Ground Lease-Based Land Use System versus Common Interest Development

In recent decades, we observe brisk growth of ground lease-based land use systems, such as shopping malls, and Common Interest Developments in retail and residential real estate, respectively. I argue that the ground lease system is an efficient response to the hold-up problem in urban land use because of two facts: the bundled consumption of land and collective goods, and landowners’ limited ex-post mobility. It incorporates the core insight of Henry George view with Tiebout competition. But, due to bundled consumption, different characteristics of retail and residential real estate determine the dominance of the ground lease systems and CIDs, respectively.