The impact of institutional arrangement on the outcomes of urban redevelopment projects : empirical evidence from China

Abstract

With the marvelous achievements of rapid economic growth, bottlenecks associated with limited land supply, urban decay, and deteriorated environment have increasingly weakened the cities’ productivity, competitiveness, livability, and safety. To address the issues of urban decay and weakness, cities all over the world have continuously sought institutional change to facilitate urban redevelopment. Given the slower and less efficient progress of traditionally state-dominated urban redevelopment in China, the central government has authorized some megacities, such as Shenzhen, to pilot market-oriented urban redevelopment (MOUR) institution aimed at facilitating urban redevelopment in China. This thesis examines how institutional arrangements within the context of MOUR affect the project duration (PD), market value (MV), and developer obligation (DO) outcomes of redevelopment projects. Different institutional arrangements which are differed by the nature of the applicant and the characteristics of property ownership are firstly identified and analyzed under MOUR. Furthermore, hypotheses on the factors that affect PD, MV, and DOs are developed based on relevant theories and existing studies to examine the impacts of different institutional arrangements on MOUR outcomes. More than 300 representative urban redevelopment projects and 451,043 condominium transaction records within the context of MOUR in Shenzhen are used to test these hypotheses. Our key empirical findings are summarized as follows. First, empirical results on PD outcome show that (1) PD is the shortest when old factory owner (OFO) is the applicant applying for the redevelopment of old industrial buildings on state-owned land; (2) PD is longer for the developer (DP) as the applicant applying for the redevelopment of old industrial buildings on state-owned land compared to OFO as the applicant; (3) PD is the longest when village committee (VC) is the applicant applying for the redevelopment of old urban village; (4) When DP is the applicant, the PD follows an ascending order for acquiring and redeveloping old industrial buildings on state-owned land, old industrial buildings on collective-owned land, and old urban villages; And (5) the implementation of the decentralization policy speeds up the approval process of urban redevelopment and shortens PD. Second, the empirical results on MV outcome suggest that (6) market premium (MP) is highest if developer (DP) is the applicant. In addition, (7) MP increases with the scale of the redevelopment project. Third, concerning the impact of institutional arrangements on the DO outcome, the results show that (8) when DP acts as the applicant, a higher portion of DOs will be contributed for public infrastructures and public facilities compared with OFO and VC as the applicant; (9) The applicants who contribute a higher portion of DOs will negotiate a higher FAR to compensate for the cost of the DO, especially when DP acts as the applicant; And (10) the redevelopment projects located in the less developed area are required to contribute a higher portion of DOs than those located in the highly urbanized regions. These varying impacts of institutional arrangements on the outcomes of MOUR projects (i.e., PD, MV, and DOs) have rarely been examined in previous studies in a local context. The main contribution of the thesis confirms the importance of institutional arrangements in shaping the outcomes of MOUR projects in China. The findings from this study serve as a timely reminder that the government should examine and approve urban redevelopment schemes in a well planned and socially sustainable fashion. They also provide valuable references for the government to make tailor-made land value capture schemes so as not to lose public value increases or kill redevelopment projects. Moreover, the deep understanding of the impacts of institutional arrangements on the redevelopment project outcomes can help the property owners and private developers to devise their own redevelopment schemes. The insights gained from this research also enrich the studies in the discipline of institutional analysis of urban redevelopment.