A government decision last year allowing the sale of commercial and residential facilities at the West Kowloon arts hub gave the cash-strapped project a shot in the arm, the vice-chairman of its managing authority said.

As part of a funding proposal, the West Kowloon Cultural District Authority on Wednesday said it plans to build seven residential blocks south of Austin Road West that could offer nearly 2,000 flats.

Last year, the government endorsed the sale of residential developments within Zone 2 of the site by the authority.

"That news itself already helped us a great deal," Bernard Chan, the authority's vice-chairman, told RTHK.

"It allowed us to talk to the bankers... The fact that we now potentially have a future income stream coming from the sale of these residential units, we're able to get refinancing and we can generate the necessary funding... to allow the authority to continue to operate."

That, Chan said, helped to overcome a "timing mismatch" with the development of arts and culture facilities outpacing that of commercial and residential sites.

"The faster we open our new [arts and culture] facilities, the more losses we will incur. In the meantime, our income has yet to materialise, because we haven't really been able to generate any income from our commercial sites," he said.

"It was always, from day one, the plan to use the commercial, residential area to subsidise the arts and culture offerings. This residential [area] is actually going to help us to finance the investment that we put in the arts and culture sites."

The government has said the residential project will help the arts hub stay afloat for at least a decade.