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Urbanisation

What can we learn from… Hong Kong Metro’s development route?

For nearly 40 years the city has been funding rail infrastructure development by capturing the value uplift in the land around new stations. David Tang MRICS explains how other cities could benefit from the same approach.

David Tang MRICS, Property director, Hong Kong MTR Corporation
8 October 2018

For nearly 40 years the city has been funding rail infrastructure development by capturing the value uplift in the land around new stations. David Tang MRICS explains how other cities could benefit from the same approach.

In the 1970s, Hong Kong was gridlocked and in desperate need of a new railway line to serve the busiest sections of the city. But in the weak economy of the time, the government did not have the HK$6bn required to pay for the infrastructure. After heated debate on how to fund the work without compromising other public services, Hong Kong decided to keep the investment of public money to a minimum, and instead relied initially on debt financing before settling on the concept of the rail-plus-property (R+P) model.

It was a ground-breaking idea that allowed Hong Kong’s Mass Transit Railway (MTR) Corporation to capture and extend the value of the same piece of land that would otherwise only have a railway facility built upon it. Rather than being given the land free of charge, MTR was granted exclusive property development rights by paying the “green-field” premium on the land above or around planned stations, and the profits from its rising value would then be used to invest in building and maintaining the rail network, crucially avoiding taxpayer subsidies.

Over the past 40 years, under this model MTR has built nearly 100,000 homes and 20.2m ft2 (1.875m m2) of commercial and office space above Hong Kong’s stations. Furthermore, 13 shopping malls, which generate around HK$3bn (£289m) a year in rent, also fall under its investment portfolio. Many of its above-station, mixed-use developments can be as large as 1.08m ft2 (100,000 m2), and include schools and day care centres for the elderly.

There are 93 mass transit railway stations in Hong Kong at present, around 45 of which have some form of development – retail, residential, or both – on top of them. When the R+P model is applied, MTR is responsible for the entire masterplan, design and integration into construction. Of course, the nature of the schemes need to vary depending on the location – those in more rural areas may require more housing, while others may be in catchment areas that benefit from a mixed-use approach – but they are always subject to local planning permission decisions.

Seamless integration

MTR’s approach to planning and design is very different to how station developments are built in other cities around the world, in that it introduces the property element together with the rail from the start. It is a seamless integration of the railway and the community. Cities seeking to adopt this model need to consider, from the outset, whether they intend to build a railway into an area that will become a hub at a future point, so development follows the railway, or the other way around? It is a bit of a chicken or the egg situation.

MTR considers both perspectives, and its use of the R+P model depends on a variety of factors. Before any city government embarks on this route, there are several questions it should ask: does it actually have a sufficient amount of development land to plug the funding gap? Also, is rail plus property necessarily the best fit, or are there other funding models that might be more appropriate? Most of Hong Kong’s railway has been built without the use of public expenditure, but R+P has to be carefully handled to fit the particular circumstances of the urban environment in question.

Date:
MON 13 MAY 2019
Time:
09:00 - 18:00
Event ends on 14 May 2019
Venue:
Conrad New York, 102 North End Avenue, NY 10282, USA
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