The future of regeneration
Every month, Insider invites readers of the Insider News emails to submit their questions about commercial property to top professionals from the North West property industry.
This week, Paul Breedon of Bury law firm Clough & Willis Solicitors, has been on hand to answer your questions on brownfield sites and tax increment financing zones.
All answers are for general guidance only. Each case must be handled on individual facts.
Q: With large-scale schemes on brownfield sites now seemingly unable to find backing, what does the future hold for them?
A: “Since 2003 the government has been encouraging the reuse of brownfield sites reducing pressure for development on greenfield land. Currently about three quarters of new development takes place on brownfield land. The successful remediation and reuse of brownfield sites is likely to remain a priority for whichever party forms the next government. The current government has been working to an annual target of at least 60 per cent of new housing being provided on previously developed land.
“However, with public and private sector investment dwindling, and many development projects grinding to a halt, the challenge of finding new methods of delivering the strategy has found its way to the top of the agenda in the regeneration industry.
“Planning is critical to the process and the shadow housing minister Grant Shapps has frequently criticised the current government’s approach. The Conservatives are committed to amending the planning system. In February David Cameron unveiled plans to reform the planning system which he described as “one of the biggest shifts in power for decades.
“The Conservatives propose to replace Whitehall targets and unelected quangos with a democratic system for national infrastructure and incentives to promote local homes and jobs. Of course increasing the delivery of housing and other development, while simultaneously shifting control to the local level, is a formidable challenge.
“Provided economic recovery can be sustained there should be a positive future for development on brownfield sites. Whoever wins the forthcoming election will determine the manner in which the development is delivered."
Q: What are tax increment financing zones (TIF) and are they the answer?
A: “TIF is a tool that allows a local body to borrow for infrastructure developments by securing a loan against rises in tax revenue expected to be generated by the investment. It is underpinned by the notion that building infrastructure leads to more businesses being attracted to the area, which in turn increases the amount of taxes raised from businesses. The TIF model was created in, and is now used most extensively in the US.
“The TIF model has yet to come to fruition in the UK. Many suggest that this is because there has not been a need for TIF before now as high property prices have kept the market buoyant. With the recession deepening, there is acknowledgement in the sector that it will be much harder to fund regeneration in the future due to a scarcity of public and private sources of finance. The profile of alternative funding mechanisms has grown in recent months.
“As recently as November 2009, Boris Johnson called on the government to allow London to adopt a TIF scheme with a view to raising money for projects and increasing his financial independence from the government. It has been suggested that central government reluctance has prevented TIFs from being introduced earlier. The Treasury, even under a Conservative government, might not be keen. At present all the tax yield goes to the Treasury except for council tax. For TIF to succeed there would have to be a way of the Treasury allowing the public authority to capture at least part of the tax yield.”
Q: What would happen if business growth in a TIF zone is not as great as predicted? Who would be responsible for that shortfall?
A: “Ultimately, this comes down to who has made the investment in infrastructure in the first place, as they will have taken on the risk of recouping their investment from future business rates. This could be a local authority, private developer, or a partnership between the two.
“A number of experts suggest that a pilot TIF scheme could take place without any changes to existing legislation. However, introducing a large scale TIF scheme would be much harder. As previously indicated, central government would have to change its existing policy and legislation before a TIF could be implemented. The All Party Urban Development Group has called for the introduction of a TIF pilot scheme but professionals across the sector suggest that the earliest we might see a TIF scheme proper is by 2011.”
Q: What future for the Homes and Communities Agency (HCA) , especially bearing in mind a possible change in government?
A: “The HCA is the national housing regeneration delivery agency for England. Its stated role is to create thriving communities and affordable homes. The HCA has put brownfield land at the heart of its work. It has the power to acquire and develop any type of land, but its main priority is the regeneration, or bringing about the more effective use of land, for the provision of a community facility or new housing.
“In the North West the HCA is working with local authorities, the Northwest Regional Development Agency, the Government Office for the North West and other stakeholders from the public and private sectors to form an integrated regional strategy for economic and housing growth."
Q: How will a change in government affect the HCA?
A: “There is no commitment in the Conservative Party election manifesto to scrap the HCA and this has been confirmed by my conversation with Robert Davies who is the press officer for the HCA.
“According to Davies the Conservatives have indicated they will keep a “watchful eye” on the HCA but, with it being in essence a delivery agency, Davies is confident that it will survive a change of government. Having said that, the shadow housing minister Grant Shapps has constantly criticised the idea of regeneration flowing down through “a series of complex quangos and layers of impenetrable bureaucracy.” Only time will tell.”