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.