Concrete Analysis | Breaking old land monopoly in Hong Kong to resolve the city’s housing crisis
- Hong Kong could consider creating new property rights for every citizen to break the endless dickering with leasehold owners
- Bargaining or market mechanism are favoured over urban planning to determine housing project locations in the US, Singapore
Hong Kong’s housing market has been the least affordable in the world for a decade, easily beating out London, New York, and San Francisco for this dubious distinction.
Yet this housing crisis is a paradox of housing scarcity amid plenty of land. Only 3.8 per cent of Hong Kong’s land is used for private (2.3 per cent) and public (1.5 per cent) residential uses, whereas 3.2 per cent is for “rural settlement” and 1.5 per cent for warehouses and storage, not to mention 75 per cent has been used for grassland, woodland, and shrub land, basically country parks.
Much of the non-residential land is buildable and can be used to solve the housing shortage. Nevertheless, there is little doubt that the government has struggled to solve the problem with measures ranging from the 2018 Lantau Tomorrow Vision to the 2021 Northern Metropolis.
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Hong Kong has until 2049 to fix its housing crisis, but is it possible?
We offer a solution based on our diagnosis of the problem as rooted in two familiar aspects of property law theory.
First, Hong Kong’s division of property rights between leasehold owners and the government creates a bilateral monopoly that results in gridlock. Second, reallocating property rights to end such gridlock can be impeded by the reciprocal causation between property rights and political influence.
Current entitlement-holders – developers, indigenous villagers, and the government – have for decades been locked in endless dickering over how to divide the gains from converting land from low-value uses like warehouses and “small houses” to higher-value uses like residential high-rises.
