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Plotting out local authority regeneration projects

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What should local authorities consider when drawing up major regeneration plans? Caroline Pillay at Airey Miller explains

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What should be the main considerations for local authority developers seeking to regenerate some of their aged estates?

Our experience tells us that local authorities should set realistic budgets informed by a comprehensive and transparent viability exercise covering all possible options for redevelopment.

This will bring about clarity on what is possible and help all stakeholders understand the funding requirements and development options and models; that is to say, special purpose vehicles to efficiently deliver shared ownership, outright sale, build to rent, joint ventures (JV) and partnerships.

It is also important to establish feasible time frames for delivery, which will inform the development of an attainable programme budget. The potential cost of buybacks and the associated timescales, logistics and cost implications of undertaking a decant programme will also inform project viability.

The level of resourcing required to compete commercially cannot be understated. As new developers, local authorities will be competing with established commercial developers and so therefore need to be adequately tooled and equipped to do so effectively.

Start as you mean to go on – think as a developer. Understand the deficiencies within your development teams, recruit, train, buy in the expertise to supplement gaps in knowledge. Consider the resource structure and skills a commercial developer would put in place to deliver major projects. For example, Homes for Lambeth sought Airey Miller to become its strategic, commercial and technical advisor for its major estate regeneration project.

Many tenants want to see the regeneration of their local areas, but are wary of being displaced from their homes. What steps can landlords take to ensure that residents are able to buy into regeneration projects?

The regeneration landscape has changed significantly over recent years. We have seen a major shift in the way projects are planned and delivered, with residents playing a more pivotal role in shaping the way strategies are being planned for the transformation of their estates.

This has been led, to an extent, by national strategy and the requirements for providers to engage residents in the regeneration process. However, more significantly, the change in profile of the resident base of local authority housing estates has driven the need for a change in approach.

Residents of local authority housing estates are now more economically and socially diverse, often with capital interests in their estates.

“The level of resourcing required to compete commercially cannot be understated.”

They are better informed and more ready to articulate their views and expected outcomes and, through Freedom of Information Act requests, challenge proposals on viability appraisals and development options.

This change demands that councils take a closer look at how they prepare for regeneration and have a good understanding of the composition and make-up of their communities and ensure proposals are centred on meeting current as well as future needs.

Adopting an approach to early engagement and transparency in the planning process will ensure local authorities are better able to stand up to challenge and well equipped to respond to scrutiny.

Regeneration in London will likely look very different to regeneration in regional towns and cities. What are some of the regional challenges for local authorities?

The process of prioritisation of local needs when considering regeneration will be the same across the country.

However, there will be regional variances that make the case that one size does not fit all. A model for regeneration that may be successful in London may not necessarily be viable in the Midlands or the North.

One of the key challenges is the uneven distribution of funding required to address these regional issues. Different governments have attempted to redress this balance over the years with varying degrees of success.

Each local authority will understand its regional issues and influencing factors. This includes, for example, the private rent levels and their ability to generate subsidy against which affordable units can be delivered.

We have recognised that understanding housing requires data; land and property values have nuances within cities smaller than London. These need to be incorporated into models and viability studies ahead of any strategic thinking.

What can local authorities do to unlock more capacity for new homes on existing sites?

Broadly speaking, a major step is ensuring development and planning work hand in hand to develop a joint vision for the area, one capable of being adopted by the planning authority.

Establishing and nurturing relations with key funding bodies – the Homes and Communities Agency, the Department for Communities and Local Government and so on – and securing their buy-in to the vision and development ambitions is also vital.

Political relaxations on light and density regulations and well-designed placemaking will assist in creating more capacity. It is important to understand many local authority assets can hold the key to much larger development potential through JVs and partnerships with commercial developers. Councils will certainly benefit from such marriage value.

Local authorities should target regeneration as potential for significant numbers. Garage sites and other small sites that are easier targets should be considered in wider decant strategies. Councils can also eye longer-term strategies by keeping land assets for future redevelopment.

The sector is providing more than just social and affordable homes for rent; market sale, shared ownership and private rented now also feature in most new developments. How important is it that we look towards more diversity in tenure for regeneration projects?

Given the cuts in public funding and the shift by local authorities to take on developer roles, the need for mixed-tenure developments as a route through which providers are raising the capital required to subsidise the development will increase the levels of affordable housing.

A variety of tenures are being developed to support scheme viability, all of which are contributing to developing successful, sustainable communities. While there are benefits to mixing tenure in developments, local authorities committed to developing their own homes need to recognise that change will also be required to the way in which housing and estate management services are planned, procured and delivered, and the same emphasis on quality introduced across all tenures.

Diversity in tenure can help dilute pockets of poverty and bring about a mix of economies. This contributes to dispelling the stigmatisation, and stereotypical and negative connotations associated with social housing. It is one of the markers of success in regeneration.

Tenure diversity is often key to the viability of any regeneration project. The surplus created enables the affordable to be viable in a world where there is no access to public subsidy.

What solutions are available for social landlords that do not have the required detailed technical knowledge or know-how to deliver comprehensive regeneration programmes?

The skills shortage in the construction industry is not just limited to contractors and consultants; there is equally a shortage of good quality experienced ‘clienting’ people.

For local authorities, the lack of any real development over many years has left the cupboard bare in respect of those skills. A comprehensive team delivering a regeneration project from a client’s perspective should include:

  • A project director
  • Project manager(s) – subject to size
  • Viability and project modellers
  • Design managers and programmers
  • Development managers
  • Cost consultants and commercial managers
  • Technical and quality advisors

All these must be able to match the skill sets of the consultant consortia who are employed to deliver the project.

This can be expanded, subject to project drivers. For example, Airey Miller has secured the services of Dennis Seal, member of the executive group for trade body Buildoffsite, to advise on offsite manufacturing strategy.

Many local authorities cannot sustain this level of in-house resource. However, consultants, such as Airey Miller, can provide this resource as an in-house out-sourced service offering.

Rather than employing six or seven different consultants, a co-ordinated approach has significant management benefits to any local authority. This model is no different to the approach that would be adopted by any commercial developer organisation and is one that councils would benefit from in development terms.


Biography
Caroline Pillay, a partner at the Airey Miller Partnership, is a project director and is responsible for the co-ordination and delivery of strategic, commercial and technical advice to Homes for Lambeth.


 

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