Written evidence submitted by the Kier
Group
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:
— — 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.
— — 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:
— — 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.
— — 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).
— — Possible
future changes to housing benefit regulations that could limit
the ability of RPs to charge up to 80% of market rent.
— — 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.
— — 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.
— — 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.
— — 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.
— — 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.
— — 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.
— — 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.
— — 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" (eg 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 two to five years.
Ultimately, the success of the Government's approach
will be assessed against KPIs, from the human element (eg number
of people housed by tenure, number of jobs created (full and part
time), improvements in the deprivation index, etc) to buildings
(eg number of family units, quality of homes built (Lifetime Homes,
wheelchair access, etc), environmental performance (eg 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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