Press release

MANIFESTO TO KICK-START CRIPPLED REGENERATION

Date

26th May 2009

Description

Retailers and councils are backing moves by the BPF to kick-start regeneration projects by paying for development with future tax revenue.

Using money from local government issued bonds which are underwritten by central government (against future revenue from business rates) was pioneered across the USA and is called tax increment financing (TIF). Now big city councils and large retailers are getting behind the property industry’s proposals to bring the scheme to England.

As property developers wake up to a prolonged hangover of no debt and no development, the British Property Federation’s Regeneration Manifesto sets out five measures to get Britain building. The BPF wants to see better use made of public building schemes such as school building. Developers want the public sector to be more innovative in how they spend cash and also in how they use their land.

The manifesto is also backed by the government ‘super agency’ the Homes and Communities Agency which has an £18bn budget to rebuild Britain. Major retailers like Tesco and John Lewis have also come out in support.

The five suggestions in the report are:

• Pay for infrastructure by using the American TIF model
• Expand equity sharing – encouraging councils donate land to make development viable
• Use funding for school and hospital building to lever in more investment
• Reform EU red tape which means councils waste time and money ticking boxes to appear ‘democratic’ when selecting a developer
• Encourage a professional rented housing sector

Ken Dytor, chairman of the BPF’s regeneration committee and managing director of Regeneration Investments Ltd, said:

“The products provided by the property sector form the lifeblood of our society. Without new places to work, live, study and play, our economy will suffer . We’ve seen a step-change in the financial world and this has had a significant effect on the way the property market functions. . No one expects councils to conjure up money they don’t have, which is why our proposals look at making the best of what we’ve got through a number of innovations. . Taking a more joined up approach to school building or looking at how public sector land can be placed in a development scheme could be vital in getting a scheme off the ground and securing the long term benefits that we know regeneration can bring.”

Jeremy Collins, head of retail development at John Lewis, said: "What is needed most is a new partnership structure between the public and private sectors to attract new private capital."

Liz Peace, chief executive of the BPF, said:

“Making regeneration viable from a developer’s point of view isn’t about using public money to enhance the private sector’s profits, it is about enabling partnerships and allowing the public to benefit from what developers do best. Regeneration schemes involve a tremendous amount of financial risk for the private sector but the benefits are clear for all to see.”

Katherine Edwards, director for communities at Tesco, said:

"It is especially important in the current climate that regeneration is not just about the built environment. It is also about the social legacy you leave by stimulating economic development and providing long-term career opportunities. We recognise the important role that regeneration plays in communities and we welcome proposals that will help to stimulate regeneration."

Peter Vernon, chief executive of Grosvenor, said: "Local authorities need to reappraise what they can expect regeneration schemes to deliver in terms of planning gain, and how they can share the risks and rewards with the private sector."

Sir Bob Kerslake, chief executive of the Homes and Communities Agency (HCA), said:

"There is much here which warrants further exploration, and at the HCA we would welcome an active role in this. I am also pleased that the BPF acknowledges that despite the tough times the sector must maintain standards and focus on quality, something which we have made a cornerstone of our activity. There are clearly opportunities to better combine public and private sector expertise, which we feel will be vital in bringing us through this recession in good shape."

Cllr Warren Bradley, leader of Liverpool City Council, said:

"With the recent opening of Liverpool One, creating over 5,000 jobs and transforming the city, Liverpool's vision has shown just how vital regeneration and development is for improving quality of life. Because of the current financial challenges, such schemes would have major difficulty coming through now."

Cllr Richard Leese, leader of Manchester Council, said:

“If we are really serious about growing the UK economy out of recession and supporting the fundamental role that city regions play in this, then we have to enable our cities to raise the finance they need to put essential infrastructure in place. Mechanisms such as Tax Increment Financing have proved to be successful in many other cities around the world, and I am pleased that more and more influential bodies like the British Property Federation are now actively supporting this agenda.”

Cllr John Shipley, leader of Newcastle City Council, said:

“We are particularly committed to using new forms of public sector financing projects to unlock regeneration schemes, and we believe Newcastle’s Science central project is ideal for the Tax Incremental Financing approach. Working with other major cities, we are pushing Government to agree this.”

Cllr Whitby, leader of Birmingham City Council, said:

"Our city region of Birmingham, Coventry and the Black Country has already
carried out considerable work on radical and unique ideas for an Accelerated
Development Zone. Our proposals centre on a £1bn package of improvements to
transport infrastructure, across six local authorities, which would open up
huge areas for business and housing growth. Analysis already indicates the
scheme could generate over 44,000 jobs whilst enabling us to compete for
investment and jobs on equal terms against the most successful city-regions
of Western Europe".

Summary of the manifesto:

Encourage innovative new funding streams, such as TIFs

The BPF wants the government to introduce tax increment financing (TIF) pilots in the UK following the successful use of TIFs in 49 states across America TIFs could kick start regeneration schemes by allowing investment in infrastructure to be financed from the increased property tax base that could be enabled by the existence of improved infrastructure. Different TIF models need to be tested to see which ones work most successfully, but they should only be used for regeneration schemes which would otherwise be unviable. The BPF has been leading the way in calling for TIFs and has the backing of eight of the country’s biggest city councils.

Expand equity sharing and public sector guarantees

Central and local government should be seeking to maintain development pipelines and to use publicly owned assets, covenants and balance sheets to leverage in additional private funding.. This might mean councils providing free land in return for developers building a scheme, where the council would then share in the long term profits. The BPF wants the Homes and Communities Agency, the government’s new ‘regeneration agency’ to help councils set up such joint venture vehicles. In order to make things happen, councils will need to look more closely at how they can use their own assets.

Make better use of government funding and public sector controls

Greater coordination of large capital spending programmes around schools or hospitals could help attract private sector investment and ensure more schemes go ahead. Councils can help by cleaning up brownfield sites and selling them to developers to ensure key regeneration schemes get built, leading to new homes, jobs and opportunities for the community. Councils should focus on producing masterplans for significant regeneration schemes, involving the private developers likely to be working with them at the earliest possible stage.

Remove damaging and costly EU red tape killing off regeneration

The interpretation of an EU ruling - the Roanne case - has led to the unnecessary stalling of many planned regeneration and development schemes across the UK. Before the Roanne case, it was generally understood that the normal EU procurement requirements would not apply to public/private development partnerships or development regulated by town planning law. However, Roanne has cast doubt on whether development agreements entered into by the public sector without a formal financial tendering process are lawful. The Government needs to issue clear guidance in the light of the decision by the European Court of Justice.

Encourage a professional rented housing sector

Following moves by the HCA to build a professional rented sector with funding from institutions and other backers, the BPF wants changes to the way stamp duty is charged in transactions involving bulk purchases of residential property to encourage investment. The barriers holding back the emergence of residential real estate investment trusts (Reits) also need to be removed if the HCA’s initiative is to be successful.. Despite residential property being the country’s best performing asset class, Britain’s obsession with home ownership has meant that, until now, renting has been stigmatised, thus missing out on the investment benefits that a large scale residential rented sector could bring. The plan to create a new professional sector would see homes built for let and managed en masse, like hotels or retail parks.

Downloadable documents

Regeneration manifesto - 144kB.

KEN DYTOR INTERVIEW ON RADIO 5 WAKE UP TO MONEY - 5MB.

LIZ PEACE INTERVIEW ON RADIO 5 BREAKFAST - 3MB.

BIRMINGHAM POST Feature - 316kB.

ESTATES GAZETTE feature - 5MB.