Hong Kong and Singapore

American Journal of Economics and Sociology, The, Dec, 2000 by Sock-Yong Phang

According to Cruden, [4] Hong Kong's political and economic climate is not favorable to the growth of compulsory government planning powers. Formal town planning in Hong Kong dates from 1939 when the Town Planning Ordinance was enacted. However, it has not been central to the implementation of land policy, as it provides only guidelines and there are no enforcement provisions. Instead, enforcement powers for land use decisions are found in the Building Ordinance and contractual powers in Crown leases.

The Hong Kong government leases land based on its land contracting system. It collects land premia from the initial land auctions, modifications of lease conditions, and contract renewals. Land leasing is an important tool in managing urban growth as well as in raising public funds in Hong Kong. The government stipulates the restrictions on uses, height, plot ratio, and building design in the Conditions of Sale when contracting to lease a parcel of land. The contract is sent to all interested land developers who will then bid for development rights of land in the public auction. A land lease sales program is issued at the beginning of each financial year and shows the details of public auctions and tenders for each month.

A leaseholder who subsequently wants to modify any of the conditions has to apply to the Lands Department for official permission. The approval of the application requires the leaseholder to pay an additional premium which is based on the enhancement in the land value deriving from modification. A new set of covenants would also be imposed on the modified contract. Lease renewals represent another opportunity for land-value capture by the Hong Kong government.

In 1984, under Annex III of the Joint Declaration, the British and People's Republic of China governments had agreed that all land leases which expired on or before June 27, 1997, would be renewed for another 50 years. Leaseholders are only required to pay a new levy of rent set at three percent of the rental value of their properties. The Declaration also limited the colonial government to total grants of new land not exceeding 50 hectares a year, and with leases for terms expiring not later than June 30, 2047. [5] This limit excluded land grants to the Hong Kong Housing Authority for public rental housing. Moreover, half of the premium income from land transactions had to be set aside for the then-future Chinese Special Administrative Region government to fund land investment and infrastructure expenditures after 1997. A Land Commission comprising officials from the two governments was set up in 1985 to implement the provisions of Annex III. The Land Commission could increase the 50 hectares annual limit, a nd did so regularly. The land disposal limit for 1994-95 was in fact 1,411 hectares--in large part for developments relating to the new airport. Between 1985 and its dissolution on June 30, 1997, the Land Commission agreed to the disposal of almost 3,000 hectares of land.

When land is needed for public purposes, the Hong Kong government obtains the land through compulsory resumption. Unlike Singapore, compensation is paid to the leaseholder based on the open market value of the land resumed.