Local authorities play a, sometimes surprisingly, vital part in
shaping our towns and cities. As development becomes more sophisticated –
responsible for delivering housing, infrastructure and commercial benefit to a
locality – councils have a pivotal role, and so an in-depth understanding of
public authorities, and their relationship with both private sector and central
government, has great value.
"It’s not just about the law," says Chris Plumley, partner in the public sector commercial practice in Trowers & Hamlins' Birmingham office. "It’s about understanding the political environment, generating confidence with the council at first instance, both with officer staff and of course the elected members. They know they have to be entrepreneurial but sometimes don’t have the right resources to drive things through. And that’s where we come in. We’re getting engaged more and more to help unlock schemes."
Plumley sees a marked change in the political climate around local development. "There’s been a big shift," he says. "A few years back the focus was on asset sales to generate capital receipts, but now councils are much more focussed on place-shaping in order to generate sustainable income for 2020 – when the funding mechanisms change – and beyond. Now, instead of selling them off, they’re using assets – in some cases liabilities – to generate jobs, housing and mixed use schemes."
"It’s reinvigorated thinking in local authorities and among developers." Amanda Hanmore, head of real estate for the Birmingham office, also sees a changing climate. "Private developers have, in the past, been put off by long-winded and expensive procurement processes. We’re finding we can advise clients on processes which are compliant, but which make schemes attractive, and that very much fits with the new climate. Developers are finding many more opportunities opening up."
One Trowers & Hamlins client, a developer and forward-funder of budget hotels, partners with local authorities to build hotels on local authority land. Using a shielded lease, the council receives rental income from the hotel and the project provides rent to the funders providing the senior debt, who find such projects attractive from a risk perspective due to the unshakeable covenants a council can offer.
In another case, the firm is acting for a council in a Midlands market town where a town-centre development project has been stalled for years, due to problems with viability and the inadequate size of the various parcels of land involved. With a new entrepreneurial attitude, the council looked at public land either side of the proposed site, and used a combination of land-swaps and joint ventures to break the development logjam and create a bigger, viable mixed-use site.
"It’s an interesting change," says Chris Plumley. "Now the councils are being more innovative, collaborative and entrepreneurial, and matching the developers instead of being the cautious and risk-averse ones!"
While the climate might be changing, Amanda Hanmore sees an issue around the skills available to some councils.
"Some of the smaller authorities struggle a bit with not having the skills or experience to put together these complex schemes," she notes. "Co-ordinating various developers and Registered Housing Providers, considering the planning, environmental, transport and energy issues can put a strain on the resources of a small council."
"Given the competition for funding and developer interest, councils need to be aware that they might lose out to a rival authority in another part of the country if they’re unable to get the right team together at the outset."
Local attitudes can also have a bearing. "It’s obviously vital to get the local population on board with any major scheme," says Chris Plumley, "but it’s important to think about things in the round too, so that projects can get rolling. A project of any size is going to bring jobs and long-lasting prosperity to an area, but if there is a lot of opposition early on, or if councils are difficult to deal with or not genuinely open for business, then it’s possible developers – who are looking for stability and openness to new ideas – may look elsewhere."
"Ultimately, it’s about finding the right balance," Plumley concludes. "The macro political environment is very unstable, and it’s likely to remain so for a number of years. But life goes on, and if councils have good leadership, the right attitude as regards welcoming funding and proper governance structures to ensure that projects aren’t subject to the whim of a few powerful individuals, they can make genuine breakthroughs."
