Fancy apartment for lawmakers

New public dormitory for House of Representatives members now under construction in the central part of Tokyo. This dormitory has currently been exposed to lots of criticism. Some TV show hosts complain that rent fee of this dormitory is too low. “Can you believe that its rent fee is only about US$900, while market rate for similar apartments in this area is US$4,500!? The difference will be covered by OUR tax!” one of the hosts speaks up.

Yes, the rent fee is low. I wish I could live in this area with such low rate. But…..how much should we bear for this new dormitory?

Roughly;

Building cost: US$300mil / one time cost

Rent cost: Market rate – this apartment rent fee = $4,500 - $900 = $3,600/room/month

Therefore, annual costs would be……….

Building cost: US$30mil = US$300mil / 10years depreciation (not real depreciation period, just simplification)

Rent costs: US$12mil = ($4,500 - $900) * 300room * 12month

Total annual cost: US$42mil (=$30 + $12)

US$42mil……………is it too high?

Japanese population is 100mil (very rough)

The annual dormitory cost per person in Japan is about US$0.42 (=$42mil / 100mil)

Now, US$0.42 is expensive? Yes, I think it’s still expensive. But you are not spending this 0.42 dollar just to satisfy lawmakers, are you? You are paying 0.42 dollars to attract talented people, who can bring benefits more than 0.42 dollar with this nice apartment.

Therefore, important thing is not the price of apartment, but whether you can have people to bring you more than value of 0.42 dollar investment. I am sure hosts or commentators of TV shows are not supposed to emphasize just absolute amount of this apartment to increase an average viewer rating, because they have the influence. (i.e. you pay costs of them)

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