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Delivering a strategic vision of place

Delivering a strategic vision of place

Partners from Trowers & Hamlins LLP's Public Sector Commercial department facilitated a discussion at MIPIM UK with senior officers from a range of local authorities and regional growth boards to debate the current opportunities and challenges in delivering a strategic vision of place including and how regeneration projects could be brought forward in light of current market conditions across the country.

The main topics of discussion were:

  1. How local authorities can overcome current challenges regarding housing and regeneration projects;
  2. Success stories and what approaches have delivered successful outcomes;
  3. The local government's relationship with central government; and
  4. Elected members' views and opportunities for inward overseas investment.

Current challenges facing local authorities regarding housing and regeneration projects

  • One of biggest challenges facing local authorities' and RPs' in their ability to deliver social housing and regeneration plans are changes in central government policy leading to an uncertain investment climate.
  •  In the summer budget, George Osborne announced that housing associations and local authorities will have to cut social housing rents by 1% per year for the next four years, starting in 2016. It was agreed that this reduction in funds will put the long term deliverability of plans to build more social housing and /or affordable homes into question. There was widespread feeling that uncertainty in central government policy is stifling local authority attempts to be innovative and entrepreneurial in this area.
  • There was a discussion about how to solve the issues of getting the construction of housing and regeneration projects off the ground, despite local authorities and RPs having necessary permissions and funding in place. The private home construction market has shrunk dramatically since the market peak.  Local authorities and RPs are interested in ways to restimulate  private sector appetite.
  • In some areas, access to land is a problem. Councils might have already developed all or most of their own land, and wresting land from private owners at affordable prices is proving difficult. There was discussion on how some local authorities have actively brought forward CPOs to implement regeneration and how to promote the necessary case to obtain a CPO without full planning and funding in place for the resultant development scheme.
  • It was noted that while there might be funding available from a range of bodies for affordable housing, funding for the necessary related infrastructure - roads, schools requires use of some more innovative approaches to help get development projects off the ground.
  • Local authorities know first-hand that we are in the midst of a housing crisis.  In London and the South East it is a double crisis - not only are there not enough homes, but even where 'affordable homes' are being built, purchasers need an income significantly above the regional average to be able to afford them.
  • A key challenge is that when the private sector get involved in building new homes and the local authority secures as a planning condition that a number of those homes must be affordable and/or social housing, if the developer tables an assessment which demonstrates the percentage of affordable homes will not be viable, then it is important   to interrogate  viability assessment s and not just concede that condition out of a fear of losing the whole development.
  • Areas with large student populations are struggling to keep up with the demand for affordable student housing. While the vibrancy of large student communities is welcomed, when office blocks and residential blocks are converted into student residences, this reduces the land local authorities have to develop into social/affordable housing.
  • The new powers announced by George Osborne for local authorities to keep the business rates they generate are perceived   by some as a "double edged sword".
  • Areas with a lot of large businesses will benefit, some voiced a concern that it could trigger a 'race to the bottom' with local authorities rushing to out-do each other, continually lowering their rates in an attempt to attract new businesses to their area. There is growing recognition that housing, regeneration and economic decisions have to be taken on a wider geographical scale. Economic growth is not genuine if it is achieved at the cost of attracting jobs away from neighbouring areas
  • However more positively, the reform should incentivise local authorities to invest in infrastructure and development. Now is the perfect opportunity for local authorities to become the engines of economic renewal in their areas and to be bold.
  • Some areas in London are experiencing rapid growth due to Crossrail and Crossrail 2 –highlighting that investment in key infrastructure will reap long term benefits in terms of increasing land values and development returns so that local authorities should increasingly be looking at how they can unlock assets and get involved in housing and development vehicles which will generate revenue..
  •  It was felt that there is gathering momentum for a reform of CIL. Concerns were voiced about how this will affect funding for the vital infrastructure projects required to support large housing and regeneration projects.

Success stories and what approaches have delivered successful outcomes

A number of T&H projects were discussed briefly to highlight the breadth of public sector regeneration and strategic investment initiatives and demonstrate how different local authorities were addressing these challenges:

  • Paul McDermott talked about Red Door Ventures, a company owned by Newham Council that is delivering market and affordable homes for rent.  It is about to begin its third development. This innovative initiative aims to deliver 3,000 new homes over 15 years and is underpinned by investment from the council.
  • Helen Randall discussed the Breckland Bridge project involving Breckland Council, where a modified model of a LABV was used which allows for shares in a joint venture company to be released in tranches once the private sector investor partner had won the Council's confidence. structure than the classic 50/50 LABV model making The modified LABV has a more flexible funding it easier to apply in a variable market conditions and for it to adapt to funding cuts or policy changes introduced by central government.
  • James Hawkins highlighted two examples of local authorities using prudential borrowing to deliver innovative schemes.  The Graven Hill Project involved Cherwell District Council purchasing a 187 hectare site in Bicester from the Defence Infrastructure Organisation as a development site for up to 1,900 self-build homes.  The project will be delivered over a 10 year period through a wholly-owned special purpose company acting as an umbrella organisation with various subsidiaries including Graven Hill Village Developments Limited.  The unique scheme also involves the creation of new commercial space, a primary school, pub/restaurant and local shops and is expected to create up to 2,000 new jobs and apprenticeships in the area. 
  • Another scheme to deliver new waste treatment infrastructure (as part of an integrated waste collection and treatment contract) has just been signed by Isle of Wight Council.  Under the arrangements, the Council will fund the development through milestone payments funded from prudential borrowing.  The project required a fundamental review of traditional risk allocation in infrastructure projects but is expected to deliver significantly improved value for money for the local authority over the 25 year lifetime of the scheme (when compared to traditional PPP/PFI funding structures). 
  • Both schemes offer a potential delivery model which local authorities can consider in the context of their own investment/regeneration plans. 
  • Amardeep Gill explained that on a project he had been working on with Belfast City Council, in order to unlock private sector land, the Council had made use of 'land swaps' to ensure that the limited land available for development was used in the best way.
  • One local authority chief executive gave an example of successful use of local authority CPO powers, explaining that while the CPO process had  taken time to deliver, it was worthwhile because it was now leading to a much needed town centre redevelopment.
  • The same officer also discussed an enterprise zone and discovery park that had been successful in his borough. While they had worked positively in his area.
  • A general discussion ensued about alternative service delivery models for housing and regeneration
  • It was agreed that when alternative delivery models are set up, it is key to their success that they have a firm commercial purpose with a long-term viable business plan

Local government's current relationship with central government

  • It was felt that while DCLG are keen to promote new policy ideas and suggest that local government act as a trailblazer to implement them, in practice they do not now have sufficient capacity to provide full support to help with the delivery of projects hence a team which involves experts with experience of what has worked and not worked on other projects is a vital ingredient of success for any major regeneration project.

Inward/overseas investment

  • Overseas inward investors are now increasingly looking beyond London and politicians are now more open minded and welcome inward investment as genuinely 'new' funding for infrastructure and economic growth.

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