Securing funding for placemaking schemes can be challenging. These are long-term projects, requiring patient capital. Sites in the right location and capable of supporting large schemes are highly sought after and delivery of placemaking schemes requires particular expertise. With the New Towns Taskforce, the British Infrastructure Taskforce, Homes England, the British Property Federation and others all looking closely at delivery and how the public and private sectors can work together, the opportunities for Public Private Partnerships (PPPs) look bright.
At a recent New Homes Summit, the English Cities Fund (a partnership between Homes England, Legal and General, and Muse), Habiko (Muse, the Pension Insurance Corporation and Homes England) and Made Partnership (Barratt Redrow plc, Homes England and Lloyds Banking Group) were held up as success stories. However, elsewhere, relationships have proven more challenging. Earlier this year, Wandsworth Council and Taylor Wimpey London announced the “mutually-agreed dissolution” of the Winstanley and York Road Regeneration joint venture.
Improving the experience
When troubleshooting PPPs, we have the benefit of hindsight and time. In the thick of negotiation, the parties have no crystal ball and are usually undertaking large and complicated projects with myriad stakeholders, multiple contracts and numerous important, and often conflicting, priorities.
• Timing is everything
A UK parliamentary term lasts a maximum of five years and our local government elections come around every four years. Yet, in 2024, Lichfields reported that “sites of 1,000+ dwellings take, on average, five years to obtain detailed planning permission, then a further 1.3-1.6 years to deliver the first dwelling”. That timescale does not factor in the time spent in steps such as procuring development partners and assembling the site.
The challenges of short-term politics for long-term problems and large-scale developments are felt by both the public and private sectors. One looming threat is the impact of Reform UK’s approach to net zero on regeneration projects tied to green infrastructure. Securing cross-party consensus on placemaking projects gives the private sector the reassurance that their significant investment of money, time and resource is worthwhile.
• Common understanding
Time spent at the outset of discussions is crucial to ensuring that the parties’ visions, their understanding of what each brings to the table and their exit strategies are aligned. Inevitably, there will be conflicting priorities and preferences along the way, and while a clear decision-making and deadlock process in the contracts (see further below) will allow progress, one party feeling disgruntled at the deal it has struck can lead to a very uncomfortable long-term relationship.
• Communication and trust
Communication and trust are the cornerstone of any successful relationship and should be actively promoted in a PPP. While contractual mechanisms are key, the value of people who get on with each other and share a common understanding, regularly and openly discussing progress, successes and concerns, far outweighs any contractual obligations.
• Viability
Balancing the public sector’s need to demonstrate best value with viability has been described as a “dark art”. Each party’s requirements, whether it be affordable housing or workspace, public realm or sustainability initiatives, all come with a price tag. These need to be considered alongside costs which may be less obvious at the outset. Delay is a massive cost to any scheme and can occur at various stages through a project. This may stem from difficulties in securing planning, Gateway approvals under the Building Safety Act 2022 or securing vacant possession.
• Recognising the differences
Acknowledging the different nature of the parties is important. Of course, these differences are present in all PPPs, but they can be particularly apparent in placemaking schemes where the relationship must endure over several years. By way of simple example, local authorities typically do not have the institutional ability to respond to decision-making requests at the same pace as, say, a private equity house.
The same can be said of similar land-owning institutions such as universities and charities, all of whom are likely placemaking partners, given their longer-term focus and priorities. But a recognition of the constitutional constraints faced by these bodies is crucial. All parties must be clear on the internal processes of the partner organisations, as well as any key meeting, signing and decision-making dates.
Structure
In theory at least, PPPs combine the innovation and efficiency of the private sector with the public sector’s commitment to public value and accountability. Joint ventures of this kind should offer an ideal model – the ability to unlock public asset value and to generate a social dividend, while delivering premium returns to developers and investors, is an alchemy worth seeking. However, success depends on robust, clear governance structures, particularly in the three critical areas of decision-making, deadlock resolution and exits.
Effective decision-making frameworks are essential to ensure that both public and private partners can influence the direction of the venture. It is intrinsic to the model that the parties, while largely aligned in terms of delivering the project, will have different priorities and strategic goals. There may well be a natural tension between, for example, a local authority’s desire to deliver affordable housing, public spaces and social inclusions and a developer’s key product of saleable units.
A balance invariably needs to be reached, not least so the project is viable, and mechanisms must feature to ensure one party’s priorities are not met by the sacrifice of another’s. These typically include the concept of reserved matters (decisions over which the relevant party has an absolute veto), clear voting rights and initiation of relevant governance and oversight bodies.
The prospect of deadlock is inevitably a factor in any venture where partners have different priorities or risk appetites, as they typically will in PPPs. Thus, clear and efficient mechanisms to resolve deadlocks are also essential. These can include escalation procedures, mediation or expert determination. Pure buyout provisions, common in wholly private partnerships, are harder to operate in the PPP realm where the parties are usually contributing unique assets and skillsets to the venture. It is rarely the case that one party can simply buy the other out and carry on with the project.
Notwithstanding the longer timelines that placemaking projects typically envisage, no joint venture lasts forever. Exit arrangements provide a roadmap for how and when the partners might disengage (whether due to strategic or political shifts, performance issues, or the natural end of a phase of the project). Key considerations on exits will include the valuation of shares, rights of first refusal and continuity of the placemaking aims.
In contrast to other developments, the need for ongoing stewardship is greater in placemaking schemes, where one of the project’s central aspirations is creation of a community. How this stewardship is achieved needs to be hardwired into the PPP constitution. As noted above, while the joint venture will mostly come to an end once construction has concluded and disposals have been effected, the maintenance of public realm, adherence to design codes and enforcement of any site-specific rules that reflect the project sponsors’ placemaking goals, must all be enshrined in the PPP’s constitution for the longer term.
These mechanisms, or at least the mechanics by which they will be determined at a later date, need to be agreed between the PPP partners. These may involve, for example, management companies responsible for the public realm, “golden share” mechanisms or direct covenants with the landowner. There are many ways to crack the stewardship nut. An understanding of that future governance model is essential, if the original aims are to be achieved and maintained long after the project dust has settled.
The future is…
Good placemaking is not just about bricks and mortar, or indeed its modern methods of construction equivalent. PPPs remain a vital tool for the delivery of new communities and the infrastructure to support them. They attract investment and collaboration to deliver public value. In that spirit, a continuing dialogue between stakeholders, the sharing of success stories, best practice and lessons learned from the challenges faced along the way are crucial components for securing the best outcomes for everyone.
Clare Reddy and Jonathan Haley are partners at Farrer & Co
Part one: Planning for placemaking
Part two: Delivering placemaking schemes
Image © Adobe Stock
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