DEVOLUTION + COLLABORATION + INTERVENTION: HOW LONDON CAN MAINTAIN AND INCREASE ITS LEADING GLOBAL POSITION London does very well in our Arcadis Sustainable Cities Index, ranking second on the overall Index beaten only by Frankfurt. It scores particularly well in two areas: People, which looks at social measures and Profit, the economic health and vibrancy of the city. The city of London attracts some of the world’s best talent, and signs of growth and prosperity are shooting up across our skyline. It is in danger, however, of becoming a victim of its own success; its infrastructure is suffering from under-investment, chronic shortage of affordable housing raises a barrier to keeping talent and air pollution levels are high. The report shows that London is a vibrant, successful city but how can it maintain its competitive position? Investment in infrastructure is key to achieving this and projects such as Thames Tideway Tunnel, Northern Line Extension and Crossrail 2 are a start but capacity is still constrained. Our ageing, heavily congested infrastructure is hindering London’s success at competing to be a world-class city. Global connectivity by air is limited as no new runway capacity is likely until 2030 and resilience in energy supply is at its lowest point ever. All this points to new ways of working as the scale of the technical and funding challenge is unique. Collaboration between the public and private sector must create business cases that will leverage the skills, innovation and funding required to stimulate regeneration and growth.
RANKING ON INDEX
PEOPLE
LONDON #12 • BIRMINGHAM #10 • MANCHESTER #14
LONDON #10
PLANET
• BIRMINGHAM #12 • MANCHESTER #14
PROFIT
LONDON #29 • BIRMINGHAM #2 • MANCHESTER #21
Housing is one area London needs to improve to maintain its position on the world stage. Helping to tackle London’s housing crisis through major regeneration schemes and the emerging Build to Rent sector are at the heart of many of the largest capital investments taking place in the capital today. Our recent report, People and money – fundamental to unlocking the housing crisis, looks at new solutions to expand the capacity of the house building industry in the UK. In our view, access to labour and money is more important than planning and land availability in determining how the UK’s housing crisis should be resolved.
The critical issue is how you are able to increase housing output in line with capacity improvement, either through broadening of the supply chain or more efficient ways of building that need less traditional site-based labour. In the absence of this, a house building drive will only stoke the fire of build cost inflation and lead to poorer quality delivery. This scenario is a structural flaw that threatens to create a glass ceiling to new build housing in London irrespective of the amount of land made available or the number of planning permissions that are granted. This now requires clients and their advisors to think differently about how they engage with the supply chain in a different way to avoid projects becoming unviable.
Another worrying feature is that of an affordable London housing market increasingly dependent on cross subsidy and effectively synchronised to the health of the private sales market. Many of London’s G15 Registered Providers are now large developers in their own rights but could be negatively impacted by any future private housing market downturn and of course the current government’s plans to reduce social rents and push on with Right to Buy. Traditional house builders will only develop at a pace that safeguards their risk of sale so any expectation that might fill any delivery gap beyond the house builders could be difficult to realise. There is the potential, with the GLA perhaps receiving a better degree of fiscal autonomy under any devolution deal, to be bolder and look at selfdelivery options combined with London Boroughs implementing greater prudential borrowing to deliver alongside the private sector. What is clear is that institutionally backed Build to Rent is possibly the sector with the greatest potential to influence output, especially if the GLA perhaps builds on its recent Strategic Planning Guidance
amendments to level the viability playing field for Build to Rent and help the large funds better access the development and stock purchasing opportunities. London has the potential to improve its Planet score in the Index, currently ranking 12th. It needs to explore opportunities to accelerate and further develop its strategies in areas such as energy efficiency, air quality, CO2 emissions and recycling within the city. This is an area where business and city collaboration can accelerate delivery. The World Business Council for Sustainable Developments Zero Emission Cities programme brings together expertise from ARCADIS, Schneider, Toshiba and others with City Leaders to design and deliver sustainability programmes. This is an area which is crucial to focus on if London wants to better balance its investments and priorities over the next few years and to maintain competitive advantage. The UK devolution agenda is fuelling greater collaboration between the public and private sector within both the Manchester and Birmingham city regions as they strive to become fiscally neutral. This will be good news for UK Plc. It could also be good news for London as treasury reliance on London generated revenue decreases. However, the GLA, Local Authorities and private sector need to respond with equal enthusiasm and embrace a more collaborative agenda. The London 2020 Vision needs a co-ordinated programme of investment activity where, for example, the London utilities companies’ own business plans align to the London plan priorities for mutual benefit. It is interesting that seven of the top 10 positions on the Index are taken by European cities. Will they be able to maintain these top positions or will the really fast development of Middle Eastern and Asian cities overtake them? Whilst the political agenda supports 32 Boroughs we can expect to see greater collaboration across Boroughs to address housing, skills and education priorities. Should future Mayoral Development Corporations and Housing Action Zones be more prescriptive about housing tenure and mix? Can London continue to rely on free market forces to determine how the 20:20 vision is implemented and the pace it is delivered? Many of the cities presenting the biggest threat to London balance free market forces with much greater city level intervention and prescription on how their visions are delivered. Devolution combined with greater collaboration and intervention presents London with the opportunity to maintain its competitive position.
CONTACT
Mark Prior London City Executive E mark.prior@arcadis.com
www.arcadis.com
9319_LONDON_R
The key issues of financing, business models and innovation in housing production are all inextricably linked and go to the heart of step changing delivery rather than just playing at the edges. Across the UK, approximately 250,000 - 300,000 units need to be constructed each year in order to meet demand 50,000 of these potentially needed in London alone. However, in 2014 we delivered less than half of this.