Rail + Property Development: A model of sustainable transit finance and urbanism

Hong Kong has aggressively pursued transit value capture to finance railway infrastructure through its “Rail + Property” development program, or R+P. More than half of all revenues received by the MTR Corporation, the owner-operator of Hong Kong’s largest railway network, come from property development. A wide variety of R+P projects presently exist in Hong Kong. Most focus on housing development though all have some degree of commercial development. Recent generation R+P projects have placed a stronger premium on urban design and quality of pedestrian environments. This has generally paid off in the form of ridership gains and higher real-estate prices. Based on ridership modeling, an R+P station with a transit-oriented design averages around 35,000 additional weekday passengers. The biggest ridership bonus comes from transit-oriented development tied to large-scale residential R+P projects. Housing price premiums in the range of 5% to 17% were found for units built as part of R+P projects. If the R+P projects had a distinctively transit-oriented design, the premiums exceed 30%. With such success, the R+P model is being seriously considered as a means of financing rail infrastructure and advancing transit-oriented development in mainland Chinese cities. MTRC recently won a concession to apply the R+P model to finance Line 4 of Shenzen’s metrorail system. As rapid urbanization continues to paralyze the streets of many Chinese cities with traffic and threatens environmental quality locally and on the global stage, it is imperative that arguably the most sustainable form of urbanism – the linkage of land use and public-transport – be aggressively pursued. Hong Kong’s R+P model, we believe, is the best template available for achieving sustainable transit finance and sustainable urbanism