Risking multi-billion decisions on underground railways: Land value capture, differential rent and financialization in London and Hong Kong

Rapid urbanization has brought the needs to minimize negative transport externalities in cities to the forefront. The development of metros is a response to urban sustainability challenges, but the construction of underground infrastructure often requires massive excavation and long construction time, disrupts the economy and people's everyday living, and is highly capital intensive. As such, these multi-billion-dollar investment decisions require political vision and determination, careful traffic analysis, and the ability to raise sufficient funds to cover not only capital construction costs but also future operations and depreciation. Underground infrastructure projects must, therefore, balance the engineering aspects of a proposed project with the development of a resilient and sustainable business model. This paper is the first to develop a comparative longitudinal analysis of the finance and funding models of two underground systems (London Underground and Hong Kong's Mass Transit Railway) with a focus on the development of a conceptual framework for understanding land value capture (LVC) based on differential rents and financialization. The focus is on exploring the supply-side aspects of underground transport infrastructure including finance or capital investment and the relationship with funding or revenue streams and the creation of financially sustainable business models.