Land pricing upon the extension of leases in public leasehold systems

Abstract

Purpose: This paper aims to compare and review alternative ways to adjust public ground leases. Design/methodology/approach: Based on principles derived from a review of scientific literature, alternatives for the extension of leases are discussed based on the case of Amsterdam. Findings: Many alternatives lead public ground-lease systems to produce results that are the opposite of what they are intended to be (as inspired by Henry George): new improvements result in higher rent, but additional location values do not result in higher rent. One exception is the lease-adjustment-at-property-transaction alternative, which may nevertheless result in fewer transactions. Social implications: Public leasehold systems are highly contested with regard to the extension of leases. Such systems are often aimed at capturing land-value gains. In practice, however, this tends to be more difficult than expected. Value capture by authorities, as intended by the system, results in counter-movements of lessees, who often gain public support to set lower leases. These political processes may even result in the termination of such public ground-lease systems. This paper reports on a search for possible solutions. Originality/value: The comparison of various alternatives to ground-lease extension based on principles derived from literature is new, and it contributes insight into public ground-lease systems.