Facilitating urban renewal: Changing institutional arrangements and land assembly in Hong Kong

Abstract

Purpose

The paper examines the operation of the Land (compulsory sale for redevelopment) Ordinance, one of a series of urban renewal policy initiatives introduced by the Hong Kong Government. The new institutional arrangement was mooted as a means to facilitate greater private sector participation in the renewal process by overcoming existing constraints on land assembly, which arise as the result of a system of common property ownership. The paper investigates whether the legislation can achieve the objective of encouraging private sector participation in the urban renewal process

Design/methodology/approach

The paper adopts a transaction cost framework, drawn from literature and applied in the context of real estate, to examine the effects of a new Ordinance. In addition to publicly available data, semi‐structured interviews were conducted with professionals involved in urban renewal and representatives from the property development companies. The apparently low usage of the new approach is explored in the context of the various alternative mechanisms for land assembly available to the private sector and the effects of transactions costs on developer behaviour.

Findings

The paper identifies that the relatively low usage of the Ordinance may be explained by institutional constraints and limitations in the legislation, which, in its current form, fails to provide sufficient incentives, but that developer behaviour may also be affected by other external factors.

Research limitations/implications

The research is limited in that any commentary on the effectiveness of the legislation in achieving its objectives is restricted by the inability to clearly identify those incidences where the threat of legal action was sufficient to achieve a negotiated acquisition of the necessary property rights. Further research might explore the implications and the inter‐relationships between the various urban renewal initiatives introduced by the Hong Kong Government.

Practical implications

The recent experience of the Hong Kong Government in designing a new institutional mechanism to overcome problems of private sector land assembly for properties in multiple‐ownership may offer more general lessons for those in similar environments who wish to use the resources of the private sector to contribute to the urban renewal process.

Originality/value

The paper adopts a transaction cost approach to examine the working of a new policy initiative for facilitating land assembly in Hong Kong and may be of interest to academics and practitioners involved in the area of urban renewal.

Citation

Hastings, E.M. and Adams, D. (2005), "Facilitating urban renewal: Changing institutional arrangements and land assembly in Hong Kong", Property Management, Vol. 23 No. 2, pp. 110-121. https://doi.org/10.1108/02637470510589986