Since the recession, UK cities have suffered the impacts of the global downturn, with development drying up and struggling to return in many places, as well as dramatically reduced budgets to fund local services and invest in growth. The shrinking local government funding settlement, combined with a gradual devolution of powers and responsibilities to local areas, raises questions about the role of local government and its ability to shape and support economic growth.
The combined impact of the recession and local government funding cuts has made publicly owned land and property assets an increasingly important tool for local authorities to support economic growth, as well as to generate revenue funding.
While national asset management strategies and policies have been targeted at reducing the size of the nationally held public estate to reduce outgoings and release surplus land, the priorities for local authorities are different.
The distinction between local authority revenue and capital budgets has driven the move to maximising the contribution of assets as sources of long-term revenue funding, rather than generating one-off capital sales. Shrinking budgets – for public service delivery, day to day spending and to fund investment – have created financial pressures for local authorities to reduce expenditure as well as finding new ways of funding public services and day to day spending. Rental incomes from publicly owned offices, as well as from residential investments, for example, can provide a source of revenue funding to support public service delivery and local authority funding in the longer term. Land and property assets are also being used to support economic development locally, in order to meet strategic goals in different city economies. This report draws on research and in-depth interviews to explore how places are maximising the value of local public assets. It finds three broad approaches that places are taking to put assets to more productive uses in order to support economic growth as well as provide financial returns:
- Leading development – Swansea , Sunderland
- Shaping development – Birmingham, Camden, Bath, and Bournemouth
- Unlocking development – Cambridgeshire, Bristol
In cities with relatively weak economies and property markets, public assets are being put to work to underpin regeneration efforts, with local partners actively leading development to stimulate growth and economic activity in core urban areas. In other cases, partners are using public sector assets as a means of guiding and shaping the type of development that takes place, in order to meet local priorities for housing, or employment space, for example. Meanwhile, other places are unlocking difficult sites through more coordinated and strategic city and city-region wide approaches to managing and investing in assets, rather than on a site by site basis.
The evidence from interviews with partners in cities suggests that there are four important elements that support local authorities to put public assets to more productive use. Localities should focus on developing:
- A more strategic approach to managing assets. For example, by developing city-wide or city-region property boards and land commissions, with support from Government, in order to improve coordination and investment between organisations and across local authority borders.
- The data and information required to inform a city-wide and cross-public sector strategic approach to asset management.
- Strong local relationships between places, between public sector organisations, as well as with the private sector, in order to capitalise on the opportunities that public assets present.
- A more entrepreneurial organisational and political culture, which can support a more commercial role for local government to engage with private sector partners.
While some places are already developing these approaches outlined above, there are constraints on their ability to take a fully strategic approach to public sector assets. This is due to the fragmented ownership of different assets, the lack of comprehensive and accessible data on assets across the public sector, competing incentives between places and public sector bodies and the lack of influence to shape how assets are utilised.
In order to support localities to put public assets to more productive use – to support local economic growth and develop funding streams, as well as delivering more efficient public services and reducing wasteful expenditure on assets – national policymakers should focus on:
- Improving intra-public sector cooperation by abolishing stamp duty on asset transfers between local bodies. The stamp duty charged on transfers of assets between public sector organisations acts as a significant disincentive to places taking more strategic approaches to managing public assets. For example, the tax is currently charged on the transfer of an asset from a local authority to a city-region public sector property company set up to improve strategic use of public sector assets. Policy should encourage local authorities and public sector to bring their assets together across a locality, in order to package sites and offer more attractive development opportunities to the market.
- Giving local areas more control over national level asset disposal strategies for land and property in their area. In many cases, however, there are different and competing priorities for different public sector partners (local and national) who own land or property in the area, which can make it difficult to align strategies. National organisations, such as the Homes and Communities Agency (HCA) and other land-owning bodies and departments, should be required to be members of city-region property boards or land commissions, in order to facilitate and speed up the release of sites that are of strategic importance to localities.
- Reforming national permitted development rights policy in order to provide more flexibility and control for local areas to shape the type and balance of development that needs to take place to support economic growth.