The land governance cost on co-ownership: A study of the cross-lease in New Zealand

Higher land-use intensity can be achieved by subdividing the land or by subdividing the structure built on it. The former avoids co-ownership but is subject to topographical constraints, whereas the latter (e.g. apartment units) uses each unit of land more efficiently but entails management of the common parts. This study examines a hybrid approach to subdivision, known as cross-lease in New Zealand, where land is co-owned, and each coowner singly and separately holds his or her structure (a detached or semi-detached house) through a very long lease. The delineation of boundaries and the maintenance of communal resources relies on self-governance. From the owners' perspective, how well does the self-governance of cross-lease work, as compared to government regulation of unit titles? Based on preferences revealed by property transactions, cross-lease is found to trade at a price discount of 0.42% per owner relative to unit titles of property of equivalent quality. Moreover, the discount increases with the number of owners sharing the land. Self-governance is, therefore, more costly than government regulation when there are multiple co-owners, making monitoring and conflict resolution difficult.

Automated summary

This study examines a hybrid approach to land subdivision, known as cross-lease in New Zealand, where land is co-owned and each co-owner holds their structure through a long lease. Findings show that self-governance in cross-lease is more costly than government regulation, leading to a price discount that increases with the number of co-owners.