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Bertil de Kleynen
16 Dec 2015
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Around the world economies are struggling to close a growing gap in infrastructure financing. The irony is however that infrastructure finance is available in trillions. How can we consultants help to bridge the available funding with the development need?
TOD means either Transport Oriented Development, or Transit Oriented Development. It is the same thing, depending only really what part of the world you grew up in. If you live in the imperial world of gallons and inches you are more likely to be used to Transit, whereas for those of us who tend to drive on the left-hand side of the road, we prefer the term Transport.
There are a number of similar acronyms. Transport Adjacent Development (TAD); Transferable Development Rights (TDR), a common based US term; and Transport-Proximity Development (TPD). All of these could be considered subsets to TOD, or individual tools in the TOD toolbox.
Almost like innovation, the term TOD has the tendency to be overused without really being well understood. Being an all-encompassing term, it’s not surprising that the acronym means many different things to many different people. What is the essence that defines TOD?
The generic meaning of TOD as per Wikipedia, goes something like this;
A transport-oriented development (TOD) is a mixed-use residential and commercial area designed to maximize access to public transport, and often incorporates features to encourage transport ridership. A TOD neighborhood typically has a center with a train or metro station, surrounded by relatively high-density development with progressively lower-density development spreading outward from the center.
The description is not incorrect. It touches on the aspects of mix-used development, the adjacency to transport hub and its ability to stimulate further growth of the development. However, there is a more fundamental ingredient to TOD’s success.
Let’s take a step back and look at the environment around us.
Urbanisation is happening at an unprecedented speed. By 2050 the world is expected to become home to nine billion people, up from the current seven billion. The rise in population will be felt most in our cities, most dramatically in the developing world. About three years ago the world crossed the line by which more than 50 per cent of our population live in some sort of urban area. By 2050, that figure will rise to 75 per cent. The demand for developing and maintaining effective infrastructure and urban environment has never been greater.
But around the world economies are struggling to close a growing gap in infrastructure financing. The irony is however that infrastructure finance is available in trillions. How can we consultants help to bridge the available funding with the development need?
This leads to the more fundamental aspect of TOD, which is a financing mechanism through Land Value Capture (LVC) that redistributes private gain back to community via public investment into infrastructure or social amenities. LVC is the capture of increased land value, through development densification brought about by increased permissible FAR in the local regulatory development plan. LVC is a progressive form of taxing that returns value that is ‘unearned’ by the private sector, back to the public. The benefit of TOD is therefore 4-fold. To the government – increased tax income, better city development. To the investor – increased value through land value. To the operator – increased ridership due to better connectivity to the places where people want to be. To the public – convenience and place making.
TOD is not just a built product, but a process. For the process to work and bring the benefit to multi stakeholders, early integration is essential. This process needs to be started at the formation of the Regulatory Development Plan, at government level, through to the transport and land planning stage and onwards to the construction and operation stage. Likely, a full cycle takes no less than a decade, and requires the coming together of public and private stakeholders at the early stages of the process. Kowloon Station Development in Hong Kong, a signature MTR TOD development of some 2 million square meters took more than 20 years to complete. The seven development parcels surrounding the station were built progressively to meet market demand ensuring sustainable absorption rates.
There are numerous and significant obstacles that need to be overcome. A clear government organisation structure and dedicated authorities empowered to enable the process is a starting point. For example, In New Delhi, TOD has been enabled through the draft Delhi Masterplan (MPD2021), but has become bureaucratically constrained due to overlapping responsibilities and conflicting interests between the development authority (DDA) and the railway authority (DMRC). In stark contrast, Hyderabad, with a progressive and entrepreneurial governance structure has set up Hyderabad Metro Rail, (HMR) a joint venture vehicle enabling Public and Private stakeholders to come together to smoothly deliver a the world’s largest Metro PPP project. Hong Kong is somewhat unique in that developer and operator is one and the same entity, making the execution of a TOD process easier to manage, and as has been proven by the vast amount of TOD projects in HK, evidently, easier to complete.
A major hurdle in the TOD process is timing. At the time that the land and transport plan is formulated, private stakeholders or TOD development advisors (such as Atkins) from the private sector should be engaged to ensure TOD design principles are laid to future proof the subsequent implementation and design development. A TOD masterplan or feasibility study is prepared to inform the station and station precinct design, which typically precedes the development by many years. Precinct development plans can embrace the Smart Growth principles covered by the Wikipedia description.
A simple TOD checklist would look like this:
In essence, all of the above should be achieved for it to be a comprehensive TOD event. Covering only some of them, usually leads to a loss of TOD opportunities, but may still achieve some form of TAD or TPD.
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