Small is Beautiful: A Probit Analysis of Development Control of Small Houses in Hong Kong

In this paper we apply the probit model, an econometric technique that has been used in urban economics to examine nonaggregate cross-sectional data, to investigate the development control (planning application) data regarding the so-called ‘small houses’ in Hong Kong with respect to two classes of statutory zones, namely the ‘green belt’ and ‘unspecified uses’ zones. Four refutable hypotheses relating to the scale of the development, exogenous policies, and internal planning guidelines confronting the planning permission mechanism are tested by using a probit model adapted for the purpose. The data set with 826 individual observations over a period of 24 years from 1975 is part of the first systematically collected and unpublished planning statistics data set for Hong Kong. Although the hypotheses are specific to Hong Kong, they can be easily adapted, where nonaggregate planning statistics are available, to evaluate three general issues: rent seeking, the dependence of planning decisions on announced policies, and the spatial variation in success rates of planning applications.