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. 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. Hong Kong sets minimum size for flats, increases land supply to tackle affordability 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. Meanwhile, the beneficiaries of more housing – potential buyers and renters currently crammed in undersized flats – are politically disorganised, scattered across the entire jurisdiction, without any networks to overcome collective action problems or the focused incentives in any particular housing project to lobby for new construction. What can be done to break the deadlock? Rather than attempt a frontal assault on the property rights of real estate tycoons and indigenous villagers, we suggest that the government would be better advised to create entirely new property rights around which new interest groups could form. Hong Kong finance chief asks big landlords to offer rent relief to tenants Those new groups could break the bilateral monopoly of officials’ dickering with current leasehold owners over the development of specific parcels. Specifically, we propose to give every Hong Kong resident “land options for housing” (LOHs). In such a regime, LOH holders rather than the government itself would sell these LOHs to developers and indigenous villagers. Those buyers would compete with each other to purchase LOHs to build high-density housing, simultaneously giving the LOH holders a stake in moving land from low-value to high-value uses while providing ample compensation to existing stakeholders. The price of the LOH would be identical to the price at which dwelling units in the proposed development would be offered. Thus, LOH holders would receive exactly what housing purchasers pay – either a dwelling unit or its equivalent price. Assuming an ample supply of eligible land, leasehold owners would thus bid against each other to purchase LOHs from the total supply conferred by the government on LOH holders. By using a market mechanism to set prices of lease modification, LOHs remove the paralysing blame about “government-business collusion,” unlocking land for housing that everyone wants. Pricing and distribution of LOHs differentiate our proposal from colonial Hong Kong’s land-exchange entitlements, which promoted housing at an exorbitant cost by turning over enormous land rents to the real estate tycoons who ended up purchasing those entitlements. The government can create an internet platform on which LOHs can be traded similar to the Hong Kong Futures Exchange. On this platform, everybody would be able to see in real time all updates of supply, demand, and transactions. Developers seeking to purchase LOHs would submit a development proposal on the platform. Hong Kong residents vote on such proposals with their LOHs. Once a developer had acquired a sufficient number of LOHs to build a particular project, the platform automatically generate a certificate of pre-approval. Rather than rely on expert planners to determine the sites for housing, we urge reliance on the collective decisions of hundreds of thousands of LOH holders to sell options to developers. Officials might argue that our trading mechanism jeopardises the integrity of urban planning, where “urban planning” is understood as a science that urban planning bureaucrats apply to decide where to build and what should be allowed. We share Jane Jacobs’ scepticism about the capacity of expert planners to meet the informational demands required for the micromanagement of complex systems like cities. Hong Kong’s track record illustrates the inadequacies of expert planning. Despite voluminous plans, nothing gets built, and land sits idle as fallow farmland, warehouses, and parking lots – uses that are obviously inappropriate by any planning criteria. In replacing planning with bargaining, we do not suggest any radical innovation. Local governments in the US have long relied on bargaining to determine the location of residential development. Likewise, successful cities like Singapore determine the location of public housing not by expert planning criteria but by the deposits of applicants: Only a proposed project that receives deposits for more than 70 per cent of its units be pushed forward. Lastly and most importantly, granting eachresideachresident LOHs would create a new group of citizens vested in Hong Kong’s stability, development, and future. This would not only solve Hong Kong’s housing crisis, but also lead to a new political reality based on broad participation and support. As Mencius indicated over 2,000 years ago, lasting property interests bring in lasting peace and stability. Roderick Hills Jr is a professor of law at New York University and Shitong Qiao is a professor of law at the Duke University