Many urban regeneration projects that rely on private sector funding are stalled and in danger of being scrapped as cash becomes ever tighter. But the British Property Federation believes that it may have a solution: it proposes that money from multibillion-pound government programmes – to build hospitals and schools – should be used to part-fund regeneration projects.

“Rather than seek a bailout, property developers want to work more closely with the public sector ensuring that more is made of the opportunities to enable stalled development schemes to happen,” the federation said.

It outlines five ways in which this could happen – without costing the Government any extra money – in a Regeneration Manifesto.

1. Encourage innovative new funding streams.
The key recommendation is for tax increment financing (TIF) trials to be set up. It says that TIF could finance schemes that would not otherwise be viable. The federation says that it has the support of eight councils on this, including Birmingham, Manchester and Liverpool. The basic principle of TIF is to allow money for infrastructure projects to be borrowed against a future increase in property tax revenues. TIF is popular in the US.

2. Expand equity sharing and public sector guarantees.
The federation recommends “using publicly owned assets, covenants and balance sheets to leverage in additional private funding”. This could include councils providing developers with free land in return for developers building a scheme where the council could share in the long-term profits – housing and retail could be built above schools or schools could share campuses with leisure and retail schemes.

3. Use existing public sector funding and powers more effectively.
This might include “councils cleaning up brownfield sites and selling them to developers to ensure key regeneration schemes get built”. The federation also wants private developers involved when regeneration plans are drawn up.

4. Reform EU procurement red tape.
The federation asserts that the interpretation of an EU ruling has led to the stalling of many regeneration projects by casting doubt on whether development agreements entered into by the public sector without a formal financial tendering process are lawful. The federation has called for this issue to be clarified and for guidance to be issued. It said: “Many regeneration schemes are being delayed or scrapped because of overzealous interpretation of EU procurement rules.”

5. Encourage a professional rented housing sector.
The federation has called for stamp duty to be reduced on bulk purchases of residential property to encourage investment and for it to be made easier for residential real estate investment trusts (Reits) to be set up. “The Reit regime introduced in 2007 does not readily accommodate residential property for detailed commercial and technical reasons that we have sought to explain to Government. Failure to make these changes in the Budget was a missed opportunity and we strongly urge the Government to reconsider their position,” it said.

Explore Management

• MBA