The Government is in talks with property developers about introducing a type of local authority-backed bond scheme to finance stalled regeneration projects.

The plans, expected to be outlined in the Pre-Budget Report in the autumn, emerged as the Prime Minister announced further funding to provide affordable housing in the Building Britain’s Future report that will create 45,000 construction jobs.

The British Property Federation (BPF) said on Monday that sites could remain mothballed for years unless other sources of funding were found.

Under the new financing proposals outlined in the report, a type of bond would be underwritten by the Government and sold to investors as part of a funding system called Tax Increment Finance (TIF). The borrowed money is used to pay for basic infrastructure on mothballed sites, which in turn allows building work to begin. The investors get their money back after an agreed term, out of the revenue from business taxes collected from occupants in the new development. Business rates are paid directly to the Treasury and the BPF said that new legislation would be required so that revenue from business rates in a TIF scheme could be ring-fenced and returned to the local area.

The finance regime, which is already popular in the United States, could be used to restart high-profile development schemes such as Battersea Power Station, in London, the BPF said. Plans to regenerate the site by the Thames have been hampered by a lack of transport links. Other councils, including Manchester, Birmingham, Edinburgh, Liverpool and Newcastle, back the proposals, along with the developers Grosvenor, Land Securities and Westfield.

The report is the result of a parliamentary inquiry by the All-Party Urban Development Group, which took evidence from public and private sector representatives.

Liz Peace, the BPF chief executive, said: “TIF is something the industry has been looking at for years and this report gives welcome backing. We are already engaged with Government on taking TIF pilots forward.”

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