Public authorities in developing economies typically have to deal with fiscal stress, lack of resources and an underdeveloped real estate industry. This poses a severe challenge at times of rapid urbanisation. Governments typically react to housing demand shocks by introducing policies that support the real estate market’s capacity to supply housing. One prominent policy in this respect is land readjustment. It has been promoted as a best practice and has been extensively discussed from an efficiency perspective; however, little is known about the ecological performance of the urban landscapes that typically emerge with this tool. Therefore, this study developed an assessment framework that allows discussion of the ecological performance of these neighbourhoods as an outcome of the reciprocal interaction between public sector initiatives and real estate market responses. Based on a LEED ND assessment of the cases of Taipei and Seoul, the research identifies four institutional drivers of ecological costs. First, public agencies tend to neglect the ecological costs of greenfield site developments. Second, public agencies to not employ policies that promoe brownfield developments. Third, a weak public sectors’ negotiating position can result in an ecologically inefficient urban pattern. And finally, the public sector’s construction standardisation policies can impose real estate market limitations and wasteful use of resources in the long run.