Compliance concerns of
environmental laws at building
design stage
Transaction cost considerations
Franky W.H. Wong
School of Professional and Continuing Education (SPACE),
University of Hong Kong, Hong Kong, China, and
Edwin H.W. Chan and Patrick T.I. Lam
Department of Building and Real Estate, The Hong Kong Polytechnic University,
Hong Kong, China
Abstract
Purpose – This study aims to identify the most critical concerns of property developers in terms of
the transaction costs involved in compliance with environmental laws at the building scheme design
stage when key design decisions are made.
Design/methodology/approach – Sixteen structured interviews were carried out with experienced
industry practitioners in Hong Kong. Transaction cost theory is used to explain the regulatory
compliance costs.
Findings – The results show that the most significant impacts of transaction costs were due to
uncertainties in negotiations with government, which takes time to obtain approvals and overcome
ambiguous legislative requirements.
Practical implications – The government could make use of the research findings to formulate a
clear environmental policy to coordinate various departments and laws to address uncertainty with
time for project delivery, and conduct quantitative regulatory impact assessments in the development
of new legislation.
Originality/value – This study identifies and explaines “uncertainties” as the most critical concern
for property developers in terms of the transaction costs involved in compliance with environmental
laws. The results of this study would help policymakers to improve policy design, which would in turn
increase efficiency and productivity in the property development process.
Keywords Environmental laws, Property development, Transaction costs, Building design,
Sustainable development, Environmental regulations, Property, China
Paper type Research paper
Introduction
Over the last few decades, the pressing need for more environmentally friendly urban
development has attracted unprecedented attention. The regulatory compliance costs of
environmental law look set to increase significantly due to tightening regulations and the
need to accept responsibility and pay for the detriments caused to the environment as the
result of human activities (Watson and Emery, 2003; Bell and McGillivrary, 2008). In this
scenario, environmental laws are likely to exert additional pressure on the regulated
parties (Cairncross, 1993). For example, in the US, the compliance costs of the tightened
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Environmental
laws
157
Received May 2011
Revised July 2011
Accepted August 2011
Property Management
Vol. 30 No. 2, 2012
pp. 157-175
q Emerald Group Publishing Limited
0263-7472
DOI 10.1108/02637471211213406