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Tag Hong Kong

What’s Wrong With Hong Kong?

One common argument against new housing is that the laws of supply and demand simply don’t apply to dense cities like New York, San Francisco ands Hong Kong, because new housing or upzoning might raise land prices.*  After all (some  people argue) Hong Kong is really dense and really expensive, so doesn’t that prove that dense places are always expensive? A recent paper by three Hong Kong scholars is quite relevant.  They point out that housing supply in Hong Kong has grown sluggishly in recent years.  They write that in the late 1980s, housing supply grew by 5 percent per year. But since 2009, housing supply has grown at a glacial pace.  Between 2009 and 2015, housing supply typically grew by around 0.5 percent per year;  in the past couple of years, it has grown by between 1 and 1.5 percent per year.   The authors note that these numbers actually overstate supply growth, because they do  not include housing that has been demolished. Not surprisingly, housing prices have grown more in recent years.  In the 1980s, housing costs increased by roughly 1 percent per year; in the past decade, costs have risen by as much as 3 percent per year. (Figure 4d).   Thus, Hong Kong data actually supports the view of many American scholars that housing prices tend to be highest in places where housing supply fails to grow.  Why is supply stagnant?  The authors point out that in Hong Kong, as in some U.S. cities, government limits housing density through floor area ratio regulations. And because Hong Kong land is government-owned, the local government can restrict housing supply by refusing to sell vacant land.  Because high land costs mean more revenue for the government, government has an incentive to sell land slowly in order to keep land prices high.  […]

Interview with Alain Bertaud

Alain Bertaud is probably the most interesting urbanist you’ve haven’t heard about. He is a senior researcher at the NYU Stern Urbanization Project next to names such as Paul Romer and Solly Angel. Bertaud used to be the lead urbanist at the World Bank, and Ed Glaeser has said that everything he knows about land use restrictions in developing countries he has learned from Alain. Bertaud has also worked as a consultant and/or resident urbanist in cities such as Bangkok, San Salvador, Port-au-Prince, Sana’a, New York, Paris, Tlemcen and Chandigarh. Our Brazilian collaborator Anthony Ling, editor of Caos Planejado, met Bertaud at the NYU DRI conference last year entitled “Cities and Development: Urban Determinants of Success”, who gave us the following interview: AL: You are currently writing a book tentatively titled “Order Without Design”, which in some way relates to the title of our website, “Planned Chaos”. What do you mean by the title of your next book – what should readers expect of it? AB: “Order without design” is a quotation from Hayek that he uses in a different context in “The Fatal Conceit”: “Order generated without design can far outstrip plans men consciously contrive”. In the context of cities it means that cities themselves are mostly self generated by simple rules and norms applied to immediate neighbors but with overall design concept designed by one person or a group of designers. The spatial structure of large cities is a mix of top-down design and spontaneous order created by markets. Spontaneous order appears in the absence of a designer’s intervention when markets and norms regulate relationships between immediate neighbors.  Most evolving natural structures, from coral reefs to starlings’ swarms, are created by spontaneous order. The objective of my book is to show that top-down design should be reduced to a minimum and much more room should […]

How Hong Kong Pulls Off Transit Oriented Development

Integrating rail and property development is the cornerstone of the MTR’s success. In the U.S., coordination between transit authorities and developers tends to be mediocre at best. In Hong Kong, however, the MTR is both the transit authority as well as the property owner, and this makes all the difference. Coordination Problem Most attempts at transit-oriented development in the U.S. involve multi-party negotiations. The agency responsible for the transportation system haggles with different developers interested in undertaking projects along the line. Instead of implementing a unified plan, the transit agency has to negotiate specific agreements with each developer. And, because the priorities of the transit agency and the developers are never perfectly aligned, development agreements become subject to second-best compromises. Further, any disputes that arise once significant capital has been committed are costly to resolve. This arrangement makes leveraging land values difficult as well. Developers frequently get tax breaks as an incentive to undertake projects. Whether abatements on property tax or straight-forward rate reductions, tax incentives typically preclude the use of land values to help fund transit. And, even without special incentives, major property owners who stand to benefit from proximity to a transit system have every reason to resist tax increases of any kind if there’s a chance of free-riding. The MTR, on the other hand, uses the integrated rail-property development  approach which combines the two roles of landlord and transit developer. The MTR owns the right-of-way as well as the surrounding properties. This removes the necessity of extended negotiations, having to settle for second best solutions, and the potential downside of disagreements partway through a project. By combining the functions of landlord and transit developer, the MTR is also able to internalize land values. The rail line drives up the value of the MTR’s properties and that value covers […]

Why No One Drives to Work in Hong Kong

Need to get 4 million people to the office every day? Hong Kong has you covered. The Mass Transit Railway (MTR) is a rail system in the city of Hong Kong, currently managed by the Mass Transit Railway Corporation Limited (MTRL). The system opened in 1979 and now operates over 135 miles of track as well as more than 152 stations in Hong Kong. The average trip costs somewhere between .50 cents and $3 USD, and the system makes back 186% of its operational costs on fares alone. Much of the system’s success can be attributed to urban density. Denser development means people live, work, and play in smaller geographic areas, meaning that more people are travelling between a fewer number of points. This is a huge plus for a fixed-route system like a railway. The MTR, however, hasn’t been a passive beneficiary of its environment. The MTR owns real estate around each station in the system and integrates rail and property planning so that the development of one supports the development of the other. Construction around each MTR station is incredibly dense, so it can put as many potential riders as close to a station as possible. Over 41% of the population in Hong Kong (2.78 million people) lives within a half-mile of a station. Additionally, the company’s real estate strategy emphasizes walkability; some residents of MTR owned properties can walk from their homes to a station entrance without ever even going outdoors. Clustering potential riders around each station–and making sure passengers have an easy time getting there–helps support high levels of ridership. While fares cover the costs of operations, it’s really property development that pays for maintenance and expansion. The rail line, in turn, increases the property values of parcels adjacent to each station. This augments the land […]

Midweek link list

1. Mumbai is rethinking its density bonuses for developers who build parking lots and hand them over free of charge to the city. 2. Tort liability driving away possible MARC operators. 3. San Mateo County legislators threaten to charge San Franciscans a congestion charge similar to the one that the city is proposing to charge San Mateo (and East and North Bay) commuters. Bring it on, I say – it’s about time drivers were charged for using local roads. 4. The Supreme Court refuses to hear West Harlem business owners’ appeal against the city’s decision to use eminent domain to hand Manhattanville over to Columbia University. 5. The NYT has a story about a commercial kitchen-for-rent in Queens, calling it a “lifeline” for for “100 small businesses.” It’s a nonprofit, but even renting a space there for 6.5 hours in the middle of the night costs $154. I’m still waiting for the Times story about the many more people who cook illegally out of their own homes and whose businesses are therefore stunted and precarious, all because they can’t afford to comply with the city’s onerous health and zoning codes. 6. The US may have 1 billion parking spaces. This does not in and of itself prove that we have too much, but for those of us who already believe that zoning codes mandate more parking than the market would provide (for which there is good empirical evidence), it’s a horrifying thought. 7. Yonah Freemark discusses how Hong Kong’s transit agency uses property development to internalize positive transit externalities and maintain (relative) independence from the municipality. 8. The WSJ reports on the strong market for downtown office space, especially compared to declining suburban office parks.

Weekend link megalist

This is probably my favorite link list yet…enjoy! 1. The WSJ claims that delinquent homeowners can expect to stay in their homes after making their last mortgage payment – that is, they can live rent-free – for at least 16 months. The longer it takes for foreclosures to happen, the longer it will take for real estate markets to adjust to the new paradigm. 2. Fascinating article about food trucks in Houston. In it I found a second example of bad anti-terrorism policy trumping good urbanism: Chimed in Joyce: “We all know that Houston is not a walking city, as much as we wish it was. But there are two areas that are walkable – downtown and the Medical Center. The use of propane trucks is prohibited downtown, however. The regulation was originally put in place as a part of Homeland Security after 9/11, but the Houston Fire Department continues to enforce it. That’s an example of something we’re looking to work with, to allow food trucks to operate in these higher foot traffic areas.” The article also confirms my suspicion that food trucks may actually be safer than restaurants: “These are essentially open kitchens…you can look in there and see exactly what these guys are doing, where they’re grabbing the food from, how they’re cooking it.” 3. Hong Kong and Singapore are both instituting controls on their residential property markets to avoid bubbles, but they are also freeing government land for developers (in spite of Singapore’s free market reputation, most residents apparently live in public housing). Some speculate that Hong Kong’s controls might be a sign of increasing control from Beijing. Reuters says that “China, Singapore, Taiwan, Thailand and Malaysia have also unveiled more stringent regulations in recent months” – the bubble that led to the 1997 financial crisis […]

Internalizing positive transit externalities

by Stephen Smith The Wall Street Journal ran an article a few days ago claiming that the MTA’s recent NYC transit cuts have lowered real estate prices along train and bus lines that have been axed. While it’s not a quantitative study, the anecdotes are compelling: “The buyer who buys in Astoria is looking for a cheaper price and to get into Manhattan quickly,” said Ms. Palmos, adding that she is having the same problem with a condominium building in Upper Ditmars, north of Astoria. Apartments there that she said would have easily sold for $500,000 with the express bus nearby are now languishing on the market at prices about $420,000. ” ‘How far is it to the train?’ That’s the first thing people ask me,” said Charles Sciberras of Realty Executives Today, a longtime Astoria broker. “The closer to the train the higher the demand… Two to three blocks away from transportation is very easy for me to rent.” […] “The best areas in Brooklyn have great transportation into the city—the most expensive neighborhood in Brooklyn is Brooklyn Heights—you can get just about anywhere in the city easily. You go out into where there is less transportation, the prices go down,” Mr. Giordano said. “It’s one of the many emotional decisions that people make that can add or detract value from real estate.” What’s most striking to me is that a simple express bus route can raise prices by $80,000 for a single apartment. Multiply this by the thousands of apartments along the bus route and it appears that the lost value from the cut bus route ought to exceed, by orders of magnitude, the cost of maintaining the route. But of course, since the MTA doesn’t see a penny of the value it creates, it isn’t surprising that […]

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