The government has proposed a new town planning mechanism for two of the city's oldest districts, which could see larger sites suitable for higher density development gain up to 30 percent more of their permitted plot ratio from nearby land.

In a paper submitted to the Town Planning Board on Thursday, officials said they will test the "Transfer of Plot Ratio" scheme in Yau Ma Tei and Mong Kok as incentive for developers to take part in urban renewal.

"Over 800 buildings are classified as having nil or negative redevelopment potential... On the other hand, numerous small sites with old buildings thereon still have unused [plot ratios] but there lacks a mechanism to encourage developers to assemble such unused gross floor area for gainful use," the Planning Department said.

"It is thus difficult to rely solely on the current planning regime to carry out urban renewal effectively."

Under the pilot scheme, sites of low redevelopment potential such as isolated dilapidated blocks, buildings with preservation value and those suitable for open space or community facilities, will become “sending sites”.

Floor areas of these plots could be transferred to "receiving sites" under the same outline zoning plan. These are larger sites at more strategic and accessible locations suitable for higher density development.

The plot ratios of "receiving sites" could be raised by up to 30 percent and height restrictions might be relaxed.

The two types of land do not necessarily have to be next to each other or fall under the same land use, but there could only be a maximum of two "receiving sites" for each application.

The administration is also looking to allow commercial sites to transfer their plot ratios to residential ones for building homes.

The Town Planning Board will discuss the proposal on Friday.