Delivering growth in a world
of austerity and localism
Alex Plant,
Chief Executive
Cambridgeshire Horizons
Content
• About Horizons
• Context – national and local
• The old model dismantled – new
model emerging?
• Ownership v rent
• Impact of Localism Bill
• Future funding models
• Conclusions
About Cambridgeshire Horizons
Established in 2004 by local authorities of Cambridgeshire
Company limited by guarantee, no planning powers, reports to Board
Horizons' five core objectives are to:
1. Coordinate development and infrastructure implementation.
2. Overcome barriers to sustainable development.
3. Secure and manage funding for infrastructure.
4. Ensure developments employ high quality sustainable design.
5. Communicate the wider benefits of the planned development
CLG cut all funding from April 2011 – Horizons to close in Sept 2011
Context : National
National debt and deficit  focus on cuts
CLG >70% cut in capital, >50% in revenue
Future economic success requires significant
uplift in new homes and infrastructure – esp. in
areas that can deliver private job growth
And huge shortfall in number of homes needed
against number of homes available
Opposition criticism of lack of growth strategy
Not clear we have the right tools for the job…
House building rates falling
Home ownership declining
Tougher to get on first rung of ladder
Year
Median LTV ratio for 1st time buyers
2006
92%
2007
92%
2008
84%
2009
75%
2010
75%
Source : Calculated from data from Mortgages.co.uk and Bank of England
Deposits as %age of income
Deposit as a percent of income,
England average for 2000-2009,
Based on 15th percentile house price
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
%
16
16
17
22
33
29
31
32
35
64
Source: NHPAU analysis
Fourfold increase in 8 years…
And interest rates likely to rise over coming years….
Context : Local
Cambridgeshire (and Cambridge sub-region
in particular) has the right ingredients for
rapid economic growth
One of the UK’s few global brands
Critical cluster for education, R&D, biotech,
hi-tech, medical research, advanced
manufacturing, creative industries, cleantech
One of the best skilled workforces in the UK
but shortages in technical skills and
competing in global market for best people
Cambridge sub-region can help lead UK
recovery: but only if we create the right
conditions for a flexible labour market
Context : Local
• Massive shortage of homes, especially affordable ones
• Real problems for low-waged workers and about to worsen
• Not a NIMBY problem – unlike some parts of the south and east
• Spatial strategy plans for significant increase in new homes
• Plan for homes/jobs together, linked to public transport
• One New Town, urban infill, fringe extensions, market towns
• A14 suspension creates a problem for major developments
• About to lose Cambridgeshire Horizons as focal point for growth
Confidence in infrastructure delivery is key to
continued public and political support for growth
Local picture on building rates is
better than national trends
Recent starts and completions, Cambridgeshire
800
700
600
500
400
300
200
100
0
Q3 2008/9
Q4 2008/9
Q1 2009/10
Q2 2009/10
Q3 2009/10
Notional quarterly completions total
Q4 2009/10
Q1 2010/11
Starts on site per quarter
Q2 2010/11
Q3 2010/11
Old model – growth areas
• Housing Growth Fund and unringfenced capital
• Local Delivery Vehicles, RDAs, GOs
• Regional Spatial Strategy
• Social Housing Grant
• Clear support/cajoling from central Government
• Joint planning arrangements (section 101 and section 29
committees)
• Well-funded HCA, able to use capital flexibly
• Local authorities also reasonably well funded
• But growth areas not in receipt of growth dividends
New model ?
• New Homes Bonus
• Community Infrastructure Levy
• Tax Increment Finance
• Relocalisation of business rates
• Making better use of public sector assets
• Feed in tariffs and other innovative finance options
• Regional Growth Fund
• Affordable Rent
• Local Enterprise Partnerships
Time to embrace private rent?
• Shift in mortgage availability is structural not cyclical
• Average age of buying a first home is now nearly 40
• But demand for a roof still going up – expressing itself
through more demand for renting
• Which should in turn attract institutional investment in
quality rented products (as in Europe)
• And help to redress negative perceptions of private rent
• As “churn” in job market increases, renting may fit better
• Whereas owner-occupation is “sticky”
• Reducing the rate of owner occupation releases capital for
more productive purposes
England an outlier on tenure mix
Source: Christine Whitehead, Cambridge Centre for Housing & Planning Research, “Subsidised
housing in the twenty first century?” 18 March 2009
Localism: a double-edged sword for growth?
• Localism Bill could allow for good developments to come forward
if a neighbourhood supports it, even if their council doesn’t
• But system could become piecemeal and more complex:
“In the Bill as drafted, the lack of a coherent strategic planning
system combined with the complexity of the neighbourhood
planning system may hinder the achievement of the Government’s
key objectives of economic recovery” (RTPI)
“The Bill will definitely not encourage more affordable housing
because many local residents in more affluent areas will not
include very much affordable housing in their own plans for fear of
bringing down the value of their own homes” (Highbury Group)
Delivering Future Growth : Funding
• At present viability is problematic and up-front investment hard to find
• Transport is biggest cost and taxpayer funded schemes will be fewer
• Also high up-front costs for (much-needed) low-carbon infrastructure
• Answers must lie in further devolution of funding to local level and
allowing sensible borrowing against future revenue streams
• If Local Authorities are able to securitise future business rates, ground
rents, feed-in-tariffs, CIL, New Homes Bonus etc., this could solve the
front funding problem, lead to higher quality development, and foster a
more positive approach to growth in local communities
• But excessive HMT concern over public sector debt could stifle this
Delivering Future Growth : Structures
• Two-tier local government is a barrier
• Need to align transport and planning – TfL-style models should become the
norm, especially for growing cities (and not just the metropolitan cities)
• Need systems for pooling revenues/assets across administrative boundaries
• Loss of RSS is a risk – authorities need to come together voluntarily to set
out integrated approaches to growth, transport and infrastructure delivery
• Local Enterprise Partnerships could be part of the answer to the vacuum left
by RSS abolition, and could help fill the implementation gap left by loss of
Local Delivery Vehicles….
• …..but LEPs are currently neither empowered nor funded sufficiently to play
the role they probably need to
Conclusions
• Rapid dismantling of existing structures/funding is a risk to delivery
• Social housing reforms could see low-wage workers priced out of
high-cost areas and so put a brake on economic growth in key places
• Localism Bill could hamper economic and housing growth
• LEPs need powers & cash to counter NIMBY risk in localism
• Private rent market should expand, more affordable/flexible than
ownership but needs institutional investment to enhance quality
• Local control over revenue streams is key. Govt must deliver on
business rates/TIFs to help close the funding gap. Local authorities
must be bold in using these and other tools to support growth