Public open space as a catalyst for income sorting in high-density urban areas: Evidence from Hong Kong

Due to housing affordability constraints, residents in high-density cities often have limited private residential space (PRS) and may seek proximity to public open space (POS) as a compensatory amenity. However, existing literature largely focuses on estimating the amenity value of POS without considering the trade-offs between PRS and POS across income groups. To address this gap, we develop a spatial equilibrium model (SEM) that disentangles these trade-offs by analysing the income and substitution effects in bidding behaviours for POS. Using 176,865 housing transactions in Hong Kong from 2017 to 2022, we find that higher-income households consistently outbid lower-income households for both POS and PRS, suggesting a link between POS distribution and income sorting. However, when mobility was restricted during the Covid-19 pandemic, lower-income households bid more aggressively for POS at the expense of PRS, indicating an unusual substitution effect. These findings shed light on the inequitable outcomes of amenity-driven bidding mechanisms in housing markets, highlighting implications for planning responses to mitigate housing inequality, particularly in high-density metropolitan areas.