Report: A City Eroded by Vacation Rentals—Number of Properties Has Increased 20-Fold in 8 Years… Operators Are Raking in Profits Despite Tighter Regulations!

Tighter Regulations and a Race for Business

42,070—this is the number of registered vacation rental properties as of July of this year.

Since the “Residential Accommodation Business Act” (commonly known as the “New Minpaku Law”), which aims to establish sound minpaku service operations, went into effect in 2018, the number of minpaku listings has continued to rise. The number of minpaku listings, which stood at approximately 2,200 when the law took effect, has increased about 20-fold over the past eight years.Tadashi Nishitani, who operates multiple vacation rentals in Tokyo and Beppu City, Oita Prefecture, shares his insights.

“Most landlords in urban areas are opposed to short-term rentals, so properties rarely come on the market. In the 23 wards of Tokyo alone, an abnormal situation persists where short-term rental operators will bid on any available property—even if the rent is nearly double the market rate.”

Amid a persistent shortage of properties relative to market growth, operators have set their sights on an unexpected source.

“Properties with a ‘sticky’ history—those associated with accidents. Since they struggle to find tenants, landlords reluctantly agree to short-term rentals,” says an operator running a short-term rental in Tokyo.

With the rapid expansion of short-term rentals, disputes with neighbors have also surged, prompting local governments to tighten regulations.

Shinjuku Ward in Tokyo was among the first in the country to establish its own rules, such as introducing a “weekday operating ban” in residential-only zones concurrent with the enforcement of the new short-term rental law.Approximately 40 percent of existing short-term rental properties are concentrated in Tokyo’s 23 wards, and it is no exaggeration to say that there are now short-term rental facilities near almost every station within the 23 wards. Shinjuku is the area with the highest concentration of such properties.

As of July of this year, the number of residential properties registered by short-term rental operators in Shinjuku Ward stood at 3,775. Last fiscal year, complaints regarding trash, noise, and illegal short-term rentals totaled 1,334. In September of this year, the ward announced a policy to, in principle, ban short-term rentals in residential areas and near schools. A Shinjuku Ward official stated:

“We have received roughly the same number of complaints this fiscal year as last year. Illegal vacation rentals have been rampant since the ordinance (our own rules) was enacted, so the ward has taken the lead in coordinating with the national government and prefectural authorities to ensure strict monitoring.”

In addition, Sumida Ward and Toshima Ward have enacted ordinances this year stipulating reductions in operating days and prohibiting the establishment of such accommodations in residential-only zones.The national government has also finally taken action; in July of this year, the Japan Tourism Agency issued a notice to local governments stating that “if the living environment in residential areas or similar locations is impaired by private lodging, local ordinances can effectively prohibit such operations in those areas.”In response to this endorsement of regulating private lodging through ordinances, Kyoto City—where reports and inquiries regarding private lodging exceeded 600 last fiscal year—quickly moved to effectively ban new private lodging operations in residential and industrial zones, sending shockwaves through the industry.

Nevertheless, many operators are still planning to enter the market, driven by the increase in inbound tourists.

Luxury vacation rentals costing 100,000 yen per night

As regulations tighten in major cities, vacation rental operators have turned their attention to the suburbs and tourist destinations, where regulations are less strict.

I actually stayed at a property in Chiba Prefecture—where vacation rentals have reportedly been on the rise in recent years—and found it to be a room in a very ordinary two-story apartment building, located a 12- to 13-minute walk from the station. Since it’s situated along a busy prefectural road, the noise was slightly bothersome even inside the room. The floor coating was worn, and it was hard to say the place was well-maintained.The rate was 12,000 yen per night—higher than hotels in the same area. While my satisfaction was by no means high, I was told it remains popular among guests. I could clearly sense the suburban vacation rental bubble.

The website I used to book this vacation rental was “Airbnb.” Among the many vacation rental booking sites, “Airbnb” boasts the world’s largest market share.While hosts are charged a commission of up to about 15 percent of their revenue, many still use the platform due to its widespread popularity. The downside is that hosts must pay close attention to detailed questions from users and maintain high cleaning standards—so much so that some critics deride the platform as “review-obsessed.”Consequently, a new business model has emerged in recent years: agencies that handle all aspects of property management. Property owners pay these agencies approximately 20–30 percent of their revenue in exchange for management services. Since the new vacation rental law took effect in 2018, this sector has seen significant revenue growth.

A Tokyo-based vacation rental management agency representative says:

“The days when people thought, ‘You’ll make money just by running a vacation rental,’ are over.Competition has intensified, and the market has matured. Some companies are entering the market by acquiring properties already operating as vacation rentals through M&A, while others are buying standalone homes in coastal or mountain resort areas, investing heavily in amenities like saunas, BBQ facilities, and open-air baths, and setting high nightly rates of nearly 100,000 yen.”

As the market evolves, new problems are also emerging. The CEO of a company that operates vacation rentals in Tokyo’s 23 wards and Nasu Town, Tochigi Prefecture, expressed frustration, saying, “We have more trouble with Japanese guests than with foreign ones.”

“In recent years, partly due to soaring hotel rates, the number of Japanese guests has been increasing. When problems arise, Japanese guests tend to be the more difficult ones. Even when high-end amenities are damaged and we have to negotiate compensation, they refuse to admit fault, and I’ve been forced to exchange messages with them for weeks on end.Lately, some people even use AI to generate their messages, which makes it even more infuriating.”

The vacation rental market is “no longer a blue ocean.” Even so, some operators boast, “About 30 percent of revenue from vacation rentals turns into profit. There aren’t many businesses this profitable.” Eager not to miss out on the “vacation rental boom”—which shows no signs of abating—they continue to watch for opportunities.

From the October 2 & 9, 2026, combined issue of *FRIDAY*