Regeneration
1.
How effective is the Government’s approach to regeneration likely to be? What benefits is the new approach likely to bring?
Achieving genuine regeneration, particularly in areas of high deprivation, requires a real understanding of the complexities of delivering mixed use schemes that can revive the local economies of local and wider areas, covering high quality housing, increased employment levels, as well as the creation of new businesses and services that ripple out beyond the immediate area.
Such regeneration requires a combination of private and public sector intervention working effectively and creatively across several disciplines (covering both expertise and funding), sensitivity to the needs of local communities and a need to extrapolate into the long term. This includes the human, bricks and mortar and financial impacts of these substantial developments.
The current economic environment is a challenging backdrop to the Government’s attempts to drive regeneration across the country. Since May 2010, the new coalition Government has sought to aggressively reduce the financial deficit, leading to reductions in public spending in key areas that have hitherto supported the regeneration of the regions, as well as abolishing or merging certain quangos that were responsible in whole or part for supporting these developments.
There are concerns amongst those involved in the sector that changes since the General Election made to the structures and funding of regeneration projects across the country will impinge on delivery. This could either mean that schemes may not proceed, they may be delayed or if they do, their outputs may be compromised by lack of resources or funding.
The key changes since the Election (some of which are still in the process of being introduced) and which are likely to affect the deliverability of projects include the following:
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Reduction of grant funding for affordable housing: Prior to the Election, the previous Government targeted housing and mixed use development with high levels of grant funding as a key means of improving housing quality whilst retaining employment levels in the construction industry.
Whilst such levels may have been unsustainable, since May 2010, grant funding was initially reduced, then cut back substantially to the extent that schemes requiring planning consents through the planning system will no longer qualify for grant funding.
This means that there is now a gap in many schemes across the country that neither developers nor councils are able to fill, apart from by reducing levels of affordable housing or other public realm, Section 106/278 or infrastructure benefits that enable such regeneration schemes to work effectively.
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Switch from social rented to affordable rented housing: Whilst the theory is that lost grant funding will be replaced with higher rents achieved by affordable rented housing, compared with social rented housing the reality is more complicated.
Registered providers (RPs) have a number of concerns about the introduction of affordable rents, including the following:
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The lack of grant funding makes the cost of private finance much higher, due to a greater financing requirement and the extra risk involved for lenders.
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Uncertainty about the future direction of market rents that could lead to affordable rents reducing over time to keep in line with 80% of the open market limit. This could be exacerbated in areas where high numbers of affordable rented properties come onto the market over time (either new or relets).
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Possible future changes to housing benefit regulations that could limit the ability of RPs to charge up to 80% of market rent.
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Demand patterns for the affordable rented product that could mean higher void levels over time.
The concern is that value will be lost from schemes as a result of the move to affordable rented housing, meaning that the delivery of affordable housing will be made more challenging as part of regeneration schemes.
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Move to Localism: The shift towards decision-making being made by local communities, including regeneration schemes, could offer real opportunities for involvement by people who will be directly affected.
However, the wider concern is that local people with little specialist knowledge of complex regeneration schemes may be able to resist or slow down the progress of such projects, unless the process is handled appropriately.
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Abolition of Regional Spatial Strategies (RSSs): Although regarded by the current Government as a bureaucratic imposition on local authorities, RSSs enabled councils to set out the requirements for new private and affordable housing across their areas into the future.
Coupled with the localism agenda, the abolition of RSSs means that local people and councils can more easily resist new developments, including much-needed regeneration schemes as the new homes, businesses and services could be considered as unnecessary in their area.
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Abolition of the Tenants Services Authority (TSA): The formation of the Homes and Communities Agency (comprising English Partnerships and the delivery wing of the Housing Corporation) and the TSA, which were set out in the Housing and Regeneration Act (2008) were considered to be positive means of improving the quality of affordable housing delivery, whilst enhancing the role of tenants and residents in the management of their homes.
However, the more recent decision to abolish the TSA as part of the ‘bonfire of the vanities’ from April 2012 sends out a message to occupiers of affordable housing that their views are less important than before and could limit their ability to provide genuine influence over regeneration schemes at the local level.
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Abolition of the Regional Development Agencies (RDAs): The expertise built up over many years risks being lost by the abolition of the RDAs. Their replacement by Local Economic Partnerships (LEPs) could mean lower resources (including public funding) to commit to regeneration and lead to a more centralised approach, including areas such as inward investment, innovation, key sector development and response to economic shocks.
Inward investment in particular has been very successful over a long period of time at a local level and consideration to restoring this through LEPs should be made.
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Public sector land: There are concerns that in an economic environment where land values have been depressed since 2008, an insistence that councils, RDAs, HCA, NHS, etc. land are forced into a ‘fire sale’ should be resisted as there will be concern that best value will not be achieved.
However, recent announcements from the CLG (Grant Shapps and Eric Pickles) in particular reflect frustration at the inability of the public authorities, especially councils, the RDAs and the HCA to engage meaningfully with the private sector in developing plans to achieve high quality regeneration initiatives. It should be possible to build in future growth in values as part of joint ventures with the private sector that enable all partners to share risk and reward appropriately over time.
Such an approach should be encouraged further by the CLG, such that the public authorities with land that could be used for regeneration purposes should be encouraged to see the wider benefits of utilising their land, possibly whilst adding in the land banks of developers and other private sector landowners to form more comprehensive areas of land to regenerate.
Starting from a position of gifted land, with possibilities for financial returns as schemes take off should be the default position for such public land owners when entering into such regeneration schemes.
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Elimination of Key Performance Indicators (KPIs): The recent move away from the use of KPIs to assess the ability of regeneration schemes to meet specific targets should be resisted.
Only by setting out clear objectives for such major projects and seeking to measure these over time can the real benefits (people, building and finance related) be assessed within and between projects. The CLG should consider the retention of these tangible KPIs as part of all regeneration schemes involving public funding.
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Town planning: There is a need to address the slow pace of making and resolving planning applications at all levels of development, including regeneration. It is difficult to see how this situation could be improved within the current structures without top down KPIs being imposed upon local planning authorities by the CLG.
However, a reduction in the levels of bureaucracy involved a streamlining of the pre-application process and imposing timescales on the resolution of planning applications should all be considered, albeit that speeding up the planning process will be made more challenging by the need for local authorities to cut staffing levels to balance their budgets over the next year or so.
The introduction of the Community Infrastructure Levy (CIL) should not be regarded by local planning authorities as a means of increasing the planning obligations pot. Also, in London, the Cross Rail levy should also not seek to impose additional onerous obligations on developers making planning applications.
In a period of low or no economic growth and with public finances in substantial deficit, the Government will have to tread a fine line between cutting public spending, whilst encouraging timely resolution of planning applications and so encouraging all developments, including regeneration schemes.
The role of resource allocation and how local regeneration initiatives can be supported with the necessary expertise is a fundamental one. Ensuring that there is a clear role for all those organisations involved in such projects, along with certainty of future direction, are fundamental issues that the CLG can help to organise and fund appropriately.
Best practice guidance, standardised planning agreements and legal agreements could be produced by the CLG to help speed up the move towards contractual close between councils and their private sector partners, whilst keeping costs down and avoiding continual reinvention.
2.
In particular: Will it ensure that the progress made by past regeneration projects is not lost and can, where appropriate, be built on? Will it ensure that sufficient public funds are made available for future major town and city regeneration projects as well as for more localised projects?
The recent approach of the coalition Government suggests that much of the expertise built up over many years risks being lost with the abolition of the RDAs and their replacement with LEPs.
Continual reorganisation of the public bodies charged with helping to spark regeneration across the regions is likely to limit the ability of the retained and new organisations to keep that stored knowledge and experience over time.
The experiences of councils and developers in regeneration should enable knowledge to be captured and built on over time. Many councils now have regeneration departments and employ teams focusing specifically on estate or area-based projects.
Many larger developers, house builders and contractors also see the benefits of being involved in major regeneration schemes and are committed to building business in this area. It is potentially an attractive model, as it covers a variety of business streams within large Groups such as Kier, enabling them to work together in partnership and to provide a ‘one stop shop’ for the enabling authorities.
The availability of public funds for regeneration is likely to be insufficient for the foreseeable future, given that not only have funds been reduced but housing values, as well as commercial rents and yields have been subdued since 2008.
The introduction of affordable rented housing may help to offset some of the lost grant funding, but is unlikely to fully compensate for the next few years at least. Other sources of public funding have been reduced and this will make schemes even more difficult to make financially viable.
Meanwhile the allocation of the public subsidy that is available could be made more locally based and targeted. The HCA, for example, appears to be moving more towards an overall four year allocation for a programme of schemes, meaning that individual projects can fall between the cracks.
In some cases, smaller schemes that provide discrete local responses to a specific range of issues may also be squeezed out by a more macro-economic approach to funding regeneration projects.
In many cases, the sponsoring authorities may have to review the aims and objectives of their projects and cut their cloth accordingly. If public funding has reduced and revenues cannot offset the lost subsidy, then areas that may have to be constrained include affordable housing (particularly social rented housing), community facilities, infrastructure, public realm and Section 106/278/CIL contributions.
The private and public sectors will have to work more closely together in future to ensure viability and to provide a balance of uses that will enable projects to proceed. A pragmatic approach will be necessary, working as part of an open book appraisal basis.
The partners should be willing to prepare flexible cascade mechanisms and overage agreements within planning agreements; to protect regeneration schemes against lost values or public subsidy (or indeed increased costs) as they progress over time. Such documents could be produced as standard templates by the CLG to avoid continual ‘reinvention of the wheel’ and to keep costs down.
3.
What lessons should be learned from past and existing regeneration projects to apply to the Government’s new approach?
A top down approach generally does not work and the further away geographically the parties to a regeneration project are the less likely swift and appropriate decision-making is likely to occur.
Councils and developers may oppose project officers being ‘parachuted’ in from central London locations. The HCA has been guilty of this in the past. Whilst the offices of such organisations are currently being rationalised, being able to retain a local presence remains a real challenge.
A fine line has to be taken in these projects between ignoring local people and allowing communities the right of veto over substantial and costly regeneration schemes.
There is a concern that Localism should not lead to ‘nimbyism’ and to delays or the cancellation of important projects that will help to revive strategic regional areas for the longer term and for the benefits of wider communities than those directly targeted.
Appropriate community engagement has therefore become a perennial issue and lessons have been learned from past approaches which have often left local people disenfranchised and excluded from the development of the regeneration initiatives that they are supposed to benefit from.
It is key that buildings are ‘future proofed’ as much as possible at the outset, such that management and maintenance costs are minimised, renewable energy is maximised and CO2 minimised. Higher build costs can translate into lower utilities bills for occupants and lower running costs.
For larger scale projects, use of combined heat and power (CHP) should be encouraged and high levels of the Code for Sustainable Homes encouraged. High BREEAM standards should be applied for commercial buildings.
Lifetime Homes standards and wheelchair accessibility enables buildings to be used by people of all ages and ability. Crucially, if the circumstances of people change, whether through age or infirmity, they can still fully utilise their properties.
Other high standards, such as the HCA’s Design and Quality Standards and the Greater London Authority’s Design Guide should be used as aspirational templates for residential developments. Secured by Design can help to design in high levels of security for buildings at the outset.
4.
What action should the Government be taking to attract money from (a) public and (b) private sources into regeneration schemes?
The role of local charitable organisations should be explored in more detail when reviewing the partners required for regeneration schemes. Their involvement can bring local expertise of the problems relating to an area, the potential for volunteer support and even matched funded financial assistance.
Other voluntary groups and the potential for ‘sweat equity’ (e.g. self build developments) can also bring a wider range of skills and resources to be utilised by the project teams.
The use of EU sources of public finance, including the European Regional Development Fund (ERDF) can add to grants and public subsidies generated at the national level. Greater use of environmentally friendly approaches to construction and ongoing use of buildings may help to unlock such funds.
Crucially, the credit crunch continues and the availability of bank finance remains a real problem across the economy as a whole. Encouraging providers of private finance to release funds for regeneration and other schemes must remain the highest priority for Government.
Possible ways of encouraging more money to be made available include risk sharing, taking equity in schemes, involving banks in the development of schemes and providing cascade mechanisms of the kind described above to de-risk regeneration schemes.
Investors may be encouraged into projects with opportunities to invest in private and affordable rented housing, depending on the level of rents to be charged and the rent guarantees to be offered by the public authorities (if any).
5.
How should the success of the Government’s approach be assessed in future?
A successful approach adopted by the Government will be assessed by thriving communities delivering high quality housing, increased employment, successful businesses and services, reduced crime and anti social behaviour levels in virtuous circles that will ripple out to improve the neighbouring areas, thus enhancing an area much wider than that of the immediate regeneration.
A worry is that public spending at too low a level may result in relatively few schemes actually commencing and starting to generate the benefits that should be anticipated.
At this stage, it is not possible to know whether there is a ‘threshold’ level of public investment that will be required to kick start these complex and challenging schemes. It would be a concern that the public money spent was unable to make a tangible difference to bringing these schemes forward.
However, should the economy revive and private sector values, rents and yields improve, then it is possible that they will take the strain and help to deliver regeneration over the next 2–5 years.
Ultimately, the success of the Government’s approach will be assessed against KPIs, from the human element (e.g. number of people housed by tenure, number of jobs created (full and part time), improvements in the deprivation index, etc.) to buildings (e.g. number of family units, quality of homes built (Lifetime Homes, wheelchair access, etc.), environmental performance (e.g. Level of the Code for Sustainable Homes achieved, level of demolition recovery, retained materials, recycled and reclaimed content, etc.), additionality and other economic development indicators.
March 2011
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