Osaka's private lodging sector is facing significant challenges, particularly with ongoing complaints from local residents regarding issues like noise and garbage disposal. This has led the city government to announce a cessation of new applications for special zone private lodging by the end of May. The deterioration in Sino-Japanese relations has further exacerbated the situation, resulting in a notable drop in tourists from China, a key source of visitors to Japan. However, despite these difficulties, there has been a notable increase in applicants scrambling to capitalize on the remaining opportunity before the application window closes.

The special zone lodging, which allows for year-round operations, offers a significant advantage over the standard residential lodging laws, which limit operations to a maximum of 180 days per year. This has made the special zone a lucrative option amidst a backdrop of hotel room shortages in Osaka, where the room occupancy rates for hotels had peaked at 84.8% before the introduction of these special accommodations in 2016. The city, keen on stimulating its tourism sector, had been actively promoting the establishment of special zone private lodgings in response to this high demand.

In a recent surge of applications, Osaka saw a record 336 applications in October following the announcement of the closure, with numbers climbing even higher to 364 by December. The rise in application numbers reflects a broader trend where real estate companies are looking to pivot from traditional leasing to short-term lodging, expecting stable revenue generation despite not becoming exceedingly profitable. The influx of foreign investment, particularly from China, has also played a role in the rapid expansion of these lodgings, with predictions stating that over 7930 facilities will be operational by January 2026, concentrated largely within Osaka.