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To build above the limit? Implementation of land use regulations in urban China

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  • Cai, Hongbin
  • Wang, Zhi
  • Zhang, Qinghua
Abstract
This paper studies the implementation of land use regulations in urban China. In particular, we investigate land developers’ compliance with floor-to-area ratio (FAR) regulations using a unique set of residential land parcel data from 30 major Chinese cities matched with the corresponding residential development projects built on those parcels. In our sample, in more than 20% of the cases, developers built above the regulatory FAR limits in the ex post land development, and the total floor area built in those cases increased 21.5% over the regulatory limit. Our analysis finds that attractive land location attributes tend to induce developers to pursue upward adjustments of FAR. Moreover, developers who are more likely to have special relationships with government officials tend to make larger upward adjustments. Our estimates suggest that there exists a significant gap between the privately optimal FAR that maximizes land value and the regulatory FAR. This gap is only modestly reduced by corrupt ties with government officials, implying that FAR regulations have imposed a highly restrictive constraint on China's urban land development even given imperfect compliance.

Suggested Citation

  • Cai, Hongbin & Wang, Zhi & Zhang, Qinghua, 2017. "To build above the limit? Implementation of land use regulations in urban China," Journal of Urban Economics, Elsevier, vol. 98(C), pages 223-233.
    • Handle: RePEc:eee:juecon:v:98:y:2017:i:c:p:223-233
    DOI: 10.1016/j.jue.2016.03.003
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    More about this item

    Keywords

    Floor-to-area ratios; Land development; Compliance; Corruption; China;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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