After Japan's New Homestay Regulations Take Effect: Can Airbnb Investments Still Make Money?

Question

What exactly is this wave of 'new regulations on private lodgings' in Japan? Why is everyone so nervous?

AIAIGAnswer

This wave of 'new regulations' is not a single law but the result of multiple layers of regulation, with the core including:

1. Increased operational qualification thresholds:
- All private lodgings (minpaku) must register with local governments as 'residential lodging operators' and obtain a registration number to operate.
- Unlicensed operations face fines of up to 1 million yen, with local governments actually conducting enforcement and on-site inspections.

2. Restricted operating days:
- The 'Residential Lodging Business Act' (Minpaku Law), effective since 2018, stipulates that ordinary minpaku can operate for a maximum of 180 days per year.
- This means properties must cease operations for half the year or switch to medium- to long-term rental models.

3. Tightening of applications in local cities:
- Osaka City has become a focal point, with its 'special zone minpaku' accounting for about 90% of the national total; in fiscal year 2024, it received about 400 complaints related to noise, garbage, and illegal short-term rentals.
- As a result, Osaka City announced around October 2025 that it would suspend acceptance of new applications for special zone minpaku, meaning the path to 'year-round operation' is temporarily blocked.

This 'crackdown' marks the transition of the short-term rental market from a gray area to a compliant era. For investors, the profit logic shifts from 'high-frequency rentals' to 'license scarcity + compliant operation'.

It is not a 'complete ban on Airbnb', but rather a suspension of the most profitable operation channel—'Special Zone Minpaku'.

1. Ordinary Minpaku (under the Minpaku Law)
- Annual operation limit of 180 days.
- Requires declaration and a 24-hour contact system.
- If the owner is not a resident, a licensed local management company must be appointed.

2. Special Zone Minpaku (under the National Strategic Special Zone system)
- Can operate year-round, but requires guests to stay for at least 2 nights and 3 days consecutively.
- Requires a separate permit application with strict screening.

3. Current Situation in Osaka:
- From 2025, new permits for 'Special Zone Minpaku' will be suspended to reduce nuisance and violation density.
- For investors:
- Existing licensed assets become more scarce;
- New investors find it difficult to replicate the 'year-round high-profit' model.

Conclusion: The Osaka market is entering a 'license premium' phase; Airbnb can still be done, but the barriers and regulatory costs have significantly increased.

Yes, but you must deal with the triple restrictions of national law + local regulations + building rules:

1. Local regulations:
- Many areas reduce allowable operating hours or zones.
- Typical practices:
- Only allow weekend hosting;
- Prohibit homestays near schools and nurseries;
- Limited to commercial or tourist areas.

2. Building management rules:
- Many condominium management regulations directly prohibit homestay operations.
- If the rules restrict it, owners cannot override them with personal wishes.

3. Operator eligibility:
- Foreigners can freely purchase property, but if they are not in Japan and have no visa, they must entrust a local compliant operator.
- The operator must fulfill 24-hour contact, guest registration, and tax reporting obligations.

Summary: Compliant short-term rentals are still feasible in Japan, but they must be operated according to "professional accommodation industry" standards, avoiding gray-area practices.

Three feasible paths:

1. Hotel Business License (Simple Lodging)
- Allows year-round operation, not subject to the 180-day limit.
- Must meet strict standards for fire safety, evacuation routes, hygiene, etc.
- Suitable for entire buildings or small hotel renovation projects.

2. Special Zone Minpaku Permit
- Located in national strategic special zones, allows year-round operation.
- However, areas are limited, with requirements for consecutive stay days and high application difficulty.
- Suitable for those holding existing licenses or purchasing assets with licenses.

3. Medium- to Long-Term Furnished Rental (Monthly Rental Model)
- Lease terms of 30 days or more convert to ordinary rentals, not subject to Minpaku law constraints.
- Target customer groups: expatriates, digital nomads, international students.
- More stable returns, with lower gross profit but better risk resistance.

Conclusion: To achieve year-round returns in Japan's short-term rentals, it is essential to determine the operation mode in advance—hotelization, special zone utilization, or medium- to long-term rental.

Yes, but it must be achieved through local cooperation or corporate structure:

1. No nationality restrictions on property purchase:
- Foreign individuals and companies can directly purchase Japanese real estate (land, apartments, entire buildings).

2. Operation is restricted by identity:
- Individuals cannot manage short-term rentals remotely.
- It is necessary to entrust a licensed local management company to operate on their behalf.
- If self-operating, a Japanese corporation must be established and a "Business Manager Visa" applied for.

3. Visa thresholds are rising:
- Starting in 2025, the Business Manager Visa requires higher capital (approximately 30 million yen), a fixed office space, and employee allocation.
- "Obtaining a visa with just a few guesthouses" is no longer feasible.

4. Managed models are becoming mainstream:
- Overseas owners often adopt an "asset + managed operation" combination, with management fees around 15%-20%.

Warning: There is a high risk of illegal remote self-management; local governments enforce regulations frequently, and illegal operations may lead to revocation of registration.

There is still profit, but it is no longer a 'high-profit side business'; it has become a professional accommodation industry.

There are three main profit models:

1. High-margin impact type (Osaka, Sapporo, Okinawa)
- Operates year-round under the Hotel Business Act/Special Zone Minpaku license.
- High occupancy rates + peak season premiums.
- High policy risks and complaint rates.

2. Hybrid 180-day + monthly rental type (Tokyo, Nagoya)
- Short-term rentals during peak seasons, switch to monthly rentals in off-seasons.
- Complex management requires precise scheduling.

3. Medium- to long-term furnished rental type (Central Tokyo, Yokohama)
- Stable tenants with almost no regulatory risks.
- Return rate around 3%-6% annualized, resistant to exchange rate fluctuations.

Core logic: Profitability is directly proportional to regulatory pressure; 'high returns' mean higher compliance costs and policy risks.

Opportunities still exist, but the logic has shifted to 'competing for compliant quotas and scarce locations'.

1. Licenses become asset premiums:
- Osaka has suspended new permits, making existing 'Special Zone Minpaku' licenses scarce.
- Future transactions will focus on 'properties with licenses'.

2. Regulatory divergence continues:
- Kyoto, Tokyo core areas: Continue strict controls, limiting weekday rentals.
- Osaka, Sapporo, Okinawa: Tend to retain compliant short-term rentals and support professional operators.

3. Industry moving towards normalized compliance:
- The 180-day limit and registration system will persist long-term.
- High local complaint rates prompt governments to maintain strict oversight.

4. Investment strategy recommendations:
- Determine the operational path before purchase (Minpaku Law / Hotel Business Law / Special Zone / Long-term rental).
- Prioritize properties with 'compliance + convertibility' structures.
- Include management and compliance costs in the investment model.

Summary: Airbnb can still make money in Japan, but it has evolved into a 'policy-quota-constrained accommodation industry'. Future winners will be investors who understand regulations, prioritize compliance, and excel in operations.

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