Market disequilibrium and urban land shortages: Analysis of policy and patterns in Hong Kong

Government regulations on urban land use can cause urban land shortages, and hence higher prices of urban land and housing. Hong Kong, in particular, is under the innate constraints of limited land resources. But developments appear to look further restrained, due to government land use policy and regulations. However, little has been done regarding the impact of planning policies on residential market operations, when both zoning and control on land supply are employed by the government. This study attempts to fill the literature gap by developing a measure for the effectiveness of urban land use, from an analysis of land demand/supply mechanisms within a structure of stringent land supply constraints. The findings suggest that provision of low-rise public housing, in addition to the rigidity of plot ratio, appears to induce floor space shortages in some older/poorer areas, although those districts happen to have a comparatively high proportion of land for residential use. A more flexible land supply policy, particularly concerning the plot ratio, is recommended in order to minimize the impact caused by floor space shortages by encouraging private participations in redevelopments.