Speeding up Housing Supply in Hong Kong through Land Readjustment

Abstract

For over a decade, Hong Kong's housing has been ranked as the least affordable globally. “Pricy and cramped” living conditions have increasingly become a pressing social issue concerning the public at large. Explanations of this housing issue are multi-faceted, among which the most fundamental cause is the insufficient supply of developable land. In response to this shortage, the Hong Kong government has passed a controversial bill to develop a large-scale reclamation project, costing more than US$50 billion to build. Nevertheless, a massive amount of land in the rural New Territories remains idling or underutilized due to convoluted history and ownership. The housing crisis may be eased more effectively if solutions can be formulated to make these lands developable.

This thesis focuses on understanding the context, characteristics, and limiting factors affecting the development potential of these rural lands. Correspondingly, a land management mechanism – Land Readjustment – will be introduced as a feasible tool to overcome major obstacles.

Chapter I – Hong Kong: Calling for a Solution to the Land Supply Problem introduces current land and housing supply issues and elaborates on how different land supply mechanisms have failed to create sufficient land for housing development. Then, the root cause on a theoretical level is explained – bilateral monopoly and constituency effect are the main predicaments paralyzing the Hong Kong land supply system. A practical solution will require breaking the gridlock inherent in current power dynamics.

Chapter II – Land Readjustment: A Possible Solution brings forth Land Readjustment as a potential tool to address the land supply problem. As Land Readjustment is a relatively unfamiliar concept in the U.S., a brief introduction explaining the rationale is presented. Embedded in its characteristics are the benefits it can realize and objectives it can achieve, which are regarded as valuable, as they are aligned with major obstacles the government faces in developing rural land in Hong Kong. As Land Readjustment does not directly lead to housing affordability, a separate discussion is dedicated to different ways to create affordable housing within the framework of Land Readjustment.

Chapter III – Applying Land Readjustment in Hong Kong focuses on drawing a tighter connection between the problem and the solution. The first evaluation is whether Hong Kong can meet all the pre-conditions to qualify for implementation of Land Readjustment. Second, ex-post performance evaluation frameworks are adapted to an ex-ante assessment of whether a satisfactory outcome could be achieved through Land Readjustment. Third, through international case studies, more practical mechanisms are incorporated to generate a bespoke proposal to address the unique conditions in Hong Kong.

To summarize, applying Land Readjustment to speed up the housing supply in Hong Kong is a feasible proposal. It can not only promote private participation to expedite land development with equitable sharing of costs and benefits but also contribute to untangling the long-lasting impasse among the Rural Committee, private developers, and the government against the backdrop of criticisms of real estate hegemony. Most importantly, the development potential of rural New Territories can be unleashed. Hong Kong youth may see a glimmer of hope for owning their first house sooner and with better quality.