Regulatory incentives for green buildings: gross floor area concessions

Incentive schemes formed by regulatory or administrative instruments are measures to promote green building (GB) and increase the motivation of developers to meet higher standards. The hidden costs to different stakeholders during the GB transaction are often ignored. Understanding these hidden transaction costs (TCs) helps appraise the costs and benefits of GB and policy effectiveness. The example of a gross floor area (GFA) concession scheme is used systematically to explore and understand the fundamental issues of TCs’ typology and chronology in the GB development process. The GFA concession scheme is a popular incentive due to its indirect compensation to developers by allowing additional floor area without expenditure by government to implement GBs. A TCs’ framework is used critically to review and evaluate the costs and benefits of the GFA concession scheme. Its particular implementation in both Hong Kong and Singapore is explored. Hong Kong is used as a case study, complemented with in-depth expert interviews on GFA concession in Hong Kong. The key contribution is to establish the parameters for estimating the optimum GFA bonus that could both motivate various stakeholders and minimize the negative impacts on the built environment in future.