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 6,992 5,928
2010/11 7,760 4,361
2011/12 11,022 4,930
2008-12 Total 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 • EZs • NHB • LHC • JVPs • REITs • PRSI/PLI
alan.benson@london.gov.uk
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
580
• Current funded programme is £22m • Pipeline programme £22m
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
» »
North of the Border
Features of US TIFs › › › › ›
Lead by Private or Public Sector Local taxation Structure Volatility of Income Basket of measures available Competition
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