Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing – the relationship between the price of a property and the term of ownership – over a 100 years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987–92) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples, we find that leasehold prices are consistent with a time declining schedule and low long‐term discount rates in housing markets.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/ecoj.12501

The time value of housing: historical evidence on discount rates

Archer R. W. (1974) The leasehold system of urban development: Land tenure, decision-making and the land market in urban development and land use, Reg. Studies 8, 225–238. The leasehold system is considered as an alternative system of urban development to the usual system which is based on freehold land and statutory planning. The essential features of the leasehold system are a large scale landowner organization which plans, develops and subdivides the land, sells the leasehold sites for private and government building development, and manages the leasehold estate and the eventual redevelopment. The main features and requirements of the system are examined and it is considered against the alternative systems of urban development. These are the freehold land and land market, the freehold land and statutory planning, the large-scale land development, and the public land and buildings systems.

The leasehold system of urban development: Land tenure, decision-making and the land market in urban development and land use

The Government Land Sales programme and developers’ willingness to pay for accessibility in Singapore, 1990–2015

Summary. In the mid 1960s there were about 22 000 single-family leasehold homes in Honolulu. Dissatisfaction with leasehold led to reform legislation in 1967, allowing lessees to buy leased land. By 1991 less than 5000 lessees remained. This paper examines why landowners elected to lease rather than sell land and attributes the rise of leasehold to legal constraints on land sales by large estates, duties of estate trustees and the federal tax code. Ideological forces initiated land reform in 1967, but rent-seeking forces captured the process in the mid 1970s. It is concluded that Hawaii’s experiment with leasehold was a failure due to the dif® culties associated with specifying and enforcing long-term contracts in residential land.

/pdf/the-political-economy-of-urban-land-reform-in-hawaii-4l38b0clom.pdf

The Political Economy of Urban Land Reform in Hawaii

The increase in U.S. mortgage rates from nine per cent in 1976 to fifteen per cent in 1982 raised monthly mortgage payments by about sixty per cent, even before rising house prices in the United States over this period are taken into account. Not surprisingly, attention has been focused on ways and means of counteracting spiralling housing costs. One proposed solution is land leasing. Under such an arrangement, the homebuyer purchases the house but leases the land. (There may be an option to buy the land at some time in the future.) Land leasing reduces the overall purchase price, and hence lowers the minimum down-payment and the initial monthly mortgage payment. In Hawaii, land leasing has been a readily available alternative to land owning throughout the postwar period. The analysis of residential housing prices in Hawaii provides some quantitative estimates of the relative prices of leasehold versus fee simple properties. The average price differential is surprisingly small. One explanation of these small price differentials, for which a model is developed and tested here, is that borrowing-constrained households use high discount rates to calculate the present value of the future land price that they will, in effect, have to pay at the expiration of the lease. These discount rates are estimated in a nonlinear hedonic property price equation. The results are then employed to answer the question: Under what conditions would a leaseholder buy the land outright before the expiration of the lease?

Is land leasing a solution to unaffordable housing

Historically, building leases have been responsible for some very enlightened estate management and town planning. They have also been abused by less responsible landlords and have caused much hardship among tenants. This article records some of the good and bad achievements of ground landlords and then attempts to analyse which elements of the leasehold relationship are worthy of preservation. Some ways are then suggested in which the balance of rights and obligations and the nature of the tenant's interest might be amended to make leaseholds more acceptable to tenants.

Ian J. Mcdonald

Papers

The Leasehold System: Towards a Balanced Land Tenure for Urban Development