Memorandum by King Sturge International
Property Consultants (ERF 08)
I am writing as the Head of Urban Regeneration
and Grant at King Sturge. This national and international company
of property consultants employees in excess of 1,000 people and
has 14 offices throughout the UK. One of my roles within the company
includes assisting private sector developers to access public
sector funding to enable their schemes to go ahead. This expertise
in Grant Funding is augmented by my previous post of Director
of Development of Central Manchester Development Corporation where
I had responsibility for encouraging and appraising applications
for Gap Funding for schemes that would assist in regenerating
part of the city centre of Manchester. The comments made within
this report therefore reflects my experience of involvement on
both sides of the process: as grant provider and as grant applicant.
The replacement to the Partnership Investment
Programme was approved in February 2001 and guidance was only
issued by the Department of Transport Local Government and the
Regions in November of that year. I must therefore caveat my comments
with the observation that we have yet to see how the new land
and property regeneration schemes perform in practice. However,
even at this early stage I, and many of the developers/investors
that I work with, have concerns at the limited nature of the programmes,
the resources available and the mechanisms for implementing the
programme.
My overall concern relates to the inadequacy
of the new programme to play a meaningful role in the Government's
stated Urban Renaissance Agenda. It is acknowledged that the problems
of our towns and cities will not be solved by the public sector
alone and it is imperative that the private sector is encouraged
to invest in urban areas, often beset with problems of market
failure and high abnormal costs of a development. To do so it
either requires the public sector to become directly involved
by acquiring land, cleaning it up, servicing it and selling it
onto the private sector at a price which reflects the state of
the local market or in providing gap funding to the private sector.
The former approach is clearly inefficient in that it ties up
scarce public sector resources and limits the number of schemes
that the public sector can afford to pursue. There is no question
that Gap Funding (assisting the gap between the high costs and
low value of an appropriate scheme) is more efficient in that
the minimum amount of assistance to enable the development to
proceed is allocated thereby allowing the public sector to pursue
a greater number of projects.
In my experience spanning almost 14 years of
dealing with Gap Funding regimes, there is no question that developers
appreciate the relative simplicity of this type of funding and
rely upon it to bring forward difficult schemes.
I also have a number of specific concerns regarding
the newly approved Gap Funding schemes.
— The new system of Gap Funding restricts
large developers (those with a turnover over
40 million or an annual balance sheet total exceeding
27 million) to projects within the Assisted Areas.
Large developers generally have greater expertise and easier access
to resources than small developers. On the other hand whilst small
developers often having a better feel for development within their
local areas, they may have difficulty raising funds for projects.
This division between large and small developers seems to have
no rationale and inhibits regeneration.
— A further anomaly is that outside
the Assisted Areas, Gap Funding can only be obtained by small
and medium sized companies, but only if they are going to occupy
the completed development themselves! Apart from this seemingly
arbitrary concession, no Gap Funding is available outside of urban
areas. This is a major handicap for the public sector in an effort
to regenerate towns and cities like Leicester, Bristol, Southampton
and Portsmouth. If the Government's target of ensuring 40 per
cent of all new development takes place on brown field sites is
to be achieved and that the Government's objectives for an urban
renaissance takes place in our cities and towns, it is imperative
that assistance is made widely available to encourage private
sector investment in those areas.
— Our major concern with the new Gap
Funding rules is the restriction placed on assisting residential
development. We have seen the benefits of Gap Funding in creating
local residential markets and bringing life and vitality back
into cities like Manchester, Newcastle and Leeds. However, under
the new rules residential development can only be funded if it
represents a minority element of a mixed use scheme, ie residential
represents less than 50 per cent of the total scheme. It is difficult
to see a scheme fitting this criteria. What other uses could make
up this mix? Retail, office and commercial leisure uses would
generally be viable on their own account. An industrial development
with residential component would be unlikely to create a suitable
environment for residential uses. At present I have two clients
where schemes are being blocked by this rule. If gap funding is
not available these schemes will not take place and approximately
£50 million of private section investment will be lost to
the West Midlands.
I understand that DTLR are thinking about seeking
a derogation from Europe to enable the funding of residential
schemes. This needs to happen quickly to ensure that schemes are
not lost.
— Gap Funding can only be awarded by
the Regional Development Agencies or English Partnerships. The
role of English Partnerships is currently under review and I would
hope that their involvement in urban regeneration is strengthened.
I say this because I have concerns that the Regional Development
Agencies are moving away from urban regeneration and towards the
promotion of economic development, inward investment etc. While
this role is in itself important to regeneration, it leaves a
question as to who, apart from local authorities and local agencies
are promoting the Government's urban renaissance agenda. It is
perhaps no coincidence that the department responsible for the
Regional Development Agencies is now the Department of Trade and
Industry.
In conclusion it is my view the new land and
property regeneration schemes are totally inadequate for the task
of regenerating our towns and cities. A fresh look is required
by Central Government and European Community to ensure that the
public sector has the tools necessary to encourage the private
sector to play a full and necessary role in the urban renaissance.
|
