Making Mass Transit Work, Part 1

Lessons from Hong Kong - Density

by Michael Hampton, AKA Dr.Bubb | December 3, 2008

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President-elect Obama is talking about government spending on Mass Transit as a way of simultaneously : creating new jobs, and reducing America's reliance on foreign oil. This could be an excellent idea, but it is fraught with economic risk.

The fact is that many mass transit systems in the US lose money, and require subsidy. In their desire to create jobs, are the Obama team going to create White Elephants that need continuing subsidies to remain in operation? I certainly hope not.

There is a better way.

Mass transit works, and it is profitable in Hong Kong, where I live now. There are two keys to the success of the MTR Corporation (HK:66) here, and both of them should be studied, as a way of improving the prospects for Mass Transit systems in America. The two keys are: densification, and capturing the property windfall.

THIS (making mass transit profitable)..................... : NEEDS TRAFFIC & RENTS FROM THIS:

Hong Kong has some of the world's highest density areas. In fact, Mong Kok in the center of Kowloon is listed in the Guiness book of World Records as the highest density (130,000 per sq,km) human settlement on the planet. There are several MTR stops in and around Mong Kok, and the need of people who live there to travel to Hong Kong island and other parts of the SAR are a good example of the competitive advantage that Hong Kong has in a huge baseload of transport demand, which has helped it to build a large and profitable mass transit system.

Mongkok's high density (left) Denver's more gentle concentration (right)

In fact, I have been trying for months to find someone within the MTR who has an interest in helping the US to address its tranport challenges. Recently, I was introduced to a consultant who works for the MTR, who agreed to ask the question for me, does the MTR have any interest to taking its expertise to the US? The answer I got back a few days later was negative. The problem is that few US cities are dense enough, to permit a profitable transit system to be built. And those few that are dense enough, already have their systems built. The MTR doesnt want to get sucked into low return or unprofitable investments, no matter how useful they may be to an energy hungry America.

So what will happen, will Obama encourage the building of transport systems that will start unprofitable and stay unprofitable for many years into the future? There is a risk of that.

The alternative would seem to be to use the Mass Transit system itself as an engine of densification. As the system is built, the future living, working, and shopping patterns of the users must be considered, as a critical part of the development process.

What typically happens in Hong Kong, is that the MTR is granted development rights on top of its stations, and sometimes on land in the immediate vicinity. The MTR then enters joint ventures with property developers to build residential towers around the stations. Normally, there will also be a large shopping mall right on top of the station, taking advantage of traffic that will flow in and around.

The malls are highly energy-efficient for the shoppers, since many will pick up their shopping on the way to work or the way home. And there is no need for parking for those residents who live within walking distance. Although there will often be provision for temporary parking around the malls and in the residential towers, these are not essential for most shoppers. Those who work near the transit system, never need to drive to get to work, to shop, or to get home. Their cars are not needed for everyday commuting. They are for weekends, and evening social activities. In fact, many Hong Kong residents do not own a car at all. I include myself amongst the large number of happy carfree citizens in this city.

In America, the present density of most cities is far lower than in Hong kong. That will begin to change, if malls, offices and residential housing are built in and around the mass transit stations. But some big changes will need to be made, to enable this. Zoning laws will need to be changed, and tax and revenue policy will need to be modified. If this is not done, America may find that massive government spending on mass transit, simply winds up benefitting private landlords. By providing the means for capturing a sizeable development profit, the capital cost that will be left to be recouped from running the railway will be reduced, and the chances of making a profit (or at least, not needing a subsidy) will be dramatically improved.

I have seen some estimates about who were the beneficiaries of mass transit spending in London, where I used to live. The Jubillee line was built and extended, and then finally completed in 1999 at a total cost of Pds.8 billion*. That's alot of money, but meantime this improvement added Pds.13 billion to the value of property held by private landlords. Government spending on transport benefitted private citizens who bought or owned property near the new tube line. More intelligent taxation policies might have returned some of this property windfall to those who financed the purchase of the underground.

In part 2 of this series, I will look at some suggestions for tax and revenue policies, to encourage the building of new mass transit systems within the US.

The US has plenty to learn from the rest of the world, and now that the savings rich countries of the world have decided that they no longer want to fund American consumers, it is really time for the US to learn from the world. If the US does learn and implement some major improvements in its living arrangements, its urban planning and its tax policies, it may one day get back to where it can rely on its own savings. If it fails to learn, and continues on the same wasteful path of the past several decades, I see a bleak future. * source: Democracy Now

Copyright © 2008 Michael Hampton

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