Hong Kong’s mass transit operator, has a funding model highly reliant on land development around stations. This may not be the answer to TfL’s short-term funding issues but it needs to be considered in the long term.
Hong Kong’s Mass Transit Railway (MTR) is one of the few mass transit systems in the world that typically generates profits. Although, like operators across the globe, it made losses after the pandemic hit in 2020, its profitability recovered in the following year even with ridership below the levels observed in previous years.
So, how did MTR balance its financial situation so quickly when other global cities, including London, continue to struggle?
It’s not all about urban density
At first sight, the urban form of Hong Kong can be seen as the explanation for its swift recovery. It is one of the densest places in the world, which provides its transport system with a massive number of users (paying for tickets) around each station. Previous Centre for Cities research supports this by showing that Hong Kong has more commuters than London, even if the network is roughly half the size.
However, the observed differences cannot be fully explained by different density profiles. As illustrated in the first blog of this series, MTR is significantly less reliant on fares than TfL – they account for around 37 per cent of Hong Kong’s funding, compared to 70 per cent in London. This means that MTR is able to raise additional revenue from other sources.
Developing land is part of the MTR funding model
The existing model in Hong Kong allows MTR to develop the land around new stations, bringing financial benefits to the system. The government of Hong Kong grants the development rights of the land at pre-railway values, which allows MTR to tender the land for over-station developments and receive either a part of the property sale value or some rental income.