Future of LondonBREAKFAST 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 New ways to pay Alan Benson Greater London Authority5 April 2011 5 April 2011

OverviewOverview

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

Devolution – housing and regenDevolution – housing and regenLocalism 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 On target for 50k

2008/09 outturn

2009/10 outturn

2010/11 2011/12 2008-12 Total

Rent 6,100 6,992 7,760 11,022 31,874Intermediate 5,996 5,928 4,361 4,930 21,215Number of re-provision completions 1,553Total forecast programme 51,536

Coalition housing agendaCoalition housing agenda

• Deficit reduction• Localism• Questioning

social housing model

Funding and targetsFunding 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 modelThe 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 timetableProcess 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 barriers5Bs – the barriers

• Benefits• Banks• Boroughs• Boards

Shiny new things Shiny new things

• TIFs• LEPs• EZs• NHB• LHC • JVPs• REITs• PRSI/PLI

alan.benson@london.gov.ukalan.benson@london.gov.uk

Patrick Odling-Smee Director of HousingIslington Council5 April 2011

New ways to pay – the local authority perspective

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

2011-12£000

2012-13£000

2013-14£000

2014-15£000

Provisional Allocation Based on 2009-10 Housing 3,700 3,819 3,819 3,819

Estimated Allocation Based on 2010-11 Housing 3,500 3,500 3,500

Estimated Allocation Based on 2011-12 Housing 2,000 2,000

Estimated Allocation Based on 2012-13 Housing 2,000

Total Received in NHBS 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

2011/12 2012/13 2013/14 2014+

Funded 54 58

Other LBI Sites 45 580

Unfunded 75 28 135

Funded RP Programme 867 527 123 180

• 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

RegenerationSocial 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

Change 0 +200 -204 -4 +333 +329

•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 youPatrick Odling-Smeepatrick.odling-smee@islington.gov.uk

Future of LondonBREAKFAST 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 2011New Ways to Save: Shared services, outsourcing, and other new models for council departments and services to maximise efficiency and effect