Japan faced some of the world’s toughest planning problems. It solved them by letting homeowners replan whole neighborhoods privately by supermajority vote.
In the shadows of Tokyo’s vast train stations lie traditional narrow yokochō alleyways crammed with small izakaya drinking dens and tiny restaurants. These spaces highlight one of history’s most remarkable urban transformations. Within a century, Japan evolved from a poor country with few paved roads to one of the world’s most technologically advanced nations, renowned for its flourishing cities and modern infrastructure.
This achievement is particularly extraordinary given the situations Japan has found itself in. Japan entered the twentieth century with cities that had generally not been designed for wheeled vehicles, let alone modern mass transit. Meanwhile, postwar land reforms fragmented rural land ownership into tiny one-hectare plots, generating enormous coordination problems when it came to laying out new neighborhoods. Japan faced among the worst planning challenges anywhere, and yet it achieved some of the best outcomes.
How did it do this? The answer lies, in part, in a system called land readjustment. In many English-speaking countries, overriding local home- or landowners has lacked legitimacy since the failures of postwar megaprojects and the rise of the environmental movement. Governments rarely use mass expropriation, even with compensation, and generating a political coalition to support large infrastructure projects often involves expensive environmental and social payments. Suburban densification is restricted in nearly every Western country.
Land readjustment generates durable public support both for affordable infrastructure, without extreme payouts to interest groups, and for urban densification, through sharing profits with the wider community. It offers an important tool in winning public support for disruptive – even drastic – urban change.
The infrastructure challenge
Towns and cities need infrastructure like roads, railways and utilities. This often poses a challenge, for two reasons. First, many kinds of infrastructure require large and oddly shaped bits of land, like the long thin ribbon of land needed to build a road. Second, many kinds of infrastructure make little or no money: they make other land more valuable, but they do not generate much revenue themselves. Roads are an obvious example of this: a city without roads would be almost worthless, but roads usually generate no direct revenue at all. These features mean that cities can face a host of coordination and free-rider problems when it comes to infrastructure that they do not usually face when it comes to, for example, housing.
Cities have historically taken one of two major approaches to delivering infrastructure. The first is to leave it to private developers. This can work to some extent when greenfield land is held in large estates by major landowners, as often happened in Georgian and Victorian England.
But relying on private delivery of infrastructure has disadvantages. For example, London’s estates often closed their streets to through traffic, enhancing amenity for their residents but compromising the traffic network of London as a whole. The estates’ private interests converged with the public good to an extent, but not entirely. Even when land ownership is relatively unified, regulatory intervention by local government is thus usually required to elicit from landowners a street network that works for the city as a whole.
Where land ownership is highly fragmented, laissez-faire planning works even less well. The example above is from the outskirts of Naples, and exhibits a dysfunctional urban form that has recurred all around the world in jurisdictions with fragmented ownership and weak public planning. Small farmers either sell off plots next to arterial roads for ribbon development, or install narrow access roads so as to develop the inner part of their land. This results in an enormous amount of road that goes nowhere attached to insufficient arterial infrastructure, and long circuitous routes that require lots of driving between many points.
The second common way of delivering infrastructure is through expropriation, also known as compulsory purchase or eminent domain. The authorities decide where infrastructure should be and then expropriate the relevant land from its current owners, with or without compensation.
Expropriation was the default way of planning a street network for urban extensions during the nineteenth century in the United States, Germany, Spain and parts of Italy. This involved mapping a future street network, expropriating the agricultural land on which the streets would run, laying out the roads, and then leaving the landowners to develop the remaining land at their leisure. Famous examples include the Commissioners’ Plan for Manhattan’s grid, the Cerdà Plan for Barcelona’s Eixample, and the Hobrecht Plan for Berlin.
Expropriation works well in some contexts. In the case of the Commissioners’ Plan for Manhattan, pictured above, the new roads usually raised the value of land so much that it was generally not necessary to pay the farmers compensation. In fact, the New York authorities often taxed the landowners to pay for the roads to be laid out, on the basis that the landowners would benefit so much from the uplift on their remaining land that they would still be major net beneficiaries. On the whole, they were correct about this, and the plan worked out well for everyone involved.
The French Government drove wide roads through Paris’s urban fabric in the nineteenth century, making heavy use of expropriation. Though it was widely seen as a success urbanistically, it was hugely controversial, and petered out under the Third Republic (1870–1940).
In the case of Paris, the roads were being planned not through the countryside, but through existing urban fabric. As with most urban fabric, land ownership was fragmented into many small plots. Because these plots were so small, some of them were totally destroyed by the road: their entire area would have had to be expropriated.
Outcomes from building infrastructure through expropriation can be wildly unequal. Some plot owners lose all their land and, if they live there, have to move elsewhere. Others keep their land, but endure years of disruption and have to live beside a loud railway or thoroughfare. At the same time, other people end up with a new train station conveniently close to their homes and enjoy enormous increases in the value of their land.
Determining how much to compensate these different landowners, and who to actually compensate, is not straightforward, and there is no real mechanism for identifying what the true detriment to different people is. This means that direct compensation will often overpay some and underpay others, and so new infrastructure projects can generate huge discord. Not only are there still many losers even if compensation is generous for those who lose their homes, but those who win and lose win often do so by widely varying amounts. Even those who win may have an incentive to fight a specific plan on the basis that a different plan could make them win by even more, as was seen in nineteenth-century Britain, where landowners competed in Parliament to try and get railways built through their own landholdings.
Historically, urban road cutting and railway building has tended to be contentious in Western countries. Over time, the controversy undermined the use of expropriation for replanning existing urban areas, in conjunction with other factors like rising home ownership and the rise of the conservation movement. Although it is still legally possible, replanning urban neighbourhoods through expropriation is rare today in the West.
The general principle here is that expropriation is politically relatively easy when land ownership is unified in such a way that affected landowners are all net beneficiaries from its results. As land ownership has become more fragmented in post-feudal societies, expropriation has gradually become more politically difficult: most modern societies are gradually moving from being more like Berlin to being more like Paris. This is one reason why so many countries now find infrastructure extremely difficult to build.
This is why the case of Japan is so important. As we shall see, Japan faced one of the most extreme situations of land fragmentation in history. Both urban and rural land ownership was structured in a way that cut against successful modern urban life. Japan found a politically durable way to drastically change rural and urban areas, and in so doing, to enable some of the greatest cities of the modern world. The two key ingredients were to share the profits broadly, not just compensating those whose properties would be destroyed for the infrastructure routes, and to show overwhelming local support through ballots of those affected.
The problem of fragmented land ownership
Premodern Japan was highly urbanized by preindustrial standards. In 1700, about five million Japanese people lived in towns and cities, about 16 percent of the total population. Osaka also had over 400,000 inhabitants. Tokyo had almost a million, making it by some measures the largest city in the world. Japanese aristocrats were required to leave their families in Tokyo as hostages of the state, meaning that scores of noble estates were mingled with densely packed districts for commoners.
These cities seem to have functioned fairly well for the purposes of the time, and early European travelers were often impressed by them. But they were poorly adapted for modern needs. Tokugawa Japan made little use of wheeled transport of any kind: freight was transported chiefly by boats, porters or pack animals, and people travelled by foot, or (if they were wealthy) by horse or palanquin. This meant that Japanese cities could have extremely narrow and crooked streets. Circulation was also impeded by an elaborate system of walls and gates dividing up the commoner districts, which helped the authorities monitor and control the movement of the population. For the same reason, the authorities often actively discouraged the building of bridges.
All this meant that traditional Japanese cities devoted far too little land to roads, while those roads that did exist were not structured in the way that modern Japan needed. These problems were compounded during the early phases of Japanese modernization, when many of the defunct aristocratic neighborhoods were broken up and redeveloped in haphazard and chaotic ways.
In the wake of the Second World War, Japan came to face an analogous problem with greenfield sites. In 1946, the American occupation authorities launched a massive programme of land reform, intending to break the power of the Japanese landowning classes whom they blamed for Japan’s militarism. A maximum landholding size was set, usually of just one hectare of paddy land, and all land holdings above this were redistributed to the tenants who worked them. Over just a few years, Japan acquired one of the most diffuse land ownership structures on earth, with eighty percent of agricultural land divided into tiny owner-occupied plots. This meant that Japan’s rural land ownership structure bore considerable resemblance to the fragmented patchwork of urban Paris.
The extreme fragmentation meant that leaving development to the private sector created extremely suboptimal results. Landowners faced endemic collective action problems in providing public goods – more like suburban Naples than like Georgian Bath.
Japan thus faced a double challenge: how to replan existing urban areas, and how to restructure land ownership in rural areas so that well planned urban expansion could take place. One option would be to use expropriation. This was and is legally possible under the Japanese constitution. But its large-scale use faced a series of problems. In urban areas, it faced the same sort of problems as it did in Paris, except on a much larger scale. Unlike their French counterparts, Japanese authorities did not just want to drive a couple of dozen boulevards through the city centre, but to replan large parts of their urban street network.
A version of this problem also occurred in rural areas. To understand why, imagine that the Japanese authorities superimposed a Manhattan-style street grid on these plots through the use of expropriation. Some lucky plots happen to sit in the middle of the blocks and gain uplift without losing land. Others sit in the middle of the street and would be expropriated in their entirety.
This is not the only problem. Farming strips were already awkwardly shaped for building, but they will be even more awkwardly shaped after a grid of streets had been superimposed on them to enable urban expansion. Plots do not slot neatly between streets but run at strange angles to them. Bizarre quadrilaterals and isolated pockets and exclaves of property are littered everywhere. Build costs will be far higher under these conditions.
The upshot is that expropriation was not a good tool for modernizing and expanding Japan’s cities in the twentieth century. This was the context in which land readjustment became important.
The mother of urban planning
Land readjustment (土地区画整理 tochi kukaku seiri), known as the ‘mother of urban planning’ in Japan, is a relatively modern planning tool, though the underlying concept has many historical antecedents. Its function is to pool neighbouring plots into one larger collective plot, to redraw the boundaries in such a way that enables space for public infrastructure, and to redistribute the remaining land in newly drawn plots in a way that is equitable between the former landowners. Each owner receives back a smaller but more regularly shaped plot (or a share in a building), while the remainder is allocated for roads, parks, and other public facilities. A portion is set aside as ‘reserve land’, which is sold privately to fund the project costs.
The first land readjustment system was implemented in Frankfurt in Germany in 1902, enabled by a law called the Lex Adickes. (Franz Adickes was a mayor of Frankfurt, who is also known as the inventor of zoning). It helped the city to build out rapidly, despite ancient inheritance laws that created highly fragmented land ownership in its environs. Land readjustment was adopted across the whole of Germany in 1918, and was used regularly under the Weimar Republic for planning urban extensions and garden cities.
German city planning was regarded as world leading in the early twentieth century, and Japanese planners often looked to it for inspiration. Land readjustment was thus incorporated into Japan’s pioneering 1919 City Planning Act.
It was to be used on a large scale much sooner than anyone expected. In 1923, the Great Kantō Earthquake destroyed much of Tokyo. The Japanese government decided to use this as an opportunity to replan the entire city with a modern street network. This meant completely restructuring the dense mass of tiny plots inherited from the Tokugawa period, for which the authorities used their new land readjustment powers. Planners introduced a sophisticated hierarchy of streets, creating excellent routes for one of the largest tram networks in human history, with 40 lines running along more than 200 kilometers of tracks. The replanning was seen as a triumphant success, and was regarded with immense pride by the Japanese authorities. An entire generation of Japanese planners grew to professional maturity working on the project. Tokyo continues to enjoy a high-functioning modern street network today as a result of their efforts.
As it turned out, the 1923 Earthquake was only a prelude for the destruction that Japanese cities suffered in the Second World War. In its aftermath, the Japanese authorities once again resolved to rebuild something better than what had been lost. The replanning of interwar Tokyo became the model for the replanning of the whole of urban Japan, endowing its cities with hierarchical road networks and an increased (though still relatively modest) share of parks, playgrounds and green spaces.
Land readjustment was extensively used in city after city, allowing urban replanning on an enormous scale. Across the country as a whole, 28,000 hectares were covered by brownfield readjustment schemes in 102 cities. The most famous example was Nagoya, where nearly the entire city was readjusted, covering 3,450 hectares and taking over 40 years. As the timespan suggests, the authorities often allowed landowners to rebuild destroyed properties on the original plot pattern and then readjusted the land later. This shows the political durability of land readjustment. Although the destruction wrought by the war certainly facilitated the widespread use of readjustment, it was not a necessary condition, and readjustment continued to be used to replan urban areas long after they had been reconstructed.
In the subsequent decades, land readjustment came to be widely used for greenfield sites too. This allowed the tiny plots created by the Allied occupation’s land redistribution to be restructured into good urban street networks and for the resulting neighborhoods to be endowed with spacious railway stations and parks.
Urban growth in postwar Japan was so rapid that it often outstripped the ability of the authorities to administer land readjustment schemes, meaning that modern Japan does have areas of poorly planned urban sprawl. Nonetheless, Japan would become probably the world’s most successful practitioner of land readjustment. Land readjustment of one kind or another accounts for 30 percent of Japan’s urban land, 12,500 kilometers of city road, 150 square kilometers of urban park (half the country’s total area of community, neighborhood and district parks), and 1,000 station plazas.
How land readjustment works today
There are two core mechanisms inside land readjustment, both of which work by generating public legitimacy for major change. The first is sharing the proceeds of the redevelopment evenly. The second is requiring that a large majority of affected residents support the change.
An individual project begins when a promoter, usually a developer or group of landowners (or homeowners), but potentially also a city council or railway company, decides that a particular area could be used more valuably than it is now. The core idea is that some land could be more valuable if it had more or better infrastructure, whether that is sewerage and water, or, more often, a new railway station, or wider, more evenly distributed streets. In many cases this also means upzoning the land to permit denser development.
This organization or group approaches the landowners, who are often a mix of homeowners or farmers, and discusses the proposals with them. If they seem amenable, the promoter gets to work. They set up a council, which will make a new land plan for the affected area. The plan sets out the land to be used for infrastructure, the land to be sold as ‘reserve land’ to fund the project, and how the remaining land is redistributed to the owners. This last step is essential. Land readjustment aims to equalize the share of value that everyone gets, so that everyone enjoys the same percentage value uplift from the scheme. There are often parallel changes to the city plan, commonly upzoning, typically put into place on the same day as the land readjustment is passed.
Usually the process goes on for several years, with consultations and public meetings to decide on a final plan that is likely to get consent. In agricultural land readjustment, the total land area stays approximately the same, and plots are merged and reorganized to try and generate more efficient and equally valuable consolidated plots. Moving from agricultural to urban land is more complicated, since a third or so of the land will be lost to parkland and infrastructure, so plots typically shrink significantly, but get much more valuable, counterbalancing this.
The most complicated cases are urban-to-urban improvements. In these cases, homeowners often lose all of their land, and are given a share of a much larger building, usually part of a floor of it. There is a standardized 1950 Ministry of Construction process for doing this. Owners rarely decide to take cash rather than land primarily because cash is only paid for pre-project values, and projects often generate enormous uplift. Cashing out means giving up all of a homeowner’s profit share.
If two thirds of affected landowners agree to the scheme, then it is sent up to the governor of the prefecture, which almost always gives approval when a large majority of land- and homeowners support the scheme.
In both public and private projects, local governments offer tax exemptions. This makes a significant difference, because Japanese property taxes are extremely high by global standards: the country charges a 1.7 percent tax (in total) on assessed property values, transactions taxes for different purposes that add up to 15 percent on purchasing a house, and up to 39 percent capital gains tax, plus extra taxes on incomes from rents.
Beyond Japan
Land readjustment illustrates a general rule of political economy: it is possible to build legitimacy for massive changes, including demolishing many people’s homes and dramatically changing the character of an area, if the benefits of doing so are shared, and if those most affected are seen to have opted for the change. The underlying mechanism has been used around the world, not just in societies with traditions of group decision making and consensus building, like Japan.
Land readjustment started in Germany. Originally, it was used to plan cities, but it was also used for agriculture, transforming three million hectares of German land from inefficient strips into efficient fields during the 1950s and 1960s, usually with the support of peasant landowners. Wheat yields tripled. Land readjustment was also used to improve the efficiency of Dutch agricultural land after the Second World War: over 20,000 hectares were adjusted annually during the 1940s and 1950s, and over 50,000 hectares were adjusted during the 1960s. Interestingly, the Dutch scheme picked up pace after leaseholders were given a say in whether schemes went ahead, perhaps because the schemes had more legitimacy. The Netherlands has been slowly working on applying the scheme to urban land since 2018.
Many successful agricultural land reforms that have consolidated land to improve its efficiency have involved the same base structure. Piotyr Stolypin’s pre-First World War Russian land reforms, which ended the final remnants of collectivized serfdom and made Russia the world’s largest grain exporter, followed the same pattern. Smallholders had to approve, by supermajority, a plan that reorganized rights into more efficient shapes.
Nearly all of the parliamentary enclosures after 1600 in England followed a standard process under which four fifths of rightsholders signed a petition presented to parliament, and a committee replanned the area to make plots more efficient. Normally, enclosure involved ‘stinted commons’, land where particular individuals had complex untradable use rights (called ‘stints’). Stinted common land was generally divided up into numerous small strips – highly inefficient agriculturally – which were assigned to different local farmers. The farmers were not normally allowed to sell their stints, so there was no easy way of consolidating land ownership, even where consolidating it would make it more valuable. People who did not have stints had no rights to the land, so the land was not truly ‘common’ in the sense that people normally understand the term.
All these examples are agricultural, but the core political economy problem and underlying incentives are the same across agricultural replanning, turning agricultural land into urban land, and in intensifying or replanning existing urban land. Those countries that have applied a land pooling system to urban and suburban contexts have often been successful at using it for replanning or intensifying urban areas as well.
Imperial Japan extended land readjustment to the countries it invaded and occupied: Taiwan and South Korea. Both countries also had post-war land reforms that led to inefficiently small plots, and both countries subsequently used land readjustment extensively to buy in support for consolidating landholdings. In Korea, 630,000 hectares of paddies were readjusted along with 380,000 hectares in Taiwan.
But it also became the main method of adding land to cities in both Taiwan and Korea – 14,000 hectares or 40 percent of Seoul was rezoned from greenfield into housing through land readjustment, including the entirety of Gangnam (where owners enjoyed a 1.3 million percent value uplift from the infrastructure and rezoning). 17,000 hectares of Taiwanese cities were developed this way.
South Korea eventually implemented a version of land readjustment designed for existing urban areas, usually low-quality shanty towns, called Joint Redevelopment Projects. Unlike the other schemes, households could not opt into these. Being designated for one was known at time as ‘the Korean dream’ due to the financial windfall affected homeowners could expect. Only one hundred or so projects were ever completed, but these delivered roughly 290,000 homes.
The same core principles have worked even further afield. Israel’s Pinui Binui and Tama 38 schemes allow apartment owners to vote to redevelop their building or their area, adding new properties whose sale pays for the existing residents to get newer, nicer units. They now provide a third of all new homes in the country. London’s estate regeneration schemes allow public housing tenants to vote on schemes to redevelop their housing estate, adding private units that are sold to pay for their own homes to be replaced at a higher level of quality as well. Dozens have gone through successfully, often adding thousands of new homes to the same site, and usually passing by enormous majorities.
There are also more bespoke examples. For example, the Squamish nation recently voted to upzone their ancestral land in Vancouver and fill it with 55-storey towers, after winning a legal case to return the land to their control.
In recent years, more countries with inefficient plots have started adopting land readjustment to deal with property rights tangles, just as Britain did in the seventeenth and eighteenth centuries. The Angolan city Huambo provides a spectacular example of how inefficient property rights tangles can be in developing countries in a 2006 case involving 62 landowners across 60 hectares. Between the 35 percent decrease for public facilities and 30 percent for reserve land, existing landowners saw a 65 percent reduction in their landholding. However, the value of the replanned land increased by 13.3 times, meaning that the landowners were enormous net beneficiaries. India, Bhutan, Nepal, Mongolia and many other developing countries are working on adapting the policy for their own contexts.
The future for land readjustment
Although readjustment has enabled development around the globe, Japan is the paradigm case.
In recent years, the use of land readjustment has declined. Japan’s cities have largely been replotted and modernized, with basic infrastructure now the envy of much of the world. Unlike many cities in the housing-deprived Anglosphere, Japan’s housing costs are relatively affordable, and floor space per person has been increasing since the 1960s, even in densely populated Tokyo. Moreover, with Japan’s population now falling, the country no longer requires the same degree of rapid building that characterised the twentieth century.
Japan’s experience with land readjustment demonstrates that urban planning can be both effective and democratic. By enabling cooperation rather than imposing control, it achieved what top-down, expropriation-based planning systems have failed to do: restructuring property rights in a way that spreads the benefits of development evenly, thus preserving public support for urban change.
The problems Western countries face are different from Japan’s postwar experience. In many Western countries, agricultural plots have already been consolidated, or were never fragmented in the first place. In those that still see fragmentation, such as the south of Italy, land readjustment could be extremely useful.
Where Western cities regularly fail is in using existing urban areas more efficiently. Historically, Western societies allowed gradual densification of suburban areas over time. But this process largely stopped in the twentieth century: the great majority of low-density suburbs in 1914 are still low-density suburbs today. Yet in many places, like Silicon Valley or the suburbs of New York City, Dublin, Paris, Munich, and London, intensifying land would generate gigantic financial windfalls for homeowners. Land readjustment, and other policies based on similar principles, offer a way that these areas could build legitimacy for major changes through sharing these benefits evenly and requiring local approval.
The Anglosphere faces an additional problem: large public transport and energy projects. Land readjustment may offer lessons there too. The Tsukuba Express in Japan involved 18 land readjustment projects around the stations it built. The overwhelming local support for these, which usually involved densifying the areas around stations, expanding commercial and retail offerings, and adding amenities like parks, may have created the legitimacy to avoid the expensive giveaways common to projects in the English-speaking world. The development around the stations also helped fund the line.
Twentieth-century Japan was encumbered with land ownership rights that were extremely inefficient given the challenges and opportunities it faced. But it did not simply revoke those rights, arbitrarily dispossessing Japanese farmers of the precious smallholdings that they had won. Instead, it restructured land rights in a way that was as respectful and consensual as it was possible to be, making farmers and urban smallholders into the agents and beneficiaries of the changes that Japan needed. This helped to preserve the legitimacy of these vital reforms in the eyes of the Japanese people.
Twenty-first century Western countries struggle with analogously inefficient patterns of land rights. The gradual democratization of homeownership is a vast social achievement, as prized by those who have benefited from it as the reform of Japan’s feudal estates was by its farmers. But the rigidity and fragmentation of this system often leaves Western societies unable to reap the great benefits that urban change could bring. Western governments should learn from the great reformers of modern Japan, making those affected by development into its greatest beneficiaries, and empowering them to make that development possible.