The Leasehold System As A Means Of Sustainable Urban Planning - A Hong Kong Case Study

This paper investigates the features of the leasehold system of Hong Kong, which is predicated on the freedom of contract, as an institutional arrangement for urban planning that promotes sustainable development. It further develops the theory of ìplanning by contractî as an alternative to ìplanning by edictî in the sustainable development research arena. This is a conceptual paper that adopts an analytical approach. The concept of property rights as informed by neo-institutional economics is used in examining the institutional features of the leasehold system. Arguments are substantiated with empirical evidence from the 160-year history of leasehold system in Hong Kong and the subsequent statutory planning control since 1939. It is argued that the leasehold system, being a dynamic system that provides (1) certainty to induce long-term investment and planning, (2) a platform for exchanging ideas, (3) a mechanism for changes in land use and (4) an indicator for managing planning activities, exhibits the institutional features that are conducive to sustainable urban planning. The addition of statutory planning control could compromise the features of certainty and adaptability of the leasehold system. This paper analyses the institutional features of the leasehold system that renders it a means of sustainable urban planning and encourages a reinterpretation of statutory zoning in areas with a leasehold system. It also warns against legislative activism in planning controls as that can destroy or erode the certainty of property rights in the land market, which is a basis for sustainable development.