Tag Archives: housing

9 Nov 11 Planning – what’s missing from the debate

London.
Creative Commons License photo credit: aaron.bihari

By Kirby Swales

Whilst land use planning decisions often make local news, debates on planning policy rarely do, nor do those debates often make national headlines. This changed last weekend as the debate on the proposed presumption in favour of sustainable development came to the fore, and has intensified since. Greg Clark, George Osborne and Eric Pickles have all had to defend the policy in the face of opposition of National Trust, CPRE and others.

It is interesting to watch the terms of the debate – it is presented as housebuilders versus the protection of greenbelt land and about economic growth and meeting housing need. What seems to be missing from the debate are voices/organisations to represent cities and other urban areas, and discussions about quality.

The new simplified regime and presumption in favour of sustainable development could have equally large impacts on urban areas as on the countryside.  Left to their own devices, developers and housebuilders could do great damage to the urban fabric in their pursuit of profit. In theory, the protections would remain through the adoption of local plans but in practice these could start to be whittled away without the back-up from other Planning Policy Statements. For example, a clear danger would be significant further employment land lost to residential schemes which in turn could hamper prospects for future economic growth (thereby defeating the proposed intentions of the changes). Equally, some Town Centre provision could be lost in an unmanaged way.

Neighbourhood planning may also be presented as a protection but this is still an uncertain area and they could take a long time to get adopted. Also, this is where higher level plans could present problems – what if a local neighbourhood decides it wants a different tenure balance to encourage a more mixed community? Most local plans in London contain blanket rule on requirements for affordable housing and, within that, the balance between social rent and shared ownership. Could neighbourhoods really override the density standards to get genuine family housing? The conformity requirements suggest not.

The other key issue is quality – national planning policy statements point to the need to deliver well designed buildings but it is left to local plans to provide the detail. Many do this but I wonder how successful the implementation is when many of the affordable housing developments in London seem to me to be poorly sited or poorly designed. This is in fact one of the dangers that Peter Hall warned about in his famous footnote of abstention in the Urban Task Forcereport

The other culprit is school building projects – often huge new investments and buildings not properly linked to their physical surroundings or effectively interacting with the local housing patterns.

CABE used to regularly assess new housing developments in the country and the majority were rated as average or poor.  See here for a Northern example. The recent series Secret Life of Buildings was also a powerful argument in favour of raising the awareness and importance of design quality and putting users/residents at the heart of the planning and design process.

Others have written more eloquently about the current debate, such as Chris Brown and George Monbiot. The government has also issued a mythbuster to counteract some of the criticisms.

It is good to see more debate about the land use planning system, but what we really need is debate about what our cities and neighbourhoods should look like, and also how people can best be engaged in the process of creating them. I’d particularly like to hear more voices representing those who live and work in our urban neighbourhoods and social housing estates.

 

Financing Regeneration – A comparison with France

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

Darling, I think you’re doing it wrong

The Budget included several measures to improve regeneration and said yes to property sectors push for Tax Increment Financing. TIF’s, as they are called in the US, are public financing instruments that are widely used in the US to raise revenue for infrastructure, affordable housing, economic and community development, and environmental clean up. It has been pushed in the UK for some time by local government. Most notably the London Borough of Barnet, which has been pushing the Treasury since 2007 to raise revenue for its infrastructure development plans through tax increment financing instruments.

So what is it?
Tax increment financing is a mechanism that allows local governments to borrow against anticipated increases in tax revenue. It is usually structured as a municipal bond, which is sold to investors who are paid back from tax revenue. In the US, the investors also receive a tax exemption for the interest they receive.

Is it good for regeneration in the UK?
There are many characteristics of TIF that makes it an attractive model for the UK. First, TIF models give local government an opportunity to raise revenue for regeneration independently. Councils has been severely limited in their ability, since the Thatcher era, to raise revenue for infrastructure and housing because of a deep rooted culture of distrust in their ability to be credit wise borrowers.

Secondly, the TIF model means that local governments can raise capital without raising taxes. This assumption relies on increases in tax revenue due to growth and investment. So what happens if the movers and shakers with the money bags don’t produce? Or what if you are in an area that experienced stagnant growth even before the recession? Which leads to the next question- Does the TIF model really provide a mechanism for really tackling regeneration? As the Regeneration Framework acknowledged last autumn, regeneration and economic development are not the same and the evidence from the last 30 years demonstrates that despite strong national and regional growth there has been an increasing gap between wealthy and poor areas since 2001. Well before we entered the economic crisis, there lacked a real redistribution mechanism that delivered wider economic benefit and inclusion. And now more than before, there is a need for a regeneration model that addresses the widening gap between wealthy and poor areas.

Will this further regeneration in the recession and after?
TIF is unlikely to provide a real boost of investment to the poorest most needing areas during the recession and recovery. The reliance on growth to secure bonds means that only areas that are most likely to provide quick and reliable growth will be targeted for TIF style financing. Put in another way, TIF is likely to be launched successfully in areas that would have been invested in without government backing in a better market, not the most difficult to transform or economically stagnant areas. TIF’s weakness as a model to finance regeneration is reflected in Section 106 and the yet to be launched Community Infrastructure Levy, which relies on property uplift to incur community benefit. By attaching revenue and benefit to expected growth, investment will only occur in areas that are most likely to be successful.

We need a model for recruiting capital for regeneration and housing that is not connected to local property growth. There is a need for a real redistribution mechanism. The Community Infrastructure Levy, which has been postponed till April 2010, was seeking to do this in part by allocating a portion of the revenue raised to regional and central government for large scale infrastructure projects that would have wider social benefit.

A real redistribution mechanism
The changed economic environment is unlikely for quite a few years to be earmarked by high speculative development and growth that characterised the pre-recession market and in turn fuels tax increment financing, Section 106 and CIL type models.

Investment for regeneration needs to be detached from raising capital for economic development. A simple means of more effectively redistributing revenue would be to pool Section 106 benefits and allowing them to be redistributed more widely throughout a local area or over an extended period of time. This would allow Section 106 revenue to be shifted to poor areas and saved for use on a rainy day.

TIF is a noble effort. There is a need for new locally controlled financing mechanisms, but growth based models will unlikely provide the capital for low investment areas during a period of no growth. Maybe it is time to look at the tax system- particularly tax relief as a way to raise revenue for local areas. The tax increases proposed provide an opportunity to push for tax relief models to finance regeneration.

Community Investment Tax Relief (CITR)
CITR is a finance model where individuals and corporate bodies invest in accredited Community Development Finance Institutions which in turn provide finance for qualifying businesses, social enterprises and community projects. This model is already in place in the UK and would only require raising the incentives and take up. This allows for regeneration to take place from the ground up where local businesses, organisations, and people are financed to drive forward growth.

US Style Low Income Housing Tax Credit (LIHTC)
LIHTC is a dollar for dollar sale of tax relief that individuals and investors purchase and in turn raises capital for affordable housing. Through the sale of tax credits enough capital is raised to lower the amount of debt taken on by housing providers and the cost savings are passed on to home owners. The tax credits are allocated to state and local governments who manage and distribute the credits to assist affordable housing builders.

It is without a doubt that the next few years will require an economic rebuilding effort near or equivalent to that of the post war era. There are real opportunities to address the widening gap between wealthy and poor areas that has characterised the last eight years. And when we finally emerge on the other side, we will have equipped local government and local people with the financial tools to regenerate their areas.

Written by Dekonti Mends-Cole, Rensaisi Senior Consultant

Budget 2009 – First Impressions

At first glance the Budget, with the snappy regeneration-related title of ‘Building Britain’s Future’, seems to offer a lot of positives for the regeneration sector, with the Chancellor committing more money to jobs, green growth and housing. But all this is balanced by a greater demand for efficiency savings from local authorities and lower spending growth and, in the longer term, record levels of borrowing.

First the good news: £600million will be allocated to stimulate housing investment and to kick-start stalled housing developments or dormant sites with planning permission. £100million of this will be used to allow local authorities to ensure higher energy efficiency standards in social housing developments.

The Budget also saw the confirmation of Leeds and Manchester as pilot city-regions, which will give them greater powers to integrate planning, housing, transport, regeneration, employment and skills programmes and increasing their ability to drive sustainable growth and economic development.

Perhaps the most daring move is the £1.2billion that has been given to the Young Persons Guarantee Scheme, which aims to help alleviate the danger that the recession will lead to long-term unemployment by guaranteeing a job, training or work placement for all 18-24 year olds who are unemployed for 12 months. This is a staggering and unprecedented move which will see funding made available for local authorities and voluntary organisations to employ 100,000 young people in ‘socially useful activity’ with 50,000 more jobs on offer in areas of dense unemployment; 10% of these jobs are in the ‘green’ sector. More concrete details about this are eagerly awaited.

Meanwhile a further £260million will be made available for education and training including the expansion of the number of places at sixth-forms and colleges by 54,000 starting in September.

Also of interest is a £750 million Strategic Investment Fund to support advanced industrial projects of strategic importance, £250million of which is earmarked specifically for low carbon projects, helping to create sustainable jobs for the future.

The bad news is that, whilst the Chancellor believes that the economy will recover and begin growth at the end of this year and will grow by 3.5% by 2011, the IMF are more pessimistic, predicting that the UK economy will shrink by 4.1% this year and 0.4% in 2010.

Increased public borrowing, at a record level, combined with less growth in public sector spending and demands for increased cost-saving and efficiency will place further pressure on public sector finances. And whilst the investment to get the housing market moving again are welcome, they represent a drop in the ocean compared to the bail-out of the banks.

The problem, as ever, will be to ensure these initiatives meet the needs of people and places at the neighbourhood level. Renaisi is all about the neighbourhood but the danger is that the initiatives announced in the Budget will not benefit the neighbourhoods and the people that need it most. Take the measures to boost housing development for instance – care will need to be taken to ensure the funding does not simply allow private-sector house-builders to profit at the expense of creating affordable housing for local people. Similarly the Strategic Investment Fund for industry must be careful to ensure local people are connected to the jobs being created and have the opportunity to fully benefit from the investment.

Written by Russell Spencer, Renaisi Consultant