When expatriates embark on the search for rental housing in Japan, it is crucial for them to be mindful of an additional fee that is commonly required on top of the rent and security deposit. This payment is known as 'key money' or 'reikin' (礼金) in Japanese.
What is key money?
Key money is a payment from the tenant to the landlord at the beginning of the lease. This “gratitude money” is charged in addition to a refundable security deposit or agent’s fee. Key money is not returned to the tenant at the end of the lease and is considered a gift to the landlord.
Which rentals require key money?
Not all rental properties require key money. In fact, in recent market reports, the trend is moving toward leases without this additional payment; less than half of renters said that they paid key money. The Urban Renaissance Agency, a semi-public institution which manages hundreds of thousands of rental units, does not require key money.
There are also regional differences in the prevalence of key money, the size of the payment, and associated fees. In Hokkaido, for example, key money is not common while in the Tokai region, a payment of 1-3 months’ rent is likely. In the Tokyo metro area, renewal fees, which are essentially a repetition of key money at the time of lease renewal, are more common than in other parts of the country. In the Kansai region, shikibiki (敷引き) is a deduction from a larger security deposit. Nationally, if key money is required, a payment of 1 month’s rent is most common.
Summary
Overall, the practice of collecting key money is more common for rentals to Japanese nationals, and less common for foreign expatriate rentals. Larger and more expensive properties targeted to foreigners are less likely to have key money charges.
Due to the arbitrary nature of this payment, AIRINC does not include it in our rent or utility budgets. As it is standard practice for tenants to pay the fee to the landlord, the recommended approach is for employers to reimburse the assignee directly for this expense.
AIRINC Research
How We Calculate Housing Budgets
No one housing market is the same. In some cities, apartments are the only option, in others a mix of apartments and free-standing houses are available. Layer on the circumstances of expatriates and safety, location of international schools, and proximity to international communities add to the factors that need to be considered. That is why AIRINC takes a multi-dimensional approach to determining housing budgets. Rather than relying only on bedroom counts we take into consideration a variety of expatriate housing options:
- Expatriate residential areas (central and suburban locations)
- Property types (apartment, house, townhouse)
- Rental costs (from moderate to premium rental values)
- Quality (from standard to premium)
To determine the recommended housing budgets, AIRINC’s professionally trained, in-house researchers:
- Interviews local realtors and relocation companies
- Considers the variety of expatriate housing options
- Benchmarks typical budgets across a spectrum of job levels and family sizes
- Aggregates findings into housing recommendations by job level and family size for each location
You receive a housing budget that is based on a globally consistent method, taking into consideration location specific needs.
