for inspecting
in the attached data.)* No for all units ( )(Specify the reasons.)vi. Noteworthy questions* Did the agent ask if you have a guarantor?
* Did the agent ask your age?
* Did the agent ask your housing needs?
* Did the agent ask your occupation andincome?
* Did the agent suggest a second visit orcontact?/Did the agent ask if you could makea second visit and when you could make asecond contact?
* Did the agent record in your application form
any other matters not usually included in thestandard form?
⑤ Other comments⑥ The name of the agent

Table 3. Incidence of discrimination measured by the 2001 Osaka Audits
Simple net measure ofincidence of discrimination

Simple gross measure ofincidence of discrimination

Excluded

1.75%

3.51% 1)

Availability of advertised units

8.77%

14.91% 2)

Availability of similar units

6.09%

9.57% 2)

No. of units available

37.39% ***59.13% 3)

Notes:
1) Cases where only the elderly auditors were told "The advertised unit has already been rented, andno similar units are available."2) Cases where while the young auditors were offered the advertised unit or similar units that wereavailable, the elderly auditors were told "The advertised unit has already been rented" and "Nosimilar units are available."3) Cases where the elderly auditors were offered fewer units than the young auditors.
4) The figure with *** is significant at the 1% level.

Table 4. Severity of discrimination measured by the 2001 Osaka Audits(number of units available)
Real estate agents preferring Simple gross measure of incidence of discrimination
young home-seekers
Differences in the number of units available(Young-favored Audit)
Simple gross measure of severity of discrimination

59.13%

Real estate agents preferring Simple gross measure of incidence of discriminationelderly home-seekers
Differences in the number of units available(Elderly-favored Audit)
Simple gross measure of severity of discrimination

21.74%

Differences

3.03
1.79

2.44
0.53

Incidence of discrimination

37.39%

Differences in the number of units available

0.59

Simple net measure of severity of discrimination

1.26 ***

Notes:
1) Real estate agents preferring young home-seekers offered more units to young home-seekers, andreal estate agents preferring elderly home-seekers offered more units to elderly home-seekers.
2) The figure with *** is significant at the 1% level.

32

Table 5. Incidence of discrimination related to questions from real estate agents
Simple net measure ofincidence of discrimination

Simple gross measure ofincidence of discrimination

Question about guarantor

43.75% ***46.43%

Question about income/occupation

17.27% ***21.82%

Question about housing needs

3.57%

12.50%

Question about age

0.92%

4.59%

Suggestion about second contact

5.31%

18.53%

Note: The figures with *** are significant at the 1% level.

Table 6. Sign conditions expected from the four hypotheses
Sign condition of β2

Sign condition of δ2j

Future income
hypothesis

Coefficient of elderly dummy＜0

Coefficient of cross term of elderly dummy and

Tenancy period
hypothesis

Coefficient of elderly dummy＜0Community
preference hypothesis

Coefficient of elderly dummy＜0

Elderly preference
hypothesis

Coefficient of elderly dummy＜0

Hypothesisrent＜0Coefficient of cross term of elderly dummy andage of housing unit＞0
Coefficient of cross term of elderly dummy andratio of elderly population＞0
Coefficient of cross term of elderly dummy andfloor space＞0
Coefficient of cross term of elderly dummy andfloor number＜033

Table 7. Test result of future income, tenancy period, and community preference
hypotheses
Explanatory variable

CoefficientStandard error

Age-0.626 ***

0.075

Rent

0.078

0.048

Age of housing unit

-0.024 ***0.008

Ratio of elderly population-1.2080.970

Cross term of age and rent

-0.115 *0.063

Cross term of age and age of housing unit

0.051 ***

0.011

Cross term of age and ratio of elderly population

2.295 *

1.260

Constant term

0.282

0.447

Number of samples: 1,255, Wald ch2=131.9.
Note: The figures with ***, **, or * are significant at the 1%, 5%, or 10% level, respectively.

Table 8. Test result of the elderly preference hypothesis
Explanatory variable

CoefficientStandard error

Age-0.522 ***0.099

Floor space

0.003

0.009

Floor number-0.0190.030

Cross term of age and floor space-0.012

0.012

Cross term of age and floor number

0.011

0.042

Constant term

0.350

0.250

Number of samples: 675, Wald ch2=35.01
Note: The figures with ***, **, or * are significant at the 1%, 5%, or 10% level, respectively.

34

Table 9. D index in Osaka and Tokyo
0-14
years

15-24
years

25-34
years

35-44
years

45-54
years

55-64
years

65 yearsand overOsaka Prefecture

12.44%

9.40%

11.34%

9.01%

7.87%

11.80%

20.01%

City of Osaka

12.52%

8.82%

11.09%

8.40%

6.65%

9.88%

17.43%

Osaka's suburbs

11.82%

9.28%

11.40%

9.24%

8.00%

12.35%

19.85%

Tokyo Prefecture

11.61%

8.82%

9.96%

6.59%

6.70%

9.21%

14.74%

Tokyo's 23 wards

10.78%

7.47%

6.03%

6.03%

5.92%

8.06%

12.61%

Tokyo's suburbs

11.20%

10.03%

7.76%

7.76%

8.34%

11.41%

17.10%

2) Osaka's suburbs are all municipalities in Osaka Prefecture other than the City of Osaka.

Tokyo's

Notes:
1) Based on the Population Census of Japan 1995.
suburbs are all municipalities in Tokyo Prefecture other than 23 wards.

Figure 1. Situation of the housing market for the elderly(Community 1)(Community 2)

35

Table 10. Characteristics of the housing market and occurrence of residential
segregation
Housing market of elderly home-seekers

Flexible rent
Inflexible rent

Housing market of young home-seekers

Flexible rent

Inflexible rent

* Both elderly and young home-seekers
conduct extensive search.

* Elderly home-seekers conduct search
only in the community with a high ratioof elderly population.

→Both elderly and young inhabitants have

→While the elderly have residential

a wide distribution.

segregation, young people have a wide
distribution.
* Young home-seekers conduct search onlyin the community with a low ratio ofelderly population.

* Elderly home-seekers conduct search
only in the community with a high ratioof elderly population, and young
home-seekers conduct search only in thecommunity with a low ratio of elderly
population.

→While the elderly have a wide
distribution, young people haveresidential segregation.

→Both elderly and young inhabitants haveresidential segregation.

Table 11. Rent function of housing units offered to elderly and young home-seekers
Elderly home-seekers
Coefficient

Young home-seekers

Standard error

CoefficientStandard error

Time distance to the center of city

-0.0320.033-0.070***0.026

Time distance to nearest station-0.032**0.014-0.0080.011

Floor space

0.484***

0.037

0.417***

0.030

Floor number

0.052***

0.016

0.032**

0.013

Age of housing unit

-0.068***0.010-0.074***0.008

Ratio of elderly population-0.0080.024-0.035**0.018

Constant term

0.364**

0.183

0.729***

0.145

Notes:
1) The number of elderly samples is 116, and R2 is 0.859.
2) The number of young samples is 189, and R2 is 0.776.
3) The figures with ***, **, or * are significant at a 1%, 5%, or 10% level, respectively.

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Notes:
1. Equality under the law is guaranteed by the provisions of the Fundamental Law of Education,
National Public Service Law, Local Public Service Law, Local Autonomy Law and other laws.
Also, the Law concerning Securing Equal Opportunity and Treatment of the Sexes, Etc., in
Employment prohibits sexual discrimination and provides for mediation, penal provisions andother measures for securing equality.

In addition, the Act for Stable Living of the Elderly

contains such systems as registration of housing units accepting the elderly, cancellation ofregistration in case of age discrimination, guarantee related to rent.
2. The system in which a public body guarantees an elderly tenant’s liabilities for rents up to six
months at the request of the lessor of registered units for admitting the elderly.
3. The Japanese Tenant Protection Law prohibits the landlord from ejecting a tenant from housing,
except in special cases, such as if the tenant fails to pay rent. Also, if the tenant refuses a rentrise, the landlord cannot increase the rent unless he obtains permission from a court.
4. Mainly composed of guarantee of elderly tenants' liabilities for rent and reinforcement in
databases of housing units available to the elderly, the SLE's provisions differ greatly from theAmerican system (Fair Housing Act), which prohibits housing discrimination based on thepresupposition that discrimination is based on the prejudice between races.
5. Hori (1998) defines wage differentials between the sexes that cannot be explained by otherexplanatory variables as "gap effects," and he argues it expresses "prejudice against women,
differences in the nature of work, sexual discrimination in opportunities for education andtraining, unfair treatment in job evaluation, and sexual discrimination in the promotion criteria."
He also says about the gap effects that because they are not observed statistically, the contents ofthese gap effects can be specified only by interviews and questionnaires at the workplace, andthat specifying the contents of the effects will be an important problem to policies for eliminating
wage gaps between the sexes.
6. The three elderly auditors were asked to report their age (63, 64, and 67 years).
7. In the U.S., it is considered that to secure the generality of an audit, audit pairs of two or moredifferent types should be formed.

Thus, the 2001 Osaka Audits are meaningful only in that they

try to detect age discrimination in the rental housing market of unmarried men in large cities inJapan.
8. In the U.S., communities for housing audits are selected considering the national and large city
averages, etc. of the ratio of Afro-American population in an effort to secure the generality of37

audit results. In the 2001 Osaka Audits, these communities were selected mainly based on audit
costs, and the system of community selection should be improved in future audits.
9. An fixed-effects model estimates β from variations of intra-group data (real estate agents in thiscase), but neglects inter-group variation.

By contrast, a random-effects model estimates βfrom the weighted average of intra-group and inter-group variations.

But because of the audit

design, there is no inter-group variation in R (because elderly and young auditors visit all the realestate agents selected). Therefore, the estimated value of β obtained by GLS and that obtainedby OLS with dummies become the same.

This paper adopts GLS from the viewpoint ofefficiency.
10. Like the case of Yinger (1986), this paper uses the R-squared of OLS with a real estate agent
dummy.
11. The reasons mentioned include "difficulty in taking action when an elderly tenant weakens or
becomes ill (cited by 93 companies)," "safety and management problems, including fires causedby negligence (68)," "no guarantor (56)," "limited availability of units with structure andequipment fit for the elderly (44)," "fear of rent arrears (28)," "tendency of too long a tenancy
period (10)," and "liability of the elderly to get into trouble with other tenants (4)."12. Moreover, the landlords in a community of young inhabitants are not experienced in the
management of elderly tenants, and so may not take proper actions when these tenants sufferfrom any changes in physical conditions.
13. Because no information on barrier-free housing was available in the present audits, floor space
was adopted as a proxy variable for housing fit for the elderly. This is mainly because thegovernment plan (Five-year Housing Construction Program) encourages the provision of larger
housing units to the elderly.
14. But because these audits did not consider whether housing units were equipped with elevators,
the analysis as to preference for floor numbers was insufficient.
15. As is evident from Equation (6), if a premium is placed that reflects the existence of
discrimination, minorities will conduct searches also in a community with a low ratio of minority
population, where there is discrimination.

Thus, it should be noted that this hypothesis does notcause residential segregation directly.
16. To simplify the discussion, Figure 1 shows the situation where, as a result of a shift of thedemand and supply curves, a rent that is the same as the original rent is quoted in community 2.
Actually, the rent level formed in community 2 varies according to the shift of the curves.

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Inany case, if the rent is flexible, differences in the rent expressed by Equation (6), which reflect
the existence of restrictions on renting, will arise between communities 1 and 2.

By contrast, inthe housing market for young home-seekers, not only a rightward shift of the supply curve but
qualitative differences, such as better community environment than community 1, arise incommunity 2, where differences in the rent will reflect these facts.
17. In 2000, the fixed-term house lease system, in which a house lease contract definitely expires
after a certain period, was created.

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