c. Making housing available to fill varied dwelling needs and closing gaps between supply and demand for housing

## (a) Home financing

The Japan Housing Finance Agency offers securitization support businesses to support the availability of long-term, relatively low fixed-rate mortgages from private financial institutions. Its operations include Flat 35 (Purchase Program) that consolidates housing loan receivables of private financial institutions and Flat 35 (Guarantee Program) which supports the private financial institutions themselves becoming the originator $ {}^{Note 1} $ to handle the securitization. The performance result for Flat 35 (Purchase Program) up to the end of March 2016 was 1,067,575 cases of purchase applications and 750,537 cases of successful purchase, with 331 financial institutions participating. The performance result for Flat 35 (Guarantee Program) up to the end of March 2016 was 20,148 applications for insurance coverage and 12,416 cases receiving insurance coverage, with 5 financial institutions participating.

For houses that are entitled to Flat 35, property inspections are carried out against a defined set of technical requirements, such as durability, to assure their quality. In addition, the framework of the securitization support service has been leveraged to launch Flat 35S, which reduces the interest rate of the loan on the acquisition of houses that meet any one of the performance requirements: earthquake-resistance, energy-saving performance, barrier-free readiness, and durability/modifiability, for the first years of its repayment (for the first 10 years for long-lasting quality housing).

The Agency also provides services in those areas that are politically significant but that cannot be easily conducted by private financial institutions, such as financing housing designed for disaster recovery or elderly rental housing with supportive services.

## (b) Housing Tax System

In the FY 2016 tax reform, a system was created for the special deduction of 30 million yen applicable to capital gains if an old vacant house inherited (limited to earthquake resistant houses) or land after removing the house was transferred, in light of preventing adverse effects caused by abandoned houses to the living environment around them. In addition, from the perspective of promoting the development of an environment where raising a child is made easier by cross-generational support, a tax reduction system is created for housing renovations for three-generation households financed by a loan or buyer's own funds. Furthermore, in view of reducing the initial burden of those who acquire housing, improving residential standards and forming quality housing stock, the application of property tax reduction for new housing was extended for two years until March 31, 2018.

Furthermore, measures to deal with a possible recoil reduction from the planned consumption tax increase by 10% in April 2017 will be taken, which include the expansion of housing cash benefit (raising the maximum amount from JPY300,000 to JPY500,000) and the tax-free measure for gift tax (raising the maximum amount from JPY15 million to JPY 30 million), in addition to a significant hike in the home buyer's tax break. It is hoped that with these measures in place, the housing acquisition of the younger generation will be promoted and the predictability will get higher for those who are considering housing acquisitions, and that these factors will contribute to the stabilization of the housing market.

## (c) Preparing the rental housing market

To improve the stocks of owner-occupied houses, such as stand-alone houses and condominium apartments, by making them available for rent in the rental housing market, the MLIT is working to prepare the rental housing market by disseminating the fixed-term housing rental system, and developing DIY type lease $ ^{Note 2} $ guideline.