Abstract
Economic incentives are widely used to promote green buildings (GB) and consume social resources. However, few studies evaluate the costs and benefits of implementing economic incentives, including hidden costs and benefits. This paper applies cost–benefits analysis (CBA) and transaction cost (TC) theory to systematically evaluate the costs and benefits of implementing the green building economic incentives, with focused study on the Gross Floor Area (GFA) Concession Scheme in Hong Kong. The data of costs and benefits indicate how the GFA Concession Scheme motivates stakeholders and how much it benefits the built environment, which provides a solid foundation for the improvement of the GFA Concession Scheme. Expert interviews were conducted to verify and compliment the new CBA framework and provide empirical evidence for policy-makers and researchers to better understand the allocation of costs and benefits. The results show that the effectiveness of the GFA Concession Scheme is readily justified even if it has caused a lot of extra transaction costs and actual costs. A 10% GFA concession attracts developers to enter the GB market but discourages them to go for a higher level of GB. It is the right time to differentiate the GFA concession to promote a higher level of GB.
Highlights
The affordability of green construction is a significant challenge, and economic incentives that can increase affordability are important drivers of green construction [1,2]
By collecting more data on costs and benefits and taking stakeholders into considerations, interview results of this study refines the framework proposed by Qian, et al [44]
After offsetting the actual costs, the rest of benefits from gross floor area (GFA) concession goes to land cost under the land bidding mechanism in Hong Kong
Summary
The affordability of green construction is a significant challenge, and economic incentives that can increase affordability are important drivers of green construction [1,2]. Economic incentives are implemented mainly in the form of subsidies, tax reduction, rebate system, low-cost loans, gross floor area (GFA) concession (i.e., density bonus), expedited permitting, and cash incentives [3,4]. Singapore rewards cash incentives to developers and project consultants of new developments with a gross area of at least 2000 m2 that achieves a green mark gold rating or higher [5]. The UK and US provide subsidies to developers [6,7] Johnston [8] questioned the impacts of income and land price on the participation rate of a density bonus scheme and impacts of incentive level on project profits in the USA. Insufficient incentives barely motivate developers to construct GB, whereas excessive incentives result in much social cost [10,11]
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