December 27-January 1
City in Context
Hong Kong is the dynamic city-state located south of the Pearl River Delta region in the People’s Republic of China. The special-administrative region was a British colony which was returned to China in 1997. In the handover agreement, China agreed that Hong Kong and its neighbor Macau are to be governed under a “one country, two systems” principle, granting the territories autonomy over their own economic and administrative systems until 2047, under the Basic Law. This means the territory has its own government and sets policy as it deems fit. This unique situation allows Hong Kong to shape its urban development free from influence of Mainland China. Planning in Hong Kong is carried out on a long term (up to 2030) and a medium term (up to 2020) basis by drafting the HK2030.
The territory is comprised of Hong Kong Island, the Kowloon peninsula, and the New Territories, together covering 1,108 sq. km. With a population of 7.4 million, the territory is the fourth densest country/dependent territory in the world. Hong Kong’s challenging geography led to the city using only 30% of the total land, with the remainder being mountainous terrain. With such scarce land resources available, it became a necessity for land-use and the transport to become integrated. Currently, about 77% of commercial and office space and 45% of living quarters are located within 500m from rail stations in Hong Kong (source). Planning for the road network and the integration of multi-modal transit facilities has been implemented in tandem with transit-oriented development using mixed-use and polycentric urban planning policies to maintain a convenient and efficient living environment for residents.
In terms of transport, about 12.6 million passenger journeys are made daily on Hong Kong’s public transport system, constituting a whopping 90 percent of all trips (source).Hong Kong’s myriad of public transport options include railways, trams, buses,minibuses, taxis, ferries and escalators. The backbone of the public transport system is the Mass Transit Railway (MTR) rapid transit network. The MTR is privately operated and is one of the most profitable metro systems in the world, covering all of its operating costs (and then some) with revenues at the farebox. This instantly sets Hong Kong’s MTR apart from other systems worldwide, which rely on a government subsidy to cover costs. For this reason, the MTR is a model that other cities look to emulate for a more financially sustainable subway system.
Hong Kong is undoubtedly in a strong position when it comes to infrastructure. But the challenges of a growing and aging population, coupled with increasing growth in private vehicles and an unbalanced spatial distribution of population and employment, threatens to derail the prowess of Hong Kong’s urban mobility system. What can be done to keep Hong Kong in this esteemed position, all while improving livability for its residents? I was keen to find out.
Rail Plus Property - Can it Address Hong Kong's Affordable Housing Crisis?
Since the first line for Hong Kong’s metro was being planned over 40 years ago, the “Rail plus Property” (R+P) model was proposed as a means to finance construction and operation of the metro line. The concept stipulates that MTR is granted exclusive land development rights alongside railway alignments to build residences, offices,shopping malls, schools, green spaces and more near railway stations and depots.In this sense, MTR Corporation Limited (a privatized company since 2000) is not only a transport operator but also a real estate developer. Since this model was established, more than 221 kilometers of rail line have been built, and performance has remained sky high with 99.9 percent of trains running on time (source).
The most intriguing outcome of the R+P model is that the MTR system operates without the need for direct government subsidies. In fact, it actually turns a profit, posting $1.3 billion in 2017 (source). MTR fares are also relatively low compared with those of metro systems in other developed cities. The base fare for an MTR trip in 2018 was $0.50. This is amazing because the farebox recovery ratio (% of operating expenses which are paid for by passengers) in Hong Kong is 124%, while metro systems in the U.S. typically range between 30-50% (source).
The financial advantages of the R+P model have been proven over time. In 2000, the Hong Kong Government privatized the MTR Corporation in an effort to dissolve its interests in public utilities. The government sold over a billion shares while retaining a roughly 75%stake in the company. Privatization was coupled with regulation of fares and performance standards that penalize the MTR HKD $1 million per hour of delay. Privatization rid the government of the responsibility for paying construction costs and bearing associated risks. Instead, the Hong Kong Government collects proceeds from the land premium and profits from its roughly 75 percent stake in the company,which is listed on the Hong Kong Stock Exchange (source).The R+P model also allows MTR to implement railway projects relatively quickly because it does not have to compete for land and public funds.
The financial advantages of the R+P model have been proven over time. In 2000, the Hong Kong Government privatized the MTR Corporation in an effort to dissolve its interests in public utilities. The government sold over a billion shares while retaining a roughly 75% stake in the company. Privatization was coupled with regulation of fares and performance standards that penalize the MTR HKD $1 million per hour of delay. Privatization rid the government of the responsibility for paying construction costs and bearing associated risks. Instead, the Hong Kong Government collects proceeds from the land premium and profits from its roughly 75 percent stake in the company, which is listed on the Hong Kong Stock Exchange (source). The R+P model also allows MTR to implement railway projects relatively quickly because it does not have to compete for land and public funds.
The image to the left shows the development of Hong Kong's heavy and light rail systems since 1910 (source).
Part of the reason why the R+P model works is because Hong Kong’s land is valuable. So valuable, in fact, that it is a city where many of the residents cannot afford to live. Homeownership is a mirage to many Hong Kongers. According to the 2018 Housing Affordability Survey by Demographia, Hong Kong is the least affordable place on the planet when it comes to buying a home, and has held the title for seven years now. Land-scarcity has meant that Hong Kongers pay the highest rates per square foot in the world, with an average of USD $4,900 per square foot (source). It would take the average Hong Konger today more than 18 years, using all their salary, to buy a flat of less than 500 square feet. This leads to many Hong Kongers living in subdivided apartments, also known as “cage homes,” which offer little more than space for a bed and a few belongings (see video on the left). This article sums up the housing crisis in Hong Kong succinctly.
So what can the city do to alleviate the burden? Some believe that the MTR, as one of Hong Kong’s main developers, is partially to blame for soaring property prices. They see the MTR as part of the equation of developers plus the government driving up property prices. While addressing one social problem (mass transportation) MTR contributes to unaffordable housing by reaping profits from luxury property projects near its new stations.
In June of 2018, MTR said it will discuss the idea of building public housing when developing property atop its stations with the Hong Kong government, a first for the city.The government has asked the MTR to act on its “social responsibility.” This comes in the wake of Carrie Lam’s election as Chief Executive in 2017, who ran on a platform of providing the opportunity for home ownership to Hong Kongers. This solution is one of a myriad of options available to Mrs. Lam. Only the future will tell if she holds the MTR to account – the future of housing affordability and the promise of the Rail plus Property model in Hong Kong may depend on it.
Central-Mid Levels Escalators
A quirky form of transport exists in the hilly Mid-levels area of Central on Hong Kong Island. Every day, about 78,000 people leave their homes and use the Central Mid-Levels Escalators to walk down to their offices or onward transport below. The system consists of a series of covered walkways,16 reversible one-way escalators and three reversible one-way travelators. Space constraints allowed for only one escalator. Thus, the escalators travel down from Mid-Levels from 6am to 10am daily, enabling commuters to reach their offices in Central and, after 10am, the flow is reversed so that the escalators travel uphill until midnight.
The Escalator was opened in 1993 after being introduced by the Hong Kong Highways Department to relieve pressure on the existing road system. The project was controversial in its early days, with cost overruns and delays harming the project’s public perception. These overruns led Hong Kong’s Director of Audit to issue a report that called the project a "white elephant" in November 1996, failing to deliver on reduction in traffic congestion and on cost estimates. Instead, the department noted that the escalator has relieved demand for public transport, but has not led to many motorists giving up driving or reduced traffic congestion. Nevertheless, the escalators met a need for mobility in the Mid-levels areas and saw patronage three times higher than anticipated upon opening.
Today, the journey is an effortless and free method of transportation between Central and Mid-levels for residents, commuters and tourists alike. For me, the journey on the escalators offered an excellent opportunity to explore the busy, bustling streets of Central, Hong Kong's oldest market district and famous antiques and art district, museums, historic buildings and the more relaxed and residential environment of Mid-Levels. It’s clear to see how the escalator breathed new life into the surrounding neighborhoods, with new restaurants and other commercial operations on the second stories of buildings. Entrepreneurial businesses added signage on the second floors to attract escalator riders. Today, buildings like the Tai Kwun Center for Heritage and Arts includes a walkway that connects directly with the escalators and adds public space to the original design. In a wonderful way, the escalators have opened up and dramatically revitalized the areas through which they pass, through an atypical transit mode.
This excellent academic paper by John Zacharias at Peking University details the role of the Central-Mid Levels Escalator as an urban regenerator in Hong Kong.
Mobility in Hong Kong works well partly because of Hong Kong’s unique characteristics. The city’s dense population and market-driven housing policy makes real estate highly valuable, which helps MTR’s developments generate reasonable profits. There are no suburbs from which people can commute by car, so there are strong incentives for everyone within the territory to use the system. Despite these unique characteristics, Hong Kong’s method towards capturing value is a powerful idea for financing transit in other cities around the globe. My home city of New York has tested this approach with its $2 billion 7-train extension to the Hudson Yards project, using dedicated property taxes from new developments. Other mechanisms include profit-sharing deals with developers, partial ownership of new developments, and on-site property rentals can all yield revenue to help pay for new investments in transit. But beyond P+R,Hong Kong’s public transport system succeeds because it makes it is a seamless experience that serves a vast majority of the population. And that is a lesson all transit systems can take home.