Faced with the challenges of narrowing gaps between deprived areas and the rest of the country and the huge financial resources needed to undertake urban regeneration projects, finding innovative tools for financing regeneration projects has always been a concern for governments.
The US-style funding mechanism called Tax Increment Financing (TIF) that is being examined by Whitehall may be an appropriate tool: it allows local and regional authorities to fund infrastructure projects by borrowing against the future tax revenues that the public works project is expected to create.
A TIF does indeed offer a wide range of advantages for the partners involved, local authorities, private investors and property owners. It is however being criticized for its limits in attracting investment in the poorest and most in needs areas and for the risk of pricing out residents due to the rise in prices and property taxes that it involves.
A similar funding system exists in France to remedy the absence of private initiative investment. Public investors such as the Caisse des Depots et des Consignations (public bank), or Industrial and Commercial Public Establishments develop financial packages to implement infrastructure projects, resulting in a significant amount of financial leverage and launching private investment in most deprived areas.
Such money is likely to be spent on infrastructure investments that are most likely to encourage greater private sector investment, and focuses in France on shopping center reconstruction, damaged co-ownership buildings, and hospitals settlements.
In France, this system has been integrated in a wider funding policy since 2002.
Faced with the complexity and the fragmentation of funding tools, and with the limitations apparent in the programmes implemented over the past 20 years, the French government has been led to implement a new co-financing process forming a one-stop funding centre. The Agence Nationale de Rénovation Urbaine (ANRU) – comparable in a way to the new Homes and Communities Agency – has been created to process files and allocate subsidies; it follows two main principles: fungibility and coordinated delivery. Fungiblity means that the subsidies coming from various sources (state, Caisse des Dépôts et Consignation, private sector and social partners) are used freely, without any relation to where they come from. Coordinated delivery implies that those credits are consistently invested in local projects.
This pooling of credits represents a simplified framework for regeneration projects, and a better joining up of regeneration and economic activity. But above all, it seeks to involve the local actors of urban regeneration. The funds are indeed allocated following a strategic application process, during which the need of the project and the backing-up of the local authority are evaluated, with one of the most important requirements being the political momentum by elected members. There may be disadvantages, but the new agency has the benefits of securing the local anchorage of a project and the involvement of local partners, and this could represent an example of best practice the HCA could look at.
Written by Claire Cunin, Renaisi Graduate Consultant
