Land banking mechanism and its effects on city development in China

1
Land banking mechanism and its effects on city
development in China

• Huang Dingxi

2
Contents

• Introduction
• International experience and practices
• Development of land banking in China
• Case study in Guangzhou, China
• Conclusions

3
Introduction
4
Origins of Land Banking Mechanism in Western
Countries

• Land banking is a mechanism initiated in western
  countries with over 100 years of history.
• Amsterdam, the Netherlands, since 1896
• Stockholm, Sweden since 1904
• Canada since 1950s
• France since 1958
• Pilot projects in U.S. since 1970s

5
Definition

• The acquisition of land ahead of development
  either by construction companies or by central or
  local government or their agencies. (Evans 2004)
• Public or publicly authorized acquisition of land
  to be held for future use to implement public
  land policies. (Strong 1979)

6
Definition

• Different categories of land banking
• Land banking by public sector
• Land banking by private companies
• Related terms
• Land bank
• Land assembly
• Correspondent term in Chinese
• ???? (tu di chu bei)

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3 steps of land banking
1 Acquisition
2 Holding
3 Disposition
Western
Mechanism
From Mostly private lands Either built up or
open space area Proved as public
interest Through Friendly negotiation Or
Compulsory purchase
For Various Periods Status Preservation Or
Temporary use
Lease to affordable housing Or Sale to local
governments Or Sale at market price Or Sale at
subsidized price
Chinese Mechanism
From Rural collectively owned land Former
state -owned enterprises Overdue vacuum
sites Through Compensation or no
compensation
For Various Periods Status Temporary Use Or
Infra structure Construction
Public Sale of LUR at market price
8
International experiences and practices
9
Land banking authorities

• The power and responsibility for implementing
  land banking mechanism in western countries were
  usually taken by two types of entities
• Special committees
• Municipal/county/state owned corporations
• The power, source of finance and goals of these
  entities were strictly defined by local or
  national legislation. (Zhang and Wang 2003)

10
Objectives of land banking

• Each land banking project in Europe or America
  usually had an explicit major objective.
• Provision of affordable housing Sweden
• Control urban growth pattern Netherlands, France
• Control land price Canada, Australia
• Institution framework for implementation of land
  banking were built to facilitate the achievement
  of the major objective. (Strong 1979)

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Effects of Land Banking

• As a mechanism of public intervention in the
  land development process, land banking affects
  city development in several aspects beyond the
  initiate major objective.
• Flenchner (1974) summarized the effects of land
  banking practice in western countries as
• Control on urban growth pattern
• Capturing capital gains for public finance
• Land price regulation

12
Other proposed functions of land banking

• In central Europe, to solve the problem of
  fragmentation of agricultural lands.
• In Africa, as a way to control social tensions
  arising from imbalanced distribution of
  resources, local overpopulation, unemployment
  and involuntary displacement in the past.
  (VanDijk Kopeva 2006)

13
Development of Land banking in China
14
Evolution of urban land reform in China
1982 1984 1986

• Constitution Amendment
• Article 10Clarification of state land ownership
  in urban area
• Economic reform in cities began Pilot trials of
  urban land market
• Land-use fee and arable land occupation fee
• Land Administration Law

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Evolution of urban land reform in China
1987 1988 1992 1996 1998

• First open land use right auction in Shenzhen
• Land Administration Law Amendment
• Approval of urban land use right (LUR)
  transaction
• Dual-track urban LUR market
• Land Administration Law Amendment
  Establishment of MLR1
• Overall land use plan

• LDC_at_GZ2
• LBC_at_SH3

1MLRMinistry of Land and Resources 2LDC
Land Development Center 3LBC Land Banking
Center
16
Dual Track Urban LUR Market

• During the early period of LUR market (in the
  1990s), LUR were traded under a dual-track
  market
• Co-existence of market supplied land with
  administratively allocated land
• Great difference in LUR prices
• Existence of an uncontrolled black market
• Land value gains were flowing to powerful
  companies or individuals rather than the
  government.(Xie 2002)

17
Development of land banking in Chinese Cities

• Guangzhou Land Development Center- established in
  1992 to facilitate comprehensive development of
  new city center via land banking mechanism.
• Establishment of Shanghai Land Banking Center in
  1996- recognized as the 1st city land banking
  authority in China in most Chinese literature.

18
Development of land banking in Chinese Cities
(Source Yang et al 2005)
19
Development of land banking in Chinese Cities

• Direct Top- Down promoting forces
• Minister of Land and Resources highly praised
  Hangzhous land banking experience at a
  conference of mayors in 1999. (Zhou, 1999)
• In 2001, State Councils Announcement for
  strengthening state owned assets management
  (Document No.15-2001) recommended cities with
  suitable conditions can implement land banking
  to strengthen the ability to adjust the land
  market.(State Council,2001)

20
Development of land banking in Chinese Cities

• Central Governments effort to establish a
  single-track LUR market
• Announcing LUR to use all kinds of land for
  business use (residential, commercial and
  tourism ) and industrial use must be sold
  publicly by bidding, auction and public
  announcement in since 2002 and 2007
  respectively. (MLR, 2002,2007)
• City governments are becoming economic interest
  group preoccupied with local growth in the
  process of decentralization during economic
  reform in China. (Zhu 2004 Xu and Yeh 2005)

21
Research on land banking by Chinese scholars

• Introduction of different practices.
• Proposals or solutions for the problems arousing
  with the implementation of public land banking.
• Quantity and location of land for banking
• Finance
• Risk management
• Institutional structure and legislation

22
More fundamental issues still need exploring

• What are land banking mechanisms possible
  effects on city development in China?
• How to define explicit objectives of implementing
  the land banking mechanism?

23
Possible effects of land banking on city
development in China

• The similar mechanism as the western practices
  may lead to similar effects on
• Land price
• Revenue of city governments
• Urban growth pattern
• Under the rapid development context of China,
  land banking may also influence the process of
  socio-spatial restructuring
• Re-distribution of residential areas of
  different social classes
• Speedy urbanization of the former rural areas
  affected by land banking
• Upgrade of industrial sector when industrial land
  is no longer free of charge

24
Case study on land banking in Guangzhou City
25
Land banking authority

• Guangzhou land development center established in
  1992 under the Guangzhou Land and Resource
  Bureau.
• Authorized by the municipal government to
  implement land resumption, acquisition, land
  banking, and LUR sales

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Source and scale of land bank

• Source of land bank
• Resuming state-owned land when the LUR owner
• Delays development for an overdue period
• Or no longer exists
• Purchase of urban LUR
• Acquisition of collectively-owned rural farm land
• By the end of 2004, the GZLDC was holding a land
  bank of 2854.96 hectares.

27
Spatial Distribution of GZLDCs land bank at Dec
2004 (source provided by GDLDC
through interview)
28
Key development areas of Guangzhou at the period
of 2006-2010 (Source Short-term development
plan of Guangzhou from 2006 to 2010)
29
Source Generated from public database of
website of Guangzhou Land and Housing
Bureau(www.laho.gov.cn)
30
Price of LUR Sale from Land Bank of Guangzhou
(2002-2006)
Source Generated from public database of
website of Guangzhou Land and Housing
Bureau(www.laho.gov.cn)
31
Comparison of land bank income, city fiscal
income and infra structure investment of
Guangzhou in 2002-2006 Source Generated from
public database of website of Guangzhou Land and
Housing Bureau(www.laho.gov.cn)
32
A village near the CBD- Lie De
(Photo sources maps.googel.com ,www.xkb.com.cn)
33
(Picture source www.upo.cn)
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Conclusions
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Charateristics of land banking in Chinese Cities

• Simplified replication of a mechanism due to
  scarcity of suitable institutions.
• Creating a suitable institutional framework for
  the newly emerging LUR market in China is
  difficult. However the replication of the land
  banking mechanism from other cities are of little
  cost.

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Charateristics of land banking in Chinese Cities

• Administration-oriented operation at city
  government level
• Administrative document at national level was not
  published until Nov 2007.
• Operation is regulated under administrative
  documents published by city governments.

37
Charateristics of land banking in Chinese Cities

• Focusing on land development process rather than
  the balanced objectives of city development
• Promoted and implemented by the land
  administration system of governments.
• Income form LUR sales as direct incentive.

38
Thank You!

• Your comments are welcome!
• Please contact dxhuang_at_hkusua.hku.hk