HomeGreening the economyWe need to be much more imaginative about funding new, green development

We need to be much more imaginative about funding new, green development

This post is by Dr Nicholas Falk, executive director of the URBED Trust.

The causes of Britain’s decline are so deep-seated that they cannot be resolved without a fundamental switch in direction. The Levelling Up White Paper rightly blames both the failure to look beyond economic capital, and short lived policies as we lurch from one crisis to another but has few proposals for raising the investment needed to close the many gaps, or match our international competitors.

Despite calls from economists for wealth taxes, politicians are frightened of even raising the possibilities. Yet, without new sources of funding, there is little prospect of growth plans or devolution being effective. So, what can be done to rebuild confidence in places where development is most needed, and to futureproof our towns and cities?

Institutional finance could be channelled better
An important, largely neglected opportunity is to channel institutional finance from pension funds and insurance companies into providing local infrastructure, including natural infrastructure and community facilities.

Many objections to building new settlements comes from planning’s failure to secure social and physical infrastructure to make new housing acceptable. Neighbours have good reason to object when homes are built away from public transport and without the schools and health facilities to create proper communities.

Well considered proposals for new garden cities, such as the winners of the 2014 Wolfson Economic Prize, were foiled by our fractured political system. Even plans for Hoo in Kent, originally proposed by Shelter, which Medway Council is promoting, have come up against objections over who will fill a potential hole in infrastructure investment.  Endless arguments waste time and resources and sap hope.

Other European countries build better
Yet, as has been shown repeatedly, other European countries build better and faster. They join up infrastructure with housing, thanks to state financial institutions that take a long term, holistic view. The French Caisse des Depots, Dutch BNG and German Sparkassen enable towns and cities to implement sustainable development plans.

In 2008, URBED proved the weakness of relying solely on private developers, showcasing European practice. The Dutch VINEX plan delivered 95 sustainable urban extensions, while British attempts at ecotowns floundered in the face of local opposition. Rieselfeld in Freiburg and Bo1 in Malmo both prove that a green transition is feasible and desirable. Instead of private finance adding to house price inflation, institutions there fund housing for rent and support co-operative and cohousing schemes.

UK institutions, like Legal and General and Nationwide, that would support building sustainable affordable housing are being held back by a shortage of viable schemes. Land assembly is hard, especially in areas with good growth prospects, such as Oxford, Bristol or the southern part of Gloucestershire. It cannot be achieved without public intervention.

Local authorities struggle to agree on joint plans. Giving more local discretion over delivering national targets calls for a different approach. Development Corporations make land assembly easier but need local and national support. Inspiring housing and ecological projects can be found in many parts of the UK but they take years to get off the ground and are plagued by financial uncertainties.

A solution is the issue of 20-30 year Green Growth Bonds, secured against land values, which increase when planning permission and infrastructure are in place. Tax Increment Finance (TIF) would permit local authorities to borrow against expected uplifts in property taxes. Portland Oregon provides the best example. Nearer to home, Copenhagen funded a metro line from land value uplift at Orestad New Town thanks to pooling public land through the City and Port Development Corporation.

Digital tech can help with planning
Trusts can be endowed to provide and maintain social infrastructure. Planning capacity is limited, so proposals should concentrate on rail-connected locations, identified using digital planning techniques to assess alternative development scenarios and their impact on property values and tax yields.

Compulsory Purchase Orders may be needed for land within a kilometre of an existing or proposed stations. Our report for the Greater London Authority shows how Land Assembly Zones could work, modelled on the French Zones d’Amenagement Concerte. This would be a valuable addition to the Levelling Up bill.

The evidence is set out in a series of policy reports based on case studies, and a number of the proposals are starting to be applied. Through support from the UK Infrastructure Bank, the National Infrastructure Commission could lead a green transformation. Indeed, if major infrastructure projects were listed and costed in a submission to parliament every year, enough certainty could be assured to provide the security that public and private investors are demanding.

However, to ensure the UK really does switch direction to a greener future and avoid ill thought out proposals, a Municipal Investment Corporation, along the lines of the Dutch BNG bank, would tie in support from both local authorities and public utilities, and help turn the vision into reality.

Written by

Green Alliance is a charity and independent think tank focused on ambitious leadership and increased political support for environmental solutions in the UK. This blog provides space for commentary and analysis around environmental politics and policy issues as they affect the UK. The views of external contributors do not necessarily represent those of Green Alliance.

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