New funding models needed to revive renewal
Ministers have been urged to pilot up to six accelerated development zones (ADZs) to kick-start stalled regeneration projects.
ADZs are a UK variant on the tax increment financing (Tif) model, which allows councils to use future gains in business rates revenue generated through developing an area to borrow money to pay for infrastructure.
Tif has been used for decades as a ‘powerful regeneration tool’ to transform communities in the US.
The all party urban development group, composed of MPs and peers, said the ‘manageable’ number of pilots should be launched in the next Pre-Budget report, expected near the end of the year.
The pilots should then be used to create a national ADZ scheme available to cities from 2011.
Clive Betts, group chair, said: ‘We must not allow this recession to prevent regeneration.
‘Piloting new funding models like Tif could open up many doors to new financing that simply would not be available otherwise.’
A combination of tighter credit conditions, slower capital growth, lower public spending and weaker economic performance have seriously undermined the UK’s existing property development and regeneration funding models, the group said.
Tools like business rate supplements and the community infrastructure levy, a development tax to raise funds for essential infrastructure such as schools, hospitals and transport, are unlikely to be able to provide sufficient resources to fund urban infrastructure needs, it added.
The introduction of local and multi-area agreements, where adjoining local authorities work in partnership, have only produced ‘small scale reform’.
The group added that local asset backed vehicles, where local authority assets are used to attract long-term investment from the private sector for new development, were not ‘broken’ but councils need to take on more of the risk in the next two years to make them feasible.
It urged the Homes and Communities Agency to establish a specialist regeneration funding team to help local authorities introduce new tools like ADZs.
More effort must be made to devolve greater financial powers to local authorities to help them drive forward major renewal projects, it added.
Progress to date on this devolution has been ‘slow’.
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