1

The Institutions of

Housing

by Dr Edward CY Yiu Associate Professor

Dept of Geography and Resource Management, Chinese University of Hong Kong

Housing Issues and Policy, Urban Studies Programme, CUHK

URSP3100

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Introduction • A polyrational decisions – a political

process • The 3 tragedies of Town Planning:

– The tragedy of the community/commons; – The tragedy of the government; – The tragedy of the individualist.

• Private property versus common property;

• Easements and Private Public Space; • Multiple ownership; • Legal aspects;

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Who shall decide housing plans?

• Town planners? – No! they are at best technical drafters of town plans

• Town Planning Board (TPB) – Non-government officials assigned by the CE – No monitoring systems – No performance evaluations – No public consultations on the assignments

• Why? – Town planning decisions are political decisions

involving a lot of stakeholders; – The decisions shall be made by democratic

selected politicians, representing the stakeholders’ benefits.

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A Polyrational Decision

• Nigel's (2007) definition of Urban Planning from "Urban Planning Theory" – a technical and political process concerned with the use

of land and design of the urban environment, including transportation networks, to guide and ensure the orderly development of settlements and communities.

– It explicitly uses the word "political" to reflect the polyrationalities.

• Benveniste (1989) “Why is planning political?” – Because it makes a difference.

– When planning makes a difference, something is changed that would have changed otherwise.”

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Conflicts of Goals – Developments require land acquisition, but

– “Land acquisition (land grabbing) violates the right to an adequate standard of living if it displaces the current land users, neglects environmental standards, and eliminates the production of food needed by local communities.” (Davy, 2012, p.171)

– If land transactions are not voluntary, it would not be Pareto efficient (i.e. someone would loss).

• NENT NDA of HK as an example,

• a new town development can help achieve a higher rate of housing ownership,

• creation of jobs and promotion of the local economy,

• but the development would reduce agricultural land and ecological value of HK.

• In other words, the plan would achieve some goals but at the expense of many others.

• Finally it requires a political fight to determine what should be and what should not be done by the plan.

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3 tragedies of TP • The 3 tragedies predict vastly inefficient use of land:

– "In the tragedy of the community, the members of the

community fail to protect the boundary between individual

and collective rationality;

– In the tragedy of the government, the land management

authority establishes an unlimited bureaucracy and

disrespects the boundary drawn by individual liberty and

community values;

– In the tragedy of the individualist, the private landowners

use their land as they deem fit...the free land uses breach

the legitimate interests of other members of society."

(Davy, 2012, p.13)

• Acting according only to their own rationality, each one of the

three actors fails as a policymaker. This is tragic.“

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Why Land Cannot All be Privately Owned?

• If a space is hard to exclude others from using it

(excludability); and

• If the consumption of the space by one more person does not

affect others’ consumptions (non-rival),

• Then there is no economic incentives to privately own the

space.

• Can a street be privately owned? Yes!

• Can a light-tower be privately owned? Yes!

• Can air be privately owned? No!

• Can a lift serving a residential tower be privately owned? No!

• Can a park be publicly owned? Yes!

• Can a shopping mall be publicly owned? No!

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Excludability v. Rivalry

• Krugman and Wells (2006: 477)

Rival in Consumption Non-rival in Consumption

Excludable PRIVATE GOODS

Detached single family

house, private park

ARTIFICALLY PRIVATE GOODS

Underground railway with market

priced fare, shopping mall access

restricted to buyers

Non-

excludable

COMMON POOL

RESOURCES

Public street, public

park, environmental

resources (air, soil,

water, freedom from

noise)

PUBLIC GOODS

Land cadastre, land register, court

system

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3 Levels of Housing Goods • 3 levels of housing goods:

– Environment: public goods

– Land and common areas: club goods (see Webster, 2001)

– Interior of a flat: private goods

• Why?:

– It cannot exclude others from enjoying the environment, and the

increase in people sharing the environment does not normally cause

rivalry, so it is a public goods.

– It can exclude non-members from using the common areas, so it

becomes a club goods. • Sometimes, club goods (a garden of a housing estate) are open to the public, although the

owner reserves the rights to stop them from entering.

• An easement can be resulted, if it is open to the public without notice, say “No Trespass”.

• Is the campus of the university a club goods or public goods? (refer the HKU 8.18 incident)

– The interior of a flat is a private goods, protected by an exclusively

possessive rights granted by the DMC.

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Legal Aspects of Housing Goods

• Sino-British Joint Declarations 1987

• Basic Laws of HK –

– Protect Private Property Rights,

– Market Economy,

– Common Law Regime

• Development Controls:

– Land Lease - Contractual

– Town Planning Ordinance (Zoning) - statutory

– Buildings Ordinance - statutory

• Housing Transactions and Management:

– Conveyancing and Property Ordinance (CPO)

– Deeds of Mutual Covenants (DMC)

– Building Management Ordinance (BMO)

• What is land?

• Easements and Rights of Way

• Post-2047? Non-Renewable Leases

International Law

Constitutional Law

Common Law

Statutory law

Rights, transactions, adjudications

Davy (2012)

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What is Land? • Land is defined by Common Law as:

– S.2 of CPO, land includes –

• (a) land covered by water;

• (b) any estate, right, interest or easement in or over any land;

• (bb) the whole or part of an undivided share in land and any estate,

right, interest or easement in or over the whole or part of an

undivided share in land; and

• (c) things attached to land or permanently fastened to anything

attached to land.

• It includes the space within the defined boundary;

– The surface on the Earth;

– The underground;

– The air above and sea / water;

– Unless otherwise specified.

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Is Land a Physical Object?

• Land is NOT just a thing, but a set of rules and obligations.

– Land includes - (b) any estate, right, interest or easement in or over

any land;

– (bb) the whole or part of an undivided share in land and any estate,

right, interest or easement in or over the whole or part of an undivided

share in land;

• The government sold a piece of land;

• A developer bought the piece of land (by a lease) and

developed it into a housing development;

• You bought one of the housing unit (by undivided shares);

• Then, you mortgaged it to a bank (by a legal charge).

• Who own the land?

Government Developer Home Buyers

Bankers

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Pre-sale? • Housing is commonly pre-sold before its completion,

• How to protect the land interests?

• By equity

• S.2 of CPO: equitable interest means any estate, interest or charge in or

over land which is not a legal estate or a freehold.

• See Wong Chim-ying v. Cheng Kam-wing [1990] 2 HKLR 111

(http://www.legco.gov.hk/yr02-03/english/bc/bc03/papers/bc030619cb1-

1986-2e.pdf); and

• the Land Title Ordinance enacted in 2004

http://ecyyiu.wordpress.com/2008/07/22/land-titles-ordinance/

• For Certificate of Compliance: see

http://ecyyiu.wordpress.com/2008/08/02/documentary-proof-of-land-

ownership-5-deemed-to-have-issued-a-land-lease/

Government Developer

Pre-sale

Buyers Bankers

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Easements

• An easement is a right enjoyed over the land of another person;

• Examples: – Public space in private developments;

– Rights of way;

– Rights of water and drainage; and

– Rights of support of buildings; etc.

• i.e. Liabilities to neighbouring sites/buildings;

• i.e. Liabilities to passers-by (if allowed to get through);

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Private Public Space

• Public open space should be owned and managed by the government?

• Why?

• What is the incentive to provide public open space?

• How about specifying the requirements of providing public open space at some land

lease conditions?

• It saves the government land, and public money.

• i.e. Public Space at Privately Owned Developments.

• No, it does not save money, nor land.

• It requires giving plot ratio bonus (dedication or surrender) to the developer

(http://ecyyiu.wordpress.com/2008/01/28/dedication-to-public-of-ground-floor-area/),

and/or reduction in land sale price.

• The real problems are:

– How to monitor whether the public space;

– When the developer further sold the development to multiple owners, then shall

the IO be responsible for the management of the public open space?

• See Shatin Town Plaza case: http://ecyyiu.wordpress.com/2011/03/07/public-open-

space-in-private-dev-doesnt-work-shatin-town-plaza-case/

Dedication and Surrender

• Dedication and Surrender (to public use) • So called Bonus GFA;

• stipulated in s.22 of the Building (Planning) Regulation.

• If the dedication of set-back area for public passage or surrender of land for road widening at ground level is consented/acquired by the Government,

• bonus GFA that equals to five times the area surrendered/dedicated or less than 20% of the permissible plot ratio, whichever is the less, may be granted in return for the private area surrendered/dedicated to the public.

• HSBC ground floor concourse.

Provision of Public Space • Special Conditions (SC) in the

Conditions of Sale of the land I.L. 8941 at the Central Market, Jubilee Street, Central, Hong Kong.

• for commercial use, site area 0.4153 ha.

• SC: Open Space of 1,500 sm is required and the word PUBLIC Open Space (POS) is explicitly specified.

• A detailed Technical Schedule for the POS is also provided at the back of the SC.

• Who owns the public space?

• What are the legal estates of the public space in a private development?

• Who bears the maintenance and management costs?

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Multiple Ownership

• Why multiple ownership of housing can be a tragedy of

commons?

– Building Management Ordinance, BMO (Cap. 344) is enacted

– A Guide on BMO is available at

http://www.buildingmgt.gov.hk/file_manager/en/documents/bmo_guide/a

_guide_on_building_management_ordinance_cap344_en.pdf

– Common parts are defined in Schedule 1 of BMO

(http://www.legislation.gov.hk/blis_pdf.nsf/6799165D2FEE3FA94825755

E0033E532/02228869AB43D9C9482575EE006E56C8/$FILE/CAP_344

_e_b5.pdf)

– The governance of the common parts are set out in an agreement called

a Deed of Mutual Covenants (DMC)

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Deeds of Mutual Covenants

• “A DMC is a private contractual agreement among all the co-

owners, the manager and also the developer of a building.

• It defines the rights, interests and obligations of the parties

concerned.”

• But, the developer can draft the DMC to their benefits, because: – In general, a DMC comes into effect on the date of execution by the developer and

the purchaser of the first unit of the building and is binding on other subsequent

purchasers.

– As with other private contracts, the terms of a DMC cannot be amended unilaterally

without the consent of all parties to the contract.

• See Uniland Investment Enterprises Ltd v Incorporated Owners of Seaview Estate

Guardian Property Management Ltd (1999) HCA No 20920/98,

(http://ecyyiu.wordpress.com/2011/02/17/dmc-who-is-the-owner-of-the-external-wall-

taikoo-shing-case/)

• See Pokfulam Garden case on the relationship between the land lease and the DMC:

http://ecyyiu.wordpress.com/2011/12/13/dmc-winding-up-io-when-land-lease-expires/

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DMC Binds All Successors

• Why an agreement between parties A & B can bind party C automatically, without C’s consent?

• Lease is one kind of covenants, which is both: – A grant of an estate in the land to the tenant – Privity of

Estate; and

– A contract between the original landlord and tenant – Privity of Contract.

• Privity of Contract – binds the parties only;

• Privity of Estate – binds all the successors.

• i.e. Liabilities to both the contract party and all successors.

Privity of Estate

• Are all covenants enjoy the privity of estate?

• NO! It has to fulfill s.41 of CPO: Enforcement of covenants – …(3) … subject to ss(5), a covenant shall run with the land

and, in addition to being enforceable between the parties, shall be enforceable against the occupiers of the land and the covenantor and his successors in title and persons deriving title under or through him or them by the covenantee and his successors in title and persons deriving title under or through him or them.

– …(10) This section shall apply to covenants whether entered into before or after the commencement of the Conveyancing and Property (Amendment) Ordinance 1988 (31 of 1988).

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References

• Benveniste, Guy (1989) Mastering the politics of planning, Crafting credible

plans and policies that make a difference, San Francisco & Oxford: Jossey-

Bass Publishers.

• Davy, B. (2012) Land Policy: Planning and the Spatial Consequences of

Property, ASHGATE.

• Krugman, P. and Wells, R. (2006) Economics, NY: Worth Publishers.

• Webster, C. (2001) Gated Cities of Tomorrow, Town Planning Review

72(2): 149-170

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The End

comments are welcome. Enquiries to:

ecyyiu@cuhk.edu.hk