Memorandum by the National Housing Federation
(GF 07)
THE IMPLICATIONS OF THE EUROPEAN COMMISSION
RULING ON GAP FUNDING SCHEMES FOR URBAN REGENERATION IN ENGLAND
The National Housing Federation is an independent,
non-profit making organisation representing around 1,400 independent
social landlords. Perhaps more commonly known as housing associations,
co-ops, trusts and local housing companies, independent social
landlords own or manage more than 1.4 million homes. They have
a strong interest in the regeneration agenda, and are recognised
as effective agencies delivering sustainable social and physical
regeneration.
The Federation believes that the Commission's
ruling on GAP funding will have a negative impact on regenerating
brownfield sites. However, attention needs to be focused on the
broader issue of resourcing physical and social regeneration.
The Federation believes the outcome of the Spending Review 2000
must contain the resources to deliver the new regeneration agenda.
OUR SUBMISSION
THE CONTRIBUTION
THAT GAP FUNDING
HAS MADE
IN REGENERATING
DERELICT AND
OTHER DIFFICULT
SITES IN
AREAS OF
"MARKET FAILURE"
The European Commission ruling (published 22
December 1999) on the Partnership Investment Programme (PIP) closed
an important avenue of resources for urban regeneration. The purpose
of the programme was to support non-commercially viable regeneration
projects throughout England. At the year end of 1999, PIP had
provided £200 million of support for projects, levering £567
million of private investment, regenerating 1,300 ha of land,
created/safeguarded 860,000 sq m of industrial/commercial floorspace
(Source: DETR Press Release 1241). This is a significant amount
of regeneration activity, and it is a matter of some concern that
the ruling could hinder similar schemes in the future being delivered.
THE CONSEQUENCES
OF THE
EUROPEAN COMMISSION
RULING FOR
URBAN REGENERATION
The key purpose of the programme was to "gap
fund" schemes where the development cost was likely to exceed
the end value. This is a scenario that developers face, commonly
in places where land values are low/negligible; where sites are
contaminated from previous use; and, involve converting existing
buildings. Developing such sites are key to delivering the Urban
Renaissance vision set out in Lord Rogers' Report (June 1999).
Whilst the new Regional Aid Programme will allow
similar support in "Assisted Areas", it will be cash
limited to 20 per cent of the total scheme cost which will also
be the ceiling to public sector support. Often, GAP funding required
is much greater, and the new limit will hinder the most difficult
schemes progressing in the future.
WHAT ALTERNATIVE
SCHEMES SHOULD
BE CONSIDERED
TO REPLACE
GAP FUNDING?
Lord Rogers' Urban Task Force report "Towards
an urban renaissance" made a number of recommendations which
included:
— harmonising VAT rates at a zero rate
in respect of new building, and conversions and refurbishments.
If harmonisation can only be achieved at a 5 per cent rate, then
a significant part of the proceeds should be reinvested in urban
regeneration. (Recommendation 84).
The Federation believes that if VAT were harmonised
at 5 per cent, this would provide an ideal opportunity to create
a fiscal incentive to facilitate the regeneration of brownfield
sites in England and Wales.
The Urban Task Force in its submission to the
Government's Spending Review, reiterated its support for:
— a Renaissance Fund, a fund of £500
million, possibly resourced by the National Lottery, to regenerate
rundown urban areas;
— creating Urban Regeneration Companies
(joint venture vehicles) to deliver major mixed-use urban developments;
— a national public-private investment
fund that can attract at least an additional £1 billion in
private investment for area regeneration projects over three years.
A minimum of 50 per cent of the resources to be directed at residential
portfolios;
— creating revolving funds for land
assembly, so that public investment in the initial costs of site
purchase can be offset by a share of subsequent gains achieved
through regeneration and disposal.
The Federation supports these proposals from
the Urban Task Force and consider them key to delivering the renaissance
vision, and we hope these recommendations will be addressed in
the forthcoming Urban White Paper and imminent 2000 Spending Review
announcement.
We support also English Partnerships' proposed
English Cities Fund, a pilot fund designed to support Regional
Development Agency priority regeneration initiatives. A £100
million budget has been earmarked for four priority areas, with
a £250 million budget increase planned to take the initiative
to other areas. However, this pilot fund is subject to European
Commission clearance.
THE SCALE
OF PUBLIC
FUNDING REQUIRED
TO ENABLE
ALTERNATIVES SCHEMES
TO PRODUCE
EQUIVALENT RESULTS
It is not possible to ascertain exactly how
much will be necessary to meet future GAP funding costs. However,
it would be reasonable to assume that some difficult sites simply
will not be developed, and schemes progressed which may have relied
on PIP funding in the past will be riskier; will rely on other
public subsidies (directly or indirectly); and, extra costs will
be passed on to the future owner(s) of the development.
WHAT PROVISIONS
SHOULD BE
CONTAINED IN
A NEW
REGENERATION FRAMEWORK
There is a regeneration framework already emerging,
albeit in a piecemeal way. The Federation welcomes the:
— National Strategy for Neighbourhood
Renewal;
— focus on urban and rural renewal;
— decentralisation of power to the
regions; and
— proposed community strategies set
out in the Local Government Bill.
But it is not clear if the new agenda is going
to be resourced adequately. The loss of the Partnership Investment
Programme has been mitigated partly by the new Regional Aid Programme.
But this should not detract from the need for a strategy for neighbourhood
renewal which is properly funded and focused on both people and
the physical environment in which they live. Regenerating brownfield
sites is a vital building block for delivering social and physical
regeneration. The Federation believes the outcome of the Spending
Review 2000 must contain the resources to deliver brownfield regeneration
as well as the other essential social and physical elements of
the new regeneration agenda.
National Housing Federation
30 June 2000
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