The government’s criteria for much of its housing funding risks exacerbating the divides exposed by the Brexit referendum
Brexit has put regeneration back on the agenda as Theresa May extends an olive branch to northern Labour MPs.
The £1.6bn stronger towns fund unveiled this month was intended to offer hope for the revival of areas ‘left behind’ by the retreat of heavy industry to provide political cover for northern and Midlands opposition MPs mulling over whether to support the government’s EU withdrawal deal.
While the level of funding offered was widely branded “tokenistic”, the move nevertheless marks a break with the past 10 years during which regeneration funding has dwindled with scarce public resources targeted towards addressing housing needs in high growth parts of the country.
These priorities were underlined last autumn when the Ministry for Housing, Communities & Local Government snuck out an announcement on its website that housing investment will be targeted more tightly on higher growth areas.
Under the new formula, 80% of the government’s £7bn housing programme will be earmarked for areas of “highest affordability pressure”. Only three authorities north of the M62 will qualify for access to this larger pot, according to an analysis by the Key Cities group of urban authorities.
The remaining councils in the north-west, north-east and Yorkshire & the Humber, which includes nine out of 10 authorities in Greater Manchester, have been left to ﬁght it out for the other ﬁfth of housing cash. Andy Burnham (Lab), mayor of Greater Manchester CA, said the announcement made it hard to give the government the “beneﬁt of the doubt” on its professed commitment to the Northern Powerhouse initiative.
east lancs paper mill gate
LGC has been exploring the way these priorities, albeit less bluntly, are reﬂected in how the housing infrastructure fund is allocated. The HIF is worth £5.5bn in total with the latest £500m tranche, announced in last autumn’s Budget, included in the £7bn that is subject to the new geographical targeting formula.
The HIF was set up with the objective of plugging the infrastructure funding gaps that often make marginal sites unviable for development.
The problem for many, particularly northern local authorities, is that the methodology used to determine HIF payments does not favour bringing back into use the tracts of brownfield still vacant following the deindustrialisation of the 1980s and 1990s.
It says the bidding authority must demonstrate the economic beneﬁts that will be that recouped as a result of HIF investment.
To judge bids, Homes England uses a ‘beneﬁ to cost ratio’ (BCR), calculated on the basis of the land value uplift that will be achieved by changing the site from its existing use to housing. The other side of the equation is the total funding provided by central government to bring the site back into use.
The next step is to work out the proportion of housing that is likely to be additional to what would have happened without intervention.
The ﬁrst problem for northern urban authorities with this methodology is that the value of land and housing across the region is typically much lower than in the more affluent south.
But build cost vary much less across England, making it less likely that the cost of infrastructure works will be recouped when sites have ben redeveloped, depressing the BCR.
The problem with the housing infrastructure fund is that it favours sites where there is the greatest uplift for the lowest level of investment
Tracy Harrision, Northern Housing Consortium
Chris Brown, chief executive of specialist regeneration developer Igloo, says it is “undoubtedly harder” to regenerate northern brownﬁeld land than it was 10 to 20 years ago when so-called ‘gap funding’ grants existed to cover the costs of remediating such sites.
“The typical scenario is a former industrial site on the edge of a town or city centre where the values are at best at or slightly above the cost of building the house so there is no market for reclaiming the land,” he says.
“Public authorities, which generally are the local authorities, are really struggling to make regeneration happen in those circumstances.”
Tracy Harrison, deputy chief executive at the Northern Housing Consortium, which represents social landlords across the north of England, agrees.
“The problem with the HIF is that it favours sites where there is the greatest uplift for the lowest level of investment, which generally isn’t northern sites.”
The problem of low values is compounded on those sites contaminated by past industrial uses. The costs of bringing such brownﬁeld sites back into use require grants and not loans, says a regeneration professional who has worked across England.
Eamonn Boylan, chief executive of the Great Manchester CA, has colourfully described the ‘periodic table’ of elements in the ground lying under his conurbation’s brownﬁeld sites.
He says: “By using a beneﬁt cost ratio that relies on land value as its primary measure, the government’s own approach to investment risks reinforcing existing inequalities rather than supporting transformational change.
“That is the transformation needed both in Greater Manchester and across the north of England, which is essential if national ambitions around housing delivery are to be achieved.”
A spokesperson for Homes England said its “mission” was to “increase the supply of homes in areas of highest demand” and it was “required by the government to use cost beneﬁt analysis to determine which projects will deliver the most beneﬁcial outcomes and demonstrate value for money to the taxpayer”.
However, the agency pointed out it has used its own resources to acquire ex-industrial sites in the north including a paper mill in Bury, a former locomotive works in Bolton and a chemical plant in Rochdale.
Of all the sites on the government’s register of brownﬁeld sites, Ms Harrison has calculated that half have permission to be developed, suggesting that commercial viability is a bigger problem on such sites than planning.
The Lancashire branch of the Campaign to Protect Rural England is currently carrying out a study, comparing brownﬁeld sites in the county and London, to see what is holding backing regeneration in the north-west.
Of the nine sites allocated more than £10m in last year’s ﬁrst £2.3bn round of the HIF, two were in the north of England. Of the 20 prospective developments awarded exactly £10m, four were in the northern regions, including two in Cheshire.
The way funding is being targeted is compounded by the looming loss of European regeneration funds, which have played a valuable role in helping to sustain regeneration projects in the poorest parts of the country over recent decades.
Housing minister Kit Malthouse defends the way the government has targeted its investment on high growth parts of the country.
He says: “Markets vary signiﬁcantly across the country and it’s right we focus the majority of some funding schemes on areas where it’s hardest to afford a home.
“But no area is excluded from funds and we encourage applications from across the whole country.”
The government can point to ﬁgures showing that nearly three-quarters of its £4.5bn home building fund long term fund has been for brownﬁeld projects.
Igloo’s Mr Brown, who was a member of the urban task force that was set up by the government in the late 1990s to improve regeneration policy, acknowledges that the government is keen to maximise housing output. But he argues that the focus on already booming areas doesn’t tally with the prime minister’s professed mission to address the grievances of the so called ‘left behind’ areas in the wake of the Brexit vote two and a half years ago.
Instead it is stoking further growth in areas that are already overheated, further exacerbating the already lopsided nature of the UK economy, Mr Brown says. “This is creating more economic activity in areas that already have more economic activity so in the context of Brexit it is not exactly what they set out to do.
“There is a danger of some of these places getting into a spiral of decline, which they will never get out of or will be increasingly expensive for the state to get back.”
Ms Harrison says her consortium’s research indicates that feelings of disenchantment are often rooted in how people feel about the places that they live in.
“Tenants were saying it’s not the tenure that stigmatises but the place. If there is no investment in a place there will be a stigma attached to it.”
Pointing to a link with the June 2016 vote to leave the EU, she says: “A lot of the areas lacking regeneration investment are the areas that voted for Brexit.”