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Hong Kong is not the only city on the brink of serious housing shortage. Housing crisis can be seen in other cities
like New York, London and San Francisco. An academic paper titled ‘Why Have Housing Prices Gone Up?’ by
Edward L. Glaeser, Joseph Gyourko, and Raven Saks may present a new perspective on the forces driving up
property prices.
The paper studied the US housing market from 1950 to 2000. It is observed that housing prices had risen much
faster than construction price since 1970s, but suppliers did not respond to the price surge by building additional
houses. It was due to a range of regulatory requirements, such as land use controls and zoning procedures that
worked to restrict new supply. To adhere to the procedures, suppliers had to devote more resources including time,
money and manpower, as if they were paying an additional price to earn the right to build on a piece of land. The
cost incurred during the process would then feed into the housing price. In other words, the society was paying a
‘regulatory tax’ when buying homes at high prices.

The possibility of regulatory tax in Hong Kong’s housing market is open for discussion. Regulatory
tax may take different forms—for instance, prolonged planning and land administration procedures
are a kind of time cost. Also, if development density cannot be maximised to accommodate more
people due to zoning restriction, this can also be seen as an implicit cost of regulatory tax.

With the presence of regulatory requirements, we encourage our readers to ask the question of who is ultimately
bearing the resultant costs.

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