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Regeneration - Communities and Local Government Committee Contents


Written evidence submitted by Hull City Council

1.0  Summary

1.1  We welcome the government's approach to supporting communities to drive regeneration. Many areas, including Hull, have developed their approaches in full partnership with their local communities, as part of a long term strategy for social and economic regeneration.

1.2.1  Delivering regeneration requires a balance of people and place based approaches. In some places lasting change will not be achieved without significant levels of physical restructuring, which requires a long term public funding commitment.

1.3  Successful regeneration requires an alignment of public sector effort and funding to create private sector confidence and a co-ordinated approach to the delivery of people based and place based interventions.

1.4  The government's approach to regeneration is set against a background of significant reductions in public spending. Whilst some of the government's proposed measures are welcome it is clear that they cannot deliver the level of intervention required for lasting change in Hull and the advantages are more than offset by the loss of funding.

1.5  Many of the proposed mechanisms are not well suited to Hull and other places with failing and dysfunctional markets. For example:

—  The New Homes Bonus will be calculated based on net additions to housing stock. Hull needs to demolish substandard housing and replace it with modern family housing, so the net addition to its housing stock will be minimal.

—  The new 80% market rent model only works where market rental values are high enough. In Hull, where market rents are close to social rents, 80% of market rent would not raise additional finance to replace the proposed loss in subsidy.

—  Tax Increment Financing works if the assumed increases in tax revenue are sufficiently certain, not in places where there is a substantial risk of them not materialising.

—  In areas such as Hull where development is only marginally viable imposing additional contributions through the Community Infrastructure Levy will act as a disincentive to development.

1.6  These new funding mechanisms are much less certain than previous ones, with some depending on competitive bidding. The Regional Growth Fund, the only likely source of replacement funding for significant housing interventions, has to cover a wide range of interventions across the country. This makes building community and investor confidence problematic.

1.7  Development of sustainable regeneration programmes that build vibrant city takes significant time and effort in working with established communities. Sudden changes, like those resulting from the impact of financial restraint over the past year, need to be managed extremely carefully in order to ensure ongoing support from residents and public/private sector partners. The need to respond to these changes in funding, have affected the confidence of residents locally who were fully engaged in developing plans for their area and has put private sector investment at risk. Many neighbourhoods have only been partially dealt with, with many families left in difficult conditions in boarded up and/or partially demolished streets. There is also a real risk that the investment to date will be wasted as these neighbourhoods deteriorate. Staff skilled in regeneration and project delivery will be lost.

1.8  The deployment of locally specific fiscal measures could assist in capturing the full benefits of economic regeneration for the city.

2.0  Introduction and Context

2.1  The City of Hull lies on the Humber estuary, a gateway to global trade. The port has always been a key driver of Hull's economy. Hull now has a once in a generation opportunity to capitalise in its economic and manufacturing assets—especially renewable energy—growth areas with the opportunity to attract inward investment and create additional jobs. The city has historically suffered from significant leakage of its wealth beyond its borders into the much more prosperous hinterland of the East Riding of Yorkshire, as middle and higher earning households choose to locate outside of the city. This has resulted in a deep polarisation between the housing markets of Hull and the surrounding East Riding, and a loss of spending power and its multiplier effects within the city.

In January 2011 Siemens announced its intention to build Britain's first major offshore wind turbine manufacturing plant in the city. This will place Hull at the forefront of wind power technology. It will create 800 jobs initially with the potential for a further 9,000 jobs in the supply chain. The plant would be the first in the world to make 6MW turbines, double the capacity of today's biggest.

The Prime Minister has acknowledged the significance of the Siemens announcement saying:

"Brilliant news for Hull and the region. I really believe this could be the start of a new era for Hull. In the years ahead, who's to say your city can't become the world's leader in offshore manufacturing? You can. And with this potential investment, you have moved one step closer".

2.2  Without a co-ordinated approach to regeneration there is a huge risk that past patterns will be reinforced and that the economic benefits of these new investments will leak away as workers choose to live elsewhere and commute. There is a risk that without an attractive housing and neighbourhood offer within the city higher value activities in the supply chain will not even locate in the city.

2.3  Hull is the 11th most deprived district in England.

—  43% of the population lives in the 10% most deprived neighbourhoods nationally.

—  It has the 5th highest benefit claimant rate in England (20.8%).

—  In the 12 months ending June 2010, it had the highest unemployment rate in Britain at 14 .1%.

—  The city has an employment rate of less than 63%.

2.4  As a result many people are unable to afford market rental or sale housing. Low values and low rents within the city result in new development not being viable in most areas.

2.5  Strategic Approach

A co-ordinated, long term, city-wide plan is in place to promote economic growth, in tandem with substantially restructuring of the housing and neighbourhood offer to create attractive places where people will choose to live. Area action plans for key neighbourhoods have been developed based on extensive community and stakeholder engagement. They are truly localist.

Visible improvements are being delivered on the ground, with significant levels of private sector investment being attracted as a result of the confidence that our vision and delivery plans have created.

2.6  The key constituents of this approach have been:

Housing RenewalIn mid-2010 Hull was just a few years into delivering a long-term strategic neighbourhood renewal programme in two areas of the city—Newington and St Andrew's in west Hull and the Holderness Road Corridor in east Hull. These aim to deliver 5,000 new homes, 4,000 frontage refurbishments and the clearance of 3,000 of the worst houses in the city. To date over 700 new high quality homes are completed or on site, 1,500 homes are refurbished and over 1,000 properties have been acquired to make way for new improved housing. The next phase of neighbourhood renewal was under development through the preparation of an outline business case for PFI round 6 funding for the Orchard Park Estate in north Hull.

Building Schools for the FutureHull is committed to improving education standards in the city and its £400 million Building Schools for the Future programme remains intact. The programme includes 10 new and improved schools including three new academies.

Economic Strategy—Hull's strategy builds upon its key assets—the port, established health care industries (including Smith and Nephews) and new opportunities in renewable technologies, especially in wind turbines.

3.0  How effective is the Government's approach to regeneration likely to be? What benefits is the new approach likely to bring?

3.1  There are a number of areas where the government's approach will support the delivery of regeneration. However, there are some areas of particular concern where we do not feel that the tools being offered are appropriate to our market conditions and will not support the level and pace of delivery required.

3.2  Localism

We welcome the government's commitment to localism. Hull has developed Area Action Plans (AAPs) which were community-led by steering groups of locally elected members, resident and community representatives. There is now a significant risk that the sudden and severe withdrawal of funding for these plans will result in a loss of confidence and cynicism in communities that have been heavily engaged in planning and decision making but will not witness much delivery.

3.3  Flexibility

The government's intention to increase flexibility in the use of public sector resources is also supportive. Hull is a "Total Capital Pathfinder" and as such is leading the way in the government's drive towards pooling of local budgets and channelling of public resources more effectively. However it would be unrealistic to expect this increased flexibility to fix Hull's fundamental problems. It will help to make us more efficient but it will not drive a strategic rebalancing of our economy.

3.4  Local partnerships

We agree that local partnerships are essential to successful regeneration. Hull has a track record in building strong partnerships.

3.5  RDA Assets

We support the proposal to use RDA assets to deliver the best possible outcomes for regeneration, rather than simply being sold to the highest bidder. In many cases assets were bought in more prosperous times so this will necessitate substantial write-downs in value. Clear guidance is needed as to how assets will be incorporated into regeneration schemes, on what basis they will be transferred and at what value in order to maximise local outcomes.

3.6  Fiscal Incentives

The principle of retaining business rates locally is attractive, although in the context of the wider review of local government financing and the possibility of service cuts there will be considerable debate about where the benefits should be directed.

TIFs will allow local authorities to borrow against future increased tax revenues to fund infrastructure or regeneration projects. Where these increased tax revenues are sufficiently certain the model will work, but where the risk of tax increases not materialising is significant it will be more difficult. The success of the model will depend on the attitude of lenders to specific projects or the ability of the public sector to underwrite risk.

In relation to CIL the issue of economic viability is critical, due to marginal land values often meaning that contributions of as little as £2,500 per property render schemes unviable in Hull. The next stage of CIL requires the Council to produce a charging schedule and determine the appropriate level to set CIL. This work is being progressed but it is unlikely CIL will raise substantial sums of money, and any requirement will further impact on our ability to require contributions for affordable housing.

3.7  Housing

We have particular concerns in relation to the financing of housing led regeneration, where the tools now on offer will not address the level of need:

—  HRA self financing brings with it a fundamental change with significant controls over capital expenditure in the form of a borrowing limit which will means, in effect, no new borrowing from 1 April 2011 in Hull. As a result the Council will have no resources to address the serious structural issues with much of its system built stock. We will be left with housing that we cannot to afford to demolish and that we cannot afford to maintain. This will severely impact on the city's ability to improve its housing offer to support economic rebalancing and will result in residents living in very poor housing and neighbourhood conditions.

—  New house building in Hull carries additional costs due to the city's ground conditions, which require expensive piling and the mitigation measures needed to address the high flood risk in the area.

—  The New Homes Bonus is a potential gap funding opportunity for new build homes. However, the bonus is based on net additions to the housing stock. This disadvantages places such as Hull where the priority is to improve the quality of its housing stock more than the quantity. Demolition of obsolete and structurally deficient stock and replacement with attractive family homes is required to support economic rebalancing.

—  Our Housing Market Assessment identifies a need for more affordable housing across Hull. Unlike some locations Hull cannot secure affordable housing through Section 106 agreements, although we are currently consulting on a possible 10% target for affordable housing within the core strategy. Viability will be an issue for most sites. New build affordable homes in Hull therefore currently require 50% gap funding from the National Affordable Housing Programme (NAHP). Without this most schemes in the priority regeneration areas are unviable. It is clear, moving forward, that there will be less NAHP funding. The proposed "Affordable Rent Model" will allow social landlords to set rents at 80% of the market rate in order to create an income flow to finance the building of new homes. In locations where Registered Providers (RPs) are currently charging less than 80% of market rent this will provide them with additional income which will help to finance new build. However because market rents are very low in Hull most RPs are already charging around 80% of market rent, so therefore the new approach will not deliver additional homes unless RPs are prepared to cross subsidise from elsewhere.

—  The Regional Growth Fund has been proposed as an alternative source of funding for housing interventions linked to economic outcomes. However the fund is not targeted at housing interventions and has to cover the whole country. Keepmoat our Lead Developer Partner in Newington and St Andrew's has submitted a bid to the fund.

4.0  Will it ensure that the progress made by past regeneration projects is not lost and can, where appropriate, be built on

4.1  Sudden changes, like those resulting from the impact of financial restraint over the past year, need to be managed extremely carefully in order to ensure ongoing support from residents and public/private sector partners. The immediate impact, to Hull, of the national funding changes has been the sudden halting of the acquisition and relocation programme leaving part-demolished neighbourhoods and the residents who remain there in an extremely vulnerable state.

4.2  Community Engagement and Capacity

The loss of community confidence is significant threat to any future work with communities in Hull. Central to all of the regeneration work has been the development of trust and support to help local communities realise joint aspirations. The Area Action Plans are based on years of community consultation and engagement, and the halting of the programme is generating cynicism and mistrust of the regeneration process. The interventions have not only addressed bricks and mortar issues, but the regeneration funding has also made a significant contribution to developing social capital and enhancing community cohesion in the priority neighbourhoods.

4.3  Key regeneration skills have been developed in recent years and many of which will now be lost. These are the very skills needed to work with local communities to achieve their ambitions.

4.4  Private Sector Confidence

Private sector investor and developer confidence is also at risk if alternative funding cannot be secured to continue the regeneration. If alternative funding/delivery mechanisms cannot be identified, an anticipated £400 million in public and £800 million in private sector investment in Hull's homes and neighbourhoods may not be realized and there is a significant risk that a proportion of the over £130 million of HMR funding invested to date and the £125 million of private sector investment already made will be wasted.

4.5  Inevitably plans will be scaled back and less will be delivered. This is particularly worrying given that areas that are now part acquired and part demolished and desperately in need of further investment to take them to a "tipping point" beyond which they can sustain themselves.

4.6  For area-wide regeneration to work critical mass is essential. Keepmoat are currently delivering two phases of development in Newington & St Andrews which total circa 260 houses—but these first phases sit adjacent to dereliction and degradation. If future phases cannot be delivered then demand for these first phases is bound to suffer, and in time values will fall and deprivation will return. The Area Action Plan anticipated 1,800 new houses and 1,800 demolitions. Coupled with refurbishment and public realm improvements this is enough to fundamentally change the character of the neighborhood. 260 new houses alone is not.

5.0  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?

5.1  Hull suffers from low property values across all sectors, and for this reason most major schemes require substantial gap funding. Whilst some of the new mechanisms are helpful to a degree it is difficult to see sufficient funding being available for major city centre regeneration.

6.0  What lessons should be learnt from past and existing regeneration projects to apply to the Government's new approach?

6.1  Area based regeneration is, by necessity, a long term process. The preparation of plans, full engagement with the public, setting up reporting structures and forums for engagement, selection of development partners and approval of schemes all take time and significant financial investment to deliver within a democratic framework. Five years is not an unusual length of time to get an area-wide regeneration programme from inception to the point where results are starting to be delivered, and 15 to 20 years is not unusual to get a place to "tipping point". Continuity of strategy and long term commitment are crucial. The democratic system will inevitably lead to shifts in national priorities and in approaches to delivery, but if these shifts are too sudden and too dramatic they can make area-wide change very difficult to deliver and can potentially lead to investment being wasted.

6.2  Successful regeneration requires the alignment of a number of funding streams and the ability to deliver people and place based interventions in tandem. In 2000 the Preston Road New Deal for Communities was awarded £53 million over a 10 year period to regenerate the estate. The NDC delivered environmental works including play areas for children, garden boundary treatments and creation of parking. A Village Centre was created which provides retail, office space, child care and other public sector and community facilities at the heart of the estate. However funding was not available to address the major problems of structurally defective housing stock in the area, or to create a wider range of housing tenure and type, Therefore despite the NDC investment Preston Road remains one of the most deprived area of the city.

7.0  What action should the Government be taking to attract money from (a) public and (b) private sources into regeneration schemes?

7.1  Building the private sector confidence in the public sector's commitment to delivery and to a long term approach is crucial. Before the HMR programme in Hull no new housing had been built in Newington & St Andrew's for over 20 years. Private investment was non-existent.

Based on their strategic partnership with Gateway Keepmoat have now committed circa £50 million of private investment to Newington & St Andrew's, and subject to their £8 million RGF bid being approved they intend to commit £118 million over the next 13 years. The HMR programme offered Keepmoat confidence that an area wide change could be delivered and critical mass could be achieved. However if the demolition programme cannot continue then the commercial success of Keepmoat's first phases will be at risk and this will put their ability to invest in further phases at risk. If the Government wishes to attract private sector investment then it should invest in creating viable investment platforms.

7.2  A co-ordinated city-wide approach is essential. If Hull can raise education attainment levels, create jobs and improve its housing offer then over time the city's economy will improve, property values will rise and private investment will be attracted to the city. The alignment of funding streams to ensure that education, health, job creation and housing strategies can come together is key. The Government's localism policy should support this concept provided that interventions do not become too fragmented. Local strategic leadership is essential.

7.3  Fiscal measures

For policy makers, the issue of the "north-south divide" is arguably still a major factor in current thinking about how to address the regeneration challenges which become more focused when examined at the regional level and ultimately at local level. As the government seeks to "rebalance the economy" it is clear that for cities such as Hull, the ability to further regeneration activity is compromised by both the fiscal measures put in place to address the national deficit and the potential low baseline (say tax revenues) and ability to benefit from the known or emerging financial fiscal interventions that are being progressed by government. In this context the Budget is likely to provide a clear direction on the ability of local authorities, in particular, to pursue such innovative measures.

7.4  The concern is, particularly given that some may require primary legislation to be enacted, that such interventions, eg Tax Incremental Finance schemes and Enterprise Zones, "underperforming" economies will not be in a position to support market opportunities as they arise, compounded by potential lengthy implementation timescales. Therefore, areas such as Hull that have seen major increase in unemployment indicators, will find themselves at a disadvantage as things stand with a common timescale.

7.5  Hull recognises that the city is in a competitive market for all types of investment, reflected by the approach taken by the Regional Growth Fund. However, as exemplified elsewhere in this submission, it has a number of major market opportunities that have the potential to be realised. To enable these to be maximised, there is an evident need for rapid development (deployment) of local fiscal measures with businesses / market opportunity; including the Governments proposed "tool-kit"; enterprise zones, relaxed planning areas, TIFs, potential business rate retention, etc—in essence progress the ideas and quickly reflect our opportunity to deliver on market potential

7.6  However, the ability to deploy such intervention in a sustainable manner; thereby avoiding the mistakes of previous deployment of such initiatives where the benefits were arguably "short-lived", will be to ensure a combined physical, social and economic approach to regeneration. In short building on lessons learned. In that context we would suggest that businesses, in a leading role, need to demonstrate "good citizenship" behaviours including mutuality in "activising" community relationships beyond what is seen as often cosmetic CSR activity.

7.7  To support such behaviour and recognising the challenges for businesses in raising employment, for localities such as Hull, the ability to also benefit from Work Programme flexibilities to address "local" conditions will be paramount. Changes in the Welfare to Work regimes will present future challenges and this needs recognition. An example of such flexibility could be the opportunity to create a local apprenticeship standard to allow the latent capacity of the local economy over a three period to be exploited—in essence local flexibility to meet known employment demands.

7.8  For "low value—low knowledge" economies such as Hull the ability to promote and develop local investment funds (under local governance arrangements) to realise opportunities arising from academia / high growth potential business sectors, thereby supporting universities in their engagement / economic development role, would be one way of supporting "rebalancing". This would not comprise the competitive environment that the fiscal measures are enabling.

7.9  To aid this general direction, the opportunity for local authorities to consider any investors' wider contribution to the area in terms of planning decisions / policy frameworks plus potential to "fast-track" planning decisions would be seen as beneficial to individual localities, accepting that there may some risk or merely moving the "money" (investment) around.

7.10  It is clear that Innovative models such as Tax Increment Financing and Local Asset Backed Vehicles should continue to be explored, and in some higher value areas these will help but if a degree of urgency is deployed, other localities may have the opportunity to benefit more fully. However, it also needs to recognised and therefore some degree of accommodation made that the new financial interventions, often predicated on a risk and reward scenario, will need to be carefully considered by many local authorities on that basis. This need to duly consider this change of approach from the "grant aid" of previous years may deter some local authorities from engaging, placing relevant local economies at risk.

7.11  We suggest that a piece of work could be commissioned to investigate whether, with the right structures in place, tax breaks could be used to attract investment to deliver specifically defined community-led delivery plans such as those that exist in our priority areas.

8.0  How should the success of the Government's approach be assessed in future?

8.1  Evidence-based policy making is important. However, an assessment of regeneration policy is never straightforward because of the difficulty of distinguishing the effects of policy from other influences. One obvious criterion is the gap, according to a range of neighbourhood renewal indicators, between the most deprived neighbourhoods and the norm. With a focus on community-led regeneration, measures of community empowerment and involvement will also be relevant.

REFERENCES

(1)  Rebalancing the Economy; prospects for the north. The Smith Institute. March 2011.

(2)  Building a Sustainable Future—Regeneration Discussion Paper. The Scottish Government (February 2011)

March 2011



 
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Prepared 3 November 2011