Shibuya Station in Tokyo, Japan

9 October 2013 — The Coalition Government’s refusal to invest in rail infrastructure has been widely critiqued by planning experts, but having profitable, successful rail infrastructure could be possible without government help… and property is the key.

In The Conversation recently, Grattan Institute program director, Cities Jane-Frances Kelly said the Prime Minister’s view that federal government should not fund urban rail projects was “troubling”, and that roads alone could not overcome the costs of congestion and poor access to transport.

“To pour Federal funds into roads while completely ignoring rail is the most extreme folly,” added Western Australian Greens Senator Scott Ludlam.

But while the lack of funding commitment from government is worrisome, international experts say effective rail infrastructure can still be obtained without government money.

Cities needed to look to the past to find new models for funding infrastructure, London deputy mayor for planning Sir Edward Lister recently told an Atlantic Cities CityLab panel.

He said in the older days railways in the US and Britain were built with “a profit motive”, which relied on capturing land values that occurred in the transport corridor.

In Asia, private rail companies were still using real estate profits to pay for their service while this had stopped occurring in Western countries.

“Somewhere along the journey we split land values away from the railway operation, and the railway operation just became a railway operation, and they lost their property arm,” he said.

“When you look at cities like Hong Kong, what they’ve done with their metro system, it’s fundamentally a property company. They built a metro system on the side. It’s there to increase values. We have to return to that. I think that’s what we’ve lost. That connectivity between the two things.”

Last year, a paper in the Journal of Transport and Land Use looked at the way Japan had created profitable rail projects, termed rail integrated communities: “high density, safe, mixed-use, pedestrian-friendly developments around railway stations that act as community hubs, are served by frequent, all-day, rail rapid transit, and are accessed primarily on foot, by bicycle, or by public transit.”

“Though they receive little financial support from the government, private railways in Japan operate profitably by diversifying into real estate, retail, and numerous other businesses,” the paper said.

Rail stations needed to be created as destinations in themselves, the paper went on to say.

“The urban villages surrounding the stations provide riders for the system, as well as being destinations in and of themselves. These areas are invariably mixed-use, with stores, schools and universities, government offices, housing, restaurants, and bars all located within walking distance from the stations.

“… much can be learned from the way that private railway companies in Japan have been able to maintain consistent profitability, something unheard of for most other transit operators.

“Real estate development holds great promise if transit agencies can either capture a portion of land price increases generated by extending rail lines, or develop land around existing stations that is currently underutilised.”

Read the full paper.