by Richard Fraser
The last two years have seen several changes to the structure of public funding for regeneration — the most recent addition to the system, city grant, is less than a year old and it could already be time for another change.
When I joined the Department of the Environment’s Inner Cities Directorate in May 1987 on a two-year secondment, urban development grant (UDG) was the medium through which private-sector developers were being encouraged to develop in unpopular and unprofitable inner-urban areas. The grant existed to make up the shortfall between the completed value of the development and all the costs of creating it, including proper finance charges and a reasonable level of developer’s profit.
It is the responsibility of the DOE’s appraisers to satisfy the minister that all estimates of value and costs are fairly and reasonably assessed; that the amount of the grant is the minimum needed to make the project happen; and that it represents good value for money to the public sector in terms of cost per new job, housing units created, and leverage of private investment.
From the introduction of UDG in 1982, it was a fundamental requirement that the appropriate local authority applied for the grant on behalf of the developer. The council would administer the grant payments and receive 75% of the amount of the grant from the DOE.
With hindsight, it is hardly surprising that only a few developers were prepared to “have a go” in the inner cities. Those who did now ruefully tell of the frustrations they experienced in negotiating through numerous local authority committees and subcommittees (each attended by more representatives than the one before), even before the case reached the appraiser at the DOE — who then started all over again!
Urban Regeneration Grant (URG), which was introduced in spring 1987, was accordingly greeted with some excitement. By allowing the developer to deal directly with the DOE, it was hoped that URG would encourage the creation of large-scale regeneration projects. It was only available for sites of at least 20 acres or existing buildings of at least 250,000 sq ft.
URG was highly effective during its short life, but it was overtaken in May 1988 by city grant, which has also replaced UDG and private-sector derelict land grant (DLG) within the 57 priority areas in which these grants were available.
City grant follows the same principles as URG, but covers all projects with a minimum completed value of only £200,000. Smaller projects can still obtain public assistance through the Urban Programme, which is administered by local authorities.
I went to the DOE looking for the fulfilment of three ideals:
- The extension of the principles of URG to small projects.
- The “greening” of unsightly inner-urban areas which are not likely to come forward for early redevelopment, eg the areas surrounding main railway stations and along major radial roads. (It is important to create good first impressions for visitors who might venture forth from the comfortable South East, particularly those controlling institutional funds.)
- The availability of substantially larger budgets for the grant regimes.
Happily, the last two years have seen significant progress towards achieving all three of these objectives:
- City grant has ousted UDG and extended URG to include smaller projects. Local authorities are no longer required to play an intermediary role (although in nearly all cases there is local authority co-operation). As a result, the processing of applications has speeded up.
- “Greening” has become a political issue. Urban Programme facilities are available to local authorities to carry out environmental improvements and, in some of the worst cases, an increased number of urban development corporations (UDCs) have wide powers to provide infrastructure and environmental improvements.
- Annual budgets of £30m to £40m pa over the past few years for UDG and then UDG/URG combined are to be increased to provide £53m a year by 1991-92.
Alongside these improvements in public support for regeneration has been a massive upsurge in business confidence nationwide. Demand for industrial and commercial floorspace has increased dramatically, while rental and capital values have followed house prices upwards at a rate well ahead of that of inflation — a trend which has undoubtedly been helped by these very same inner-city policies.
None the less, I believe it is now time for city grant to move on again. A change in character of the grant system could shift the emphasis to the real “eyesore” sites and buildings which still abound in some of the country’s inner-urban areas. I think the majority of other sites can now be safely left to take care of themselves –growing demand will ensure that they can attract developers without any need for grant aid.
Serious consideration should be given to a revised city grant scheme which should incorporate the following factors:
(1) A scheme for the designation of “eyesore” sites and buildings which physically and environmentally require regeneration. The selection could be made by central government or local authorities and run along the same lines as the “listing” of buildings of architectural merit or historic interest.
(2) Abandoning the 57 priority areas for property developments and making grants available within urban areas countrywide.
(3) City grant should always be available to cover the proven shortfall between the costs of development and completed value, without regard for the present “value for money” criteria. In exceptional cases, this could even include projects where the public-to-private sector leverage shows negative gearing.
(4) Grants should be available in such cases whether redevelopment will have a “hard” end use (ie a building) or a soft one (“greening”, or such like).
(5) Grants for business development projects, where the nature of the development is so specialised that the completed development is of greater value to the company than it is on the open market, should continue to be appraised by the current methods but should only be available in the non-assisted areas (ie those not already covered by the Department of Trade and Industry).
I feel it is essential that the system for grant aid from the public sector should be sufficiently flexible to respond to the changing demands of the private sector. Private developers must be encouraged to venture to places they would otherwise fear to tread if we are to remove the “eyesores” from our nation’s cities.
