Hong Kong land sale

Will Hong Kong’s next leader dare to stop selling land to the highest bidder?

Maura Wong says the city has the ability – and the great need – to try a new way of land development that does not use money as the only yardstick. If other cities can innovate, why can’t Hong Kong?

PUBLISHED : Thursday, 02 March, 2017, 5:13pm
UPDATED : Thursday, 02 March, 2017, 8:47pm

Dear Carrie Lam, John Tsang and Woo Kwok-hing: in the last leg of your election campaigns to be Hong Kong’s next chief executive, I am proposing a policy challenge for you – to bring our city out of the dark ages of its land sale policy.

The Hong Kong government has long followed a policy of not selling land cheaply in order to “safeguard” public revenue. This is done primarily through a public auction and tender process that makes money the only determinant of how land should be developed and who gets to develop it.

Such one-dimensional thinking has failed to meet the increasingly complex demands of our society. Awarding land to the highest bidder serves two purposes: revenue maximisation for government coffers, and ease of administration.

However, there are significant hidden costs to this policy. It heavily favours those with deep pockets and who enjoy low costs of capital, contributing to the dominance of large property interests; and, it neglects the non-monetary elements that are important in urban design.

Buying spree bolsters Hong Kong’s land sales to a record HK$71.88 billion

Times have changed. With the city’s fiscal reserves projected to reach a record level of HK$935.7 billion next month, revenue optimisation – not maximisation – should be the new mantra.

In a land sale, the highest bid does not guarantee the best design or that community needs will be met. To the contrary, in order to justify the winning bid, property developers often squeeze every drop of use out of the gross floor area (GFA) – the sum of its saleable area – at the expense of good design, liveability, sustainability and community considerations. There is only one master in the game: GFA.

The good news is that there is an alternative. Cities like Paris, London and Stockholm are showing us how to do it.

Recognising that social inclusion has become a pressing political issue, Paris came up with an innovative idea to redevelop sites across the city. Instead of holding a land auction, it organised a competition in 2014 inviting groups to “reinvent Paris”. The winners were not those that offered the best price, but were judged on objectives such as the provision of affordable housing.

Experimentation, without which cities will stagnate, must be encouraged

The guidelines were different for each site, depending on the needs of the district. Thus, one neighbourhood may prioritise affordable housing while another prizes open space. This flexible approach allows for diversity and customisation that cannot be reduced to a bid price.

Some elements of the Parisian experience are worth considerating for Hong Kong’s application. Firstly, Paris put up 23 sites for redevelopment in one go, from brownfields to historic buildings. The competition generated 815 letters of interest and 360 completed project ideas, from which it chose a shortlist of 75 bidders for 23 sites. The initiative attracted international and local interest, and produced project ideas that a conventional process might not yield. It also allowed new and smaller players with good ideas to have a share of the market, avoiding domination by a few that may be capital-rich but idea-poor.

Recently in Hong Kong, some new market players from the mainland won bids in Wong Chuk Hang, Kai Tak and Ap Lei Chau. Their entry was made via eye-popping bids that some people worried might signal higher property prices down the road. People would rather see new players enter the market not by throwing money around but by offering superior project ideas.

Hong Kong’s biggest landowners usurped by mainland developers

There’s more to housing than just buildings

Secondly, the Reinventing Paris contest asked bidders to form consortiums that bring together a mix of urban actors – not only financiers, developers and industry professionals but also future users as well as members of the local community. A key objective was to embrace the needs and expectations of users of the area, particularly those who live and work there.

Let’s set aside half of these for a Paris-style competition, and the other half to be auctioned to the highest bidders

Each proposal had to spell out the type of spaces available (residential, office, community, open, and so on) and list the expected users (such as young people, start-ups, the elderly or social enterprises). This recognises the fact that housing is no longer just about building flats, but also about creating spaces for people to live together, taking into account the evolving expectations about how people share use, as well as new ways of living, working, doing business and being entertained.

In Hong Kong’s auction system, these considerations are hardly relevant.

Thirdly, citizens’ participation and consultation are built into the process. Public engagement should not be something that only the government cares about. Nor should it be done only at the tail end of a process. In the Parisian experiment, project leaders have to involve stakeholders of the city when drawing up the proposals.

The private sector should be encouraged to seek public views, early on in the process. The outcome will be projects that, when implemented, are more likely to have broad support in the community and meet a spectrum of needs.

More than half of Hongkongers denied enough space for recreation, think tank says

Here is my idea. Hong Kong will be selling 28 residential sites, three commercial sites and one hotel site in 2017-18, not to mention the space that may become available from the reprovisioning of existing government facilities. Let’s set aside half of these for a Paris-style competition, and the other half to be auctioned to the highest bidders.Then let us compare the results under these two approaches.

Hong Kong’s next chief executive must overhaul land supply policy

Hong Kong needs to find the courage to experiment and innovate. Other cities have shown the way.

The fact that we have a good supply of land and space in the pipeline means it has a golden opportunity to try something new. Let the results speak for themselves. Experimentation, without which cities will stagnate, must be encouraged. This is something mainland cities know well.

An administration that truly puts ‘people first’ must examine its old policy tools critically

To reach former financial secretary John Tsang Chun-wah’s target of 60 per cent public housing for Hong Kong, the private sector must play a part in looking for solutions. This can be done with this approach; just insert affordable housing provisions in the different plots of land.

As well, a new class of affordable housing, as suggested by former chief secretary Carrie Lam Cheng Yuet-ngor – something between subsidised housing and private housing in quality and affordability – could be introduced through this approach.

Critics may say this approach will introduce subjectivity into the process and, with it, the risks of undue influence from vested interests and even corruption. I need not point out that these risks are not unfamiliar in Hong Kong. The solution has to come from a transparent, equitable process, fair and effective law enforcement, and adherence to the rule of law, not by holding onto an outdated land sale policy that is no longer benefiting Hong Kong.

An administration that truly puts “people first” must examine its old policy tools critically. Continuing the current land sale policy will only exacerbate high property prices, uninspiring architectural design, as well as the compartmentalised thinking that somehow private housing can be divorced from community needs.

It’s time for Hong Kong to break out of the straitjacket of the money-as-the-only-yardstick land sale policy. Mrs Lam, Mr Tsang and Mr Woo, will any of you provide the leadership to make it happen?

Maura Wong is founder of The IDEA, a platform for policy innovation and engagement. She is a former CEO of Civic Exchange and producer of Walk21 Hong Kong