Media

Purpose
In response to the discussion paper for the Task Force on Land Supply about tapping into the potential of private land, the Ronald Coase Centre for Property Rights Research at the University of Hong Kong introduces their “land readjustment” and “land bonds” proposals to expedite land flow and unleash the development potentials of privately-owned land in the New Territories.

Major findings of their study will be presented to the Task Force on Land Supply.

“Land Readjustment” (LR) (Appendix 1)
Land Readjustment is a mechanism of land exchange and in-situ rehousing that proves to be effective internationally. It has been implemented as a policy in Japan, Korea, Germany, Spain, the Netherlands, Israel and India for development of urban land. For instance, almost all the new urban land in Spain since the 1980s was developed through LR. About 370,000 ha. of urban land in Japan were created by LR. In Seoul, LR has contributed around 14,600 ha. of urban land since the 1930s (about 730 Tai Koo Shing).

With LR, private land owners voluntarily contribute their land parcels to the government. After comprehensive planning efforts and fulfilling the “developers’ obligation” in contributing a portion of the land for public housing and facilities such as roads, infrastructure, parks and other purposes, LR can unleash a remarkable quantity of land for housing development, while the private landowners receive in return development rights in the optimized replotted sites in the vicinity. New developments must comply with the existing approval mechanism and can only be carried out after premium payment.

LR is to create marriage value for underutilized land parcels, and then redistribute the gains to major stakeholders including landowners, original communities and society at large. It aims at and leads to win-win-win situations. Referencing the Outline Zoning Plan of Hung Shui Kiu, if LR is to be applied to 1,000 ha. of privately-owned land in the New Territories, it may generate more than 300,000 new housing units in the NT, and hundreds of billions of dollars in land premiums to the Government. Assuming 100 ha., is to be used for public rental housing development, it will create about 76,000 additional housing units, which could cut down almost half of the public housing application queue as of December 2017. With a careful institutional design, LR can be a short-to-medium term measure to unleash land supply in HK.

HKU Ronald Coase Centre for Property Rights Research believes that “land readjustment” serves as an alternative to conventional land assembly methods such as unilateral massive land taking by the Government, which may be prone to disputes, severe criticisms and opposition. It enables all stakeholders to share the fruits of economic development. The LR model should operate under administrative procedures under the existing land management system and avoid any prolonged legislative process.

In the past, missing owners, speculative holdouts and communal interests collectively owned by the indigenous villagers were the major challenges to carrying out comprehensive development in the NT. The LR model in HK should enable the public authority to take custody of those fair interests without the need of proceeding to land taking. In cases where preservation of tangible or intangible heritage elements are needed, the LR model should enable the stakeholders to raise their concerns, so that the Government can adopt needed measures in its development. TPB and the public authority should act as gatekeepers.

Since the allocation of replotted lands to minority landowners may cause certain technical issues such as location selection etc., the majority landowners and the public authority should assure that the LR plan is attractive to these minority landowners. Successful LR schemes require all stakeholders to be open-minded and collaborative, and, in some cases, innovative ideas can help solve deadlocks. Some pre-LR experimental or consultative sessions conducted by independent bodies or professionals may ease the bargaining process. Mediation or even arbitration mechanisms can be put in place if necessary.

“Land Bonds” (LB) (Appendix 2)
Along this line, the Ronald Coase Centre for Property Rights Research proposes that the SAR Government can consider issuing “Land Bonds” as a medium to assemble suitable privately-owned land in the New Territories, including those idle agricultural land in the hands of major developers, the Tso and Tong land of the indigenous villagers (much of which have become what we called “the brownfield sites”) and other privately-owned land. After this assembling process, the Government can carry out land readjustment, planning and optimize land uses, and subsequently redeem the land bonds using the market mechanism.

Land bonds is a means to meet a present imminent need with a deferred remedy. It enables the Government to assemble a remarkable quantity of land and respond to the need for housing development before implementation of any massive land development projects. The idea is for the Government to commandeer private land plots fit for planned housing development and to pay their owners tradable land bonds. These bonds entitle their holders to redeem land which is not restricted to the resumed and readjusted land in the New Territories but could be those comparable plot of new land parcels that the SAR Government will produce through reclamation. Aside from the original land bond holders, other interested investors can take part in tendering Government land, or they can buy land bonds from the market and bid for the Government land with a premium. The premium for bidding land hinges on the location of the site, and changes according to market sentiments.

Land bonds must be freely transferable in the market or on public trading platform at current market prices. Competition among land bond holders in the market and great transparency can dispel concerns about collusion. The value of land bonds can be pegged to development rights of land. This bond can serve as an alternative option to investors who no longer need to scramble for limited housing units. The bonds’ fluctuating exchange prices can provide the Government with information on the amount of land to be produced. Unlike the defunct “Letter A/B”, under which the Government had to make a detailed layout plan prior to resumption of privately owned land, land bonds are completely opposite in that landowners are to surrender their land first and the Government consider when and how to make good use of them.

It avoids the adverse effect of government land resumption, which violates private property rights that are expressly protected by the Basic Law and saves the Government from the costly litigation provoked by land resumption. For now, the disposal of Tso or Tong land in the New Territories requires a great majority consent from the beneficiaries of any village clan, “land bonds” proposal is a means to break through the stringent restrictions that has prevented land from being committed to higher value uses. Theoretically, this proposal can assign rights of comprehensive development in the future to landowners holding fragmented and scattered parcels. Besides, the SAR Government can conduct extensive readjustment to improve land uses in the New Territories, develop new towns and resolve problems of brownfield sites and small houses. The bold measure to issue land bonds could give the general public the assurance that the SAR Government is determined and fearless in resolving the land supply problem. This could produce an instant effect in stabilizing property prices and contribute to the long-term development of the SAR.

Land Readjustment proposal introduction video and pptx
Land Bonds proposal introduction video and pptx

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