New Ways to Pay

Future of London BREAKFAST SEMINAR SERIES 5 April 2011

New Ways to Pay: Mixed economies for housing and regeneration delivery, using TIF, the new homes bonus and more

New ways to pay Alan Benson Greater London Authority 5 April 2011

Overview • Devolution

• The current programme • The affordable rent model • New ways to pay

Devolution – housing and regen Localism Bill: • Turning off Mayor’s s30 restriction • Turning off HCA powers in London • Royal Assent Nov – commencement Apr 2012 Delivery: • GLA Housing and Regeneration Dept • Co-location Autumn – go live April 2012 • London Housing & Regeneration Board

On target for 50k

2008/09 outturn Rent 6,100 Intermediate 5,996 Number of re-provision completions

Total forecast programme

2009/10 outturn

2010/11

2011/12

2008-12 Total

6,992 5,928

7,760 4,361

11,022 4,930

31,874 21,215 1,553

51,536

Coalition housing agenda • Deficit reduction • Localism • Questioning social housing model

Funding and targets • c£4bn for affordable housing nationally 2011-15 • 150,000 new completions by 2015 • 65,000 already in pipeline (£2.2bn) • 28,000 in London (£1.1bn) so …

• £1.8bn new money available nationally • But no new money until 2012 • And no regional allocation of the national budget

The affordable rent model • Rents up to 80% of market rent (new and relets) • Plus disposals, pipeline conversion & surpluses • Much lower grant levels – all on completion • Renewable, not lifetime, tenancies • Works in London & SE (where rents are higher) • LHA caps don’t apply but £26k total cap will • It is affordable housing in planning terms • It is not social rented or intermediate housing

Process and timetable • Two sets of contracts (national and London) • London contract novates to Mayor •Timetable • Feb: HCA/CLG bidding prospectus issued • May: Registered Providers’ proposals submitted • Jun: Programme signed off by Board/Minister • Apr 2012: Contracts novate to the Mayor

5Bs – the barriers • Benefits • Banks • Boroughs • Boards

Shiny new things • TIFs • LEPs • NHB • LHC • JVPs • PRSI/PLI

alan.benson@london.gov.uk

Future of London

BREAKFAST SEMINAR SERIES 5 April 2011

New Ways to Pay: Mixed economies for housing and regeneration delivery, using TIF, the new homes bonus and more

New ways to pay – the local authority perspective Patrick Odling-Smee Director of Housing Islington Council 5 April 2011

New ways to pay • New Homes Bonus • Land supply – without grant • S106 • HRA Headroom • Regeneration – using the value

View from the bunker • • •

• • •

We are going to be delivering less housing after 2013 Welfare benefits changes “Affordable” rent product is not affordable and politically unacceptable - who is this housing for?

What we do deliver has to be right.

We have to find new ways of doing things.

The housing world is divided

New Homes Bonus • • •

No new money Islington second highest in the country.

Balance of uses

New Homes Bonus

Provisional Allocation Based on 2009-10 Housing

2011-12 £000

2012-13 £000

2013-14 £000

2014-15 £000

3,700

3,819

3,819

3,819

3,500

3,500

3,500

2,000

2,000

Estimated Allocation Based on 2010-11 Housing Estimated Allocation Based on 2011-12 Housing Estimated Allocation Based on 2012-13 Housing Total Received in NHBS

2,000 3,700

7,319

9,319

11,319

Estimated Extra Loss in Formula Grant (based on £176m nationally)

0

0

(2,000)

(4,000)

Estimated Cumulative Net Impact through Formula Grant on Council’s MTFS

3,700

7,319

7,319

7,319

Land supply, without grant • • •

Local authority new build programme Land disposal without grant Capacity to deliver

Islington New Build Programme

Funded

2011/12

2012/13

54

58

2013/14

2014+

Other LBI Sites

45

Unfunded

75

28

135

527

123

180

Funded RP Programme

867

• Current funded programme is £22m • Pipeline programme £22m

580

Getting more from s106 •

• •

Reduced social housing contribution delivered without grant Financial contribution on small sites CIL

HRA Headroom • • • • •

Decent homes vs new build?

Temptation to subsidise the GF Taste for borrowing Land and money not always matched Disposals

HRA Headroom

Regeneration – using the value •

Land assembly

•

Increased densities

•

Place shaping

•

Protecting social housing

Regeneration Social Rented

Shared Ow’ship

L’holders

LBI Sub Total

Outright Sales

Total Homes

Current Stock

533

0

204

737

0

737

Proposed Stock

533

200

0

733

333

1,066

0

+200

-204

-4

+333

+329

Change

•Development cost estimated to be £163.617m.

•developer would have ownership of 333 of these new homes - estimated £102.775m •net cost to be paid for by the developer would therefore be £60.842m •£4.832m a year for the next twenty years •Shared ownership capital receipts of £34m.

• cumulative HRA surplus over the thirty year period of £3.256m

Summary • • •

Local authority control?

Devolution?

HCA?

Thank you Patrick Odling-Smee patrick.odling-smee@islington.gov.uk

Future of London

BREAKFAST SEMINAR SERIES 5 April 2011

New Ways to Pay: Mixed economies for housing and regeneration delivery, using TIF, the new homes bonus and more

Tax Increment Financing

Colin Ross Associate Director (Assets and Infrastructure)

“Introducing TIF would ensure that London can lead the way out of recession by generating and sharing in the “growth dividend”. TIF is also an important practical response to the localism agenda.” Boris Johnson, Dec. 2009 “The new borrowing powers, known as Tax Increment Financing (TIF), will allow Local Authorities to borrow against predicted growth in their locally raised business rates. They can use that borrowing to fund key infrastructure and other capital projects, which will support locally driven economic development and growth.” Nick Clegg, Sept. 2010

How Does It Work?

Where is the Evidence That it Works?

» Initiated in 1950s in California » Features of US TIFs › › › › ›

Lead by Private or Public Sector Local taxation Structure Volatility of Income Basket of measures available Competition

» North of the Border » England & Wales?

Will This Happen in the UK?

» “The LGRR will consider proposals...allowing (Councils) to retain

locally raised business rates, and introducing new powers to enable local authorities to carry out tax increment financing.” Bob Neill MP, Jan 2011

» Timetable › › › ›

Core Group: Treasury/DCLG April 2009 ­ 2010 Local Government Resource Review, completed by April 2011 Outline Proposals, July 2011 Formally Introduce Proposals, April 2012

Issues for the Public Sector

» Government › Displacement › Additionality

» Authorities › Borrowing Powers › Set up costs › Defining the TIF Zone

Conclusion

For information about the Future of London Programme and to book events please visit our website: www.futureoflondon.org.uk

Next Seminar: 17 May 2011 New Ways to Save: Shared services, outsourcing, and other new models for council departments and services to maximise efficiency and effect