House of Commons - Communities and Local Government Committee

Regeneration - Communities and Local Government Committee Contents

Written evidence submitted by the National Housing Federation

1. Introduction and summary

1.1 The National Housing Federation represents 1,200 independent, not for profit housing providers in England. Its members include housing associations, cooperatives, trusts and stock transfer organisations. They own and manage 2.5 million homes provided for affordable rent, supported housing and low cost home ownership, including an increasingly diverse range of community and regeneration services. Our members are at the heart of regeneration work across the country, whether as key partners in former Housing Market Renewal Pathfinders (HMR) in northern and central England or development partners in regeneration of East London for the Olympics. Housing associations invest around £500 million per year in over 6,800 neighbourhood projects, including programmes to improve the employment prospects of individuals and initiatives to tackle social exclusion.

1.2 We welcome the opportunity to submit evidence to the Communities and Local Government Committee inquiry into regeneration. There has been substantial progress in regeneration initiatives over the past decade backed by significant public investment, but this progress is being threatened by the recession and the focus on cutting the deficit. Declining property values and the withdrawal of funding from banks has undermined the viability of many developments. Many residential and commercial sites have been mothballed and others are in jeopardy as private developers nearing the limits of their financial capacity have withdrawn as partners. Despite this, the Government's new localist approach has massive potential to develop and increase public, private and third sector partnership and help position regeneration schemes so economic growth can drive forward regeneration as we emerge from the recession.

1.3 Economic rebalancing is not just about the growth of the private sector but tackling housing market decline. The link between investment in housing and new homes to the success of the economy means that integration of economic and housing strategies are critical for successful regeneration.[18] Investment in improving and building new homes has a direct impact on improved resident satisfaction, well-being and enhanced quality of life.[19] The Audit Commission calculates that each £1 spent on construction in HMR areas generates £2.84 in total economic activity and each new home built equates to at least 1.25 jobs being created or maintained.[20]

1.4 The key points in our response are:

— We are concerned that the New Homes Bonus (NHB), National Planning Policy Framework (NPFF), and the abolition of Regional Spatial Strategies may reduce affordable housing provision and result in the redistribution of funding from low to high value areas.

— The Government should reconsider a number of its proposed welfare reforms, in particular the plans to reduce housing benefit for working-age families occupying social housing and who live in households with spare bedrooms and the imposition of an overall cap on benefits.

— The Homes and Communities Agency (HCA) needs to ensure that their funding supports the delivery of new homes in regeneration areas. It is critical that these homes offer a range of tenures that meet the needs of local communities.

— Government should set up an independent advisory group to review and recommend innovative ways that local communities could use limited public funds to attract and secure private investment.

— Government should establish a Big Society Catalyst Regeneration Fund of £50 million to support local innovative pilots for piloting new ideas for pump-priming private investment in regeneration areas.

— Government should add an additional £500 million to the Regional Growth Fund (RGF).

— Local Enterprise Partnerships (LEPs) should be charged with developing a planning and housing strategy for the area they cover and have a key role in shaping and delivering regeneration.

— The Government should make a clear and compelling long term commitment to supporting regeneration, backed by a sufficient level of funding to enable private investment in regeneration to be secured.

1.5. We have attached appendices with three regeneration case studies researched for this submission.

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

2.1 Regeneration delivers targeted intervention in areas of market failure to address economic, social and environmental decline. Successful regeneration achieves positive outcomes in these areas that would be impossible without public intervention whilst delivering value for money for the public purse. Successful regeneration requires long term public commitment, collaboration between many agencies and interests and can take around 15-20 years.[21]

2.2 Having drastically cut regeneration expenditure to help address the budget deficit, the Coalition Government are starting from a challenging position. The withdrawal of funding for HMR has the potential to derail the substantial progress already made and means broken promises to local communities. To date the HMR programme has generated £5.8 billion of economic activity, created 19,000 jobs in construction and related industries and helped maintain over 2,600 jobs in the construction industry each year. We support the recent recommendations of the Audit Commission that:

— National government and the HCA should determine how to invest limited resources within the RGF, and any other nationally determined investment streams, to support the resilience of failed market areas.

— Local partnerships should finalise options for structural change to pathfinder partnerships, ensuring that transitional arrangements do not detract from programme delivery and agree key principles to build on pathfinder achievements to date.[22]

2.3 The Government's new approach to regeneration is a localist approach, with locally driven growth encouraging business investment and promoting economic development. There are a number of key benefits that could be secured through this approach. The public sector is fundamental in tackling market failure, which needs to be supported in part by public investment. With the reduction in capital funding budgets Government is focused on removing the burden of bureaucracy and empowering local areas through reforming and decentralising, incentivising growth, removing barriers that hinder local ambitions and targeted investment.

Reforming and Decentralising

2.4 Communities and Local Government's (CLG) publication Regeneration to enable growth sets out measures for reforming and decentralising:

— a simplified and streamlined NPFF;

— increasing local control of public finance and opening up government to public scrutiny; and

— welfare reform.[23]

2.5 We support the principles of empowering communities and removing the burden of bureaucracy that underpins the NPPF and the abolition of Regional Spatial Strategies. However, we have a number of fundamental concerns about the impact and implementation of these measures.

2.6 The NPPF should greatly reduce the amount of bureaucracy and unwieldy guidance that inhibits the effective operation of the planning system. We hope that the meeting of housing need and provision of new affordable homes will be one of these key objectives explicitly identified and supported within the NPPF. The NPPF should build on what we hope will be a statutory requirement for the planning system to deliver sustainable development.[24]

2.7 The Federation welcomes the Government's commitment to increased levels of housing delivery and sustainable development. However, we are concerned that the abrupt abolition of the Regional Spatial Strategies has created a vacuum which our evidence demonstrates has led to the loss of thousands of planned homes. In the longer term it could result in a significant reduction in housing provision and lead to less sustainable patterns of development.[25]

2.8 We also support the principles and objectives of the Government's plans for a Universal Credit in trying to simplify a complex system and removing work disincentives. However, we are very concerned by the impact of some of the proposals in the Welfare Reform Bill. Regeneration areas suffer high levels of social deprivation and unemployment so the impact of these proposals will be particularly acute in these localities. The Government should reconsider a number of its proposed welfare reforms, in particular the plans to reduce housing benefit for working-age families occupying social housing and who live in households with spare bedrooms and the imposition of an overall cap on benefits.

Incentives for growth

2.9 Government has proposed a range of incentives for growth:

— Introduction of the NHB.

— Consideration of options such as granting local authorities powers to discount business rates and retain receipts.

— Amending the Community Infrastructure Levy (CIL).

— Replacing regional bodies with LEPs.

— Reshaping the HCA to provide targeted assistance to local communities and ensuring that land and property assets transferred from former Regional Development Agencies (RDAs) are used to deliver the best possible outcomes for regeneration and value for money for the public purse.[26]

2.10 The Federation supports the principle of incentivising growth but we fear that the proposed measures will not significantly benefit regeneration areas. We are concerned about how the NHB—as currently designed—will operate in practice. The current proposals will result in a redistribution of local authority finances from low to high value areas, and generally from the north to the south. This is because funding will be withdrawn from formula grant to fund a scheme where payment is based on housing values.[27]

2.11 We believe the CIL regulations as currently written prejudice the delivery of affordable housing through S106, historically one of affordable housing's most consistently successful means of delivery. The proposed balancing act between CIL contributions and the viability of schemes that include affordable housing simply cannot be achieved with a top-sliced and mandatory CIL. The lack of provision for exceptions in CIL charging schedules means that for schemes on the margins of viability affordable housing will be reduced. Our firm view is that the NPPF should make it clear that an exceptions policy should normally form part of a CIL charging schedule.

2.12 LEPs have the potential to drive innovation and cross-boundary working, bringing together leaders from business, the third sector and government to help deliver regeneration initiatives in their areas. The Federation is pleased that Government envisages LEPs developing a strategic housing and planning role. This could help deliver many of the Government's ambitions in relation to regeneration. We recommend that LEPs should be charged with developing a planning and housing strategy.

2.13 Following the recent transfer of land and assets from the former RDAs to the HCA there is a real opportunity to maximise the value that these assets can bring to regenerating areas. In particular innovative use of public sector land can help attract private investment and support commercial and residential development. Innovative approaches on how this land is used to support regeneration. For example, deferred payment could help to drive economic growth.

2.14 We support the Government's ambitions to look at creative mechanisms to encourage growth, such as allowing local authorities to grant business rate discounts and the likely announcement in the budget on the creation of ten enterprise zones. There is an opportunity to learn from the 1980s experience of enterprise zones to ensure that they deliver real sustainable growth and are cost effective.

2.15 We support recommendations that have been made by the Centre for Cities and the Work Foundation for enterprise zones that:

— There should be a range of incentives that could be used depending on local need and circumstances.

— In addition to business rate discounts, other measures to support business growth and boost employment such as reductions in corporation tax should be considered.

— Enterprise zones should be aligned with targeted investment in regeneration, skills and infrastructure to support long term sustainable growth.[28]

Removing barriers that hinder local ambitions

2.16 To maximise the impact of growth incentives, government will remove barriers that hinder local ambitions, for example through planning reform and introducing powers that allow local authorities to implement tax increment financing (TIFs).[29] We strongly support the steps that Government is taking to break down the barriers that inhibit economic growth and support the development of innovative financial mechanisms that can help drive forward regeneration. TIFs are one potential tool to support development and infrastructure that would otherwise be unviable and we hope that Government will help unlock the potential of other mechanisms. For example, local asset backed vehicles, regeneration bonds, ethical investment sources (such as Corporate Social Responsibility investment) and Joint European Support for Sustainable Investment in City Areas (JESSICA).

2.17 A key challenge in successful regeneration is that the spatial distributions of market failures cross local boundaries. Social deprivation is inherent in communities where regeneration activity is focused. The spatial distribution of deprivation varies from small pockets within communities or across broad areas, crossing local authority boundaries. Whilst we are strongly supportive of a localist approach this should not be at the expense of cross-boundary working. Area based intervention has been shown to be one of the most effective mechanisms for successful cost-effective regeneration as long as a critical mass for investment is reached.[30] However, targeted investment should not be restricted by geographical boundaries but focus on the spatial distribution of market failure.[31]

Targeted Investment

2.18 Government sets out a range of targeted investments amounting to £20 billion in infrastructure that will support growth regeneration. This includes the national high speed railway, London Crossrail, the £6.5 billion housing budget and £1.5 billion RGF.[32] We welcome the recent announcement of £30 million funding for the Government's national coalfield programme and the £100 million to help bring 3,000 empty homes back into use.

2.19 We also strongly supported the Governments' decision to invest £1.4 billion in the RGF over the next three years. However, the funding falls short of what is needed to achieve significant scale in regeneration. For the first round of bidding to the RGF for £250 million and £300 million, 464 bids were received with a total value of £2.78 billion.

2.20 We understand the Fund's focus on private sector growth and job creation in areas traditionally dependent on the public sector. But in a period of sweeping public sector cuts, we believe this remit is too narrow and ultimately short-sighted. Economic restructuring and private sector job creation are only one aspect of rebalancing the overall economy and needs to be matched by tackling housing market failure and the social and economic problems this causes. The current assessment criteria for RGF does not align with housing schemes as it fails to recognise the wider economic benefits of investment in housing. Future bidding rounds for RGF should be open to new bidders who have the potential to address the wider steps necessary to both rebalance the economy and create long-term sustainable communities.

2.21 The Government's new model for investment in affordable housing allocates £4.5 billion to build around 150,000 new homes. It is a move towards a revenue based model with housing associations being permitted to charge up to 80% of market rents on new build and a proportion of relets. However, we are concerned that the framework will not deliver the right number of new homes or the right tenure mix in regeneration areas as in low value housing markets there is a narrow gap, or even convergence, between market rents and social rents.

2.22 Our modelling has indicated that homebuilding could fall by 53% in Yorkshire and the Humber in the next financial year, 54% in the North-East and 44% in the Midlands. The HCA needs to ensure that their funding supports the delivery of new homes in regeneration areas. It is critical that these homes offer a range of tenures that meet the needs of local communities and new supply should not be focused solely on near market rents but also include social rent, low cost home ownership and specialist and supported housing.

2.23 We believe that it is equitable that as beneficiaries of a low rent, existing tenants pay a small part of their rent to help build new affordable homes, so that others can benefit from the same opportunity. Housing associations should be able to raise existing rents between 1-3% (dependent on property type and area) as part of the investment agreements negotiated with the HCA, where the additional revenue is needed to help facilitate development under the new investment model.[33]

2.24 None of the Government policy initiatives outlined in Regeneration to Enable Growth are designed to deal specifically with regeneration issues, and these initiatives need to be underpinned by a comprehensive and coherent approach to regeneration policy. In an independent report for CLG in 2009, supported by recently updated research, the Parkinson Review set out how the recession has impacted on regeneration. Parkinson concluded that with banks and investors being risk averse and liquidity in the lending market significantly reduced, the financial model underpinning regeneration has been fundamentally challenged. The key risk is that cuts in public investment combined with the recession will damage confidence and potential growth, undermining the substantial progress made in regeneration. The public sector will need to maintain activity and ensure policies around other public projects are aligned with regeneration aims. The Government should play a greater role in investment in long-term regeneration, sharing both the risks and the rewards.[34]

3. 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?

3.1 Unfortunately, it is difficult to envisage how we can mitigate the loss of public funding for existing regeneration projects. The impact is not just economic but has massive human repercussions. A key difficulty in delivering successful regeneration is community engagement and the impact of broken promises make this difficult to achieve. The case studies in the attached appendices are a stark reminder of this.

3.2 We have outlined the limitations of government regeneration policy above and set out measures that would help address these limitations. Many regeneration schemes, and private sector confidence and commitment, are being undermined by the current policy vacuum. Government needs to ensure that it moves swiftly to put in place a comprehensive and holistic regeneration policy that builds on the success of past regeneration initiatives such as HMR and the New Deal for Communities (NDC). A localist approach is the right one but it needs to be supported by sufficient access to public funds and a long-term commitment that lasts beyond the term of one government. Otherwise, the Government's desire to rebalance the economy will not be delivered.

HUMAN IMPACT OF WITHDRAWAL OF HMR FUNDING
NEWINGTON ST. ANDREW'S, HULL, THE SMITH FAMILY

Pensioner Mrs. Smith has set her heart on one of the brand new, energy efficient homes being built by Keepmoat Homes at St. Andrew's Square, part of Gateway's regeneration programme for Newington St. Andrew's, Hull.

Despite suffering from arthritis and breathing problems, Mrs. Smith is the main carer for her gravely ill partner and her eight year old granddaughter, who attends the local primary school. She is an active member of the community, regularly raising money for cancer charities and getting involved in all aspects of local life.

Despite being just a stone's throw away from the smart new homes at St. Andrew's Square, the Smith family is currently living in some of the worst housing conditions in the city. Their property is cold and damp, and is one of a few still occupied in the street. Mrs. Smith is pinning all her hopes for a better future for her small family on the move to St. Andrew's Square. With no HMR funding available to purchase her property, Mrs. Smith will be told this week that her move can no longer go ahead.

(See appendices for a case study of regeneration in Hull).

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

4.1 There is an extensive body of literature available on the lessons to be learnt from regeneration projects. We would suggest these align with four key themes:

4.2 Regeneration is about places and people—successful regeneration needs to be underpinned by a strategic approach with clear objectives and policies for addressing skills and worklessness, infrastructure investment (including housing and improving the physical make-up of neighbourhoods), support for business growth and work within spatial markets, not geographical boundaries.[35] Government is putting in place a number of tools, such as NHB and a welfare system where work pays, that have potential to support regeneration where they are integrated with a comprehensive regeneration policy.

4.3 Housing market failure—housing market intervention is central to successful regeneration, changing both the physical nature of a community and the profile of the people who live there. Investment in improving and building new homes directly improves resident satisfaction and well-being, quality of life and satisfaction with the neighbourhoods. Critical to successful housing market intervention is engagement and partnership working with housing providers. The benefits secured are well evidenced but are long term and likely to take more than a decade to become apparent. [36]

4.4 Community led regeneration is critical to success but in a partnership approach—successful regeneration schemes work with the community to set objectives and set out how they can shape the project as it moves forward. It is vital to manage expectations as communities can have unrealistic expectations and perceptions of benefits. Communities want to shape regeneration but often don't have the interest or skills to oversee the delivery of projects.[37] The public sector needs to take a lead role and LEPs could potentially become a catalyst to coordinate a big society approach to regeneration. For example, much of the success of pathfinder schemes is attributable to allowing local communities and their partners' relative freedom to develop strategies to meet local demands.[38]

4.5 Long-term commitment needed—long-term commitment from government (including long term funding) to regeneration is critical for success.[39] It is also fundamental to attracting private sector investment. The high national profile of the HMR programme was seen as a reassuring and powerful force in drawing developer interest to otherwise unattractive areas.[40] The 2011 Audit Commission review of HMR is clear that the "untimely and premature ending of this programme" when there still needs to be continued public investment to build on progress means broken promises to communities and a legacy of uncompleted projects.[41]

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

5.1 We recommend that the Government:

— Set up an independent advisory group to review and recommend innovative ways that local communities could use limited public funds to attract and secure private investment and examine what barriers need to be removed to support this. This should include a review of a risk sharing approach between the public, private and third sectors. For example, deferred payment on public land, local asset backed vehicles, loan guarantees and regeneration bonds.

— Establish a Big Society Catalyst Regeneration Fund of £50 million to support local innovative pilots, steered by LEPs, for piloting new ideas for pump-priming private investment in regeneration areas. Lessons from these pilots should be shared across all regeneration schemes.

— Add an additional £500 million to the £1.4 billion already allocated for the RGF over the next three years. This new funding should be open to fresh bidders with broader criteria.

— The HCA should ensure that the new affordable housing programme and funding support helps housing associations continue to deliver new homes and refurbish existing homes at scale in regeneration areas. This should include innovative use of public sector land in regeneration areas.

— LEPs should be charged with developing a planning and housing strategy for the area they cover and have a key role in shaping and delivering regeneration.

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

6.1 Fundamentally the success of Government must be judged against their ambition of "putting residents, local businesses, civil society organisations and civic leaders in the driving seat and providing them with local rewards and incentives to drive growth and improve the social and physical quality of their area".[42]

6.2 At the outset of regeneration projects systems should be put in place that effectively monitor and measure progress whilst minimising any reporting burdens. It is important that value for money measurements are not be narrowly defined and it is accepted that it may take more than a decade before this can be properly measured.[43]

6.3 We support the Government in its efforts to minimise reporting requirements by putting in place a single list of data reporting. These should be used to measure progress, ensuring that proposed measures are accurate indicators of progress in regeneration areas. Over recent years The Index of Multiple Deprivation (IMD) in particular has become the best national measure of area deprivation.[44]

March 2011

18 Audit Commission, Housing Market Renewal Programme Review, May 2009 Back

19 Communities and Local Government, Interventions in housing and the physical environment in deprived neighbourhoods Evidence from the New Deal for Communities Programme, March 2010 Back

20 Audit Commission, Housing market renewal: Housing, programme review, March 2011 Back

21 Joseph Rowntree Foundation, Regeneration in European Cities: Making Connections, April 2008

and Communities and Local Government, Key messages and evidence on the housing market renewal pathfinder programme 2003-09, 2009 Back

22 Audit Commission, Housing Market Renewal Programme Review, May 2009 Back

23 Communities and Local Government, Regeneration to enable growth: What the Government is doing in support of community-led regeneration, January 2011 Back

24 A copy of our response on the National Planning Policy Framework is available from www.housing.org .uk Back

25 We made a number of recommendations on this issue in our recent submission to the CLG Select Committee Enquiry into the Abolition of Regional Spatial Strategies. A copy of our response is available from www.housing.org.uk Back

26 Communities and Local Government, Regeneration to enable growth: What the Government is doing in support of community-led regeneration, January 2011 Back

27 Our response to the recent consultation on the New Homes Bonus from www.housing.org.uk Back