Back to Urban Regeneration
The principal concern in relation to private finance is the market's failure to provide the kind of medium and long-term risk capital that complex area regeneration projects require. Government can help to attract this kind of investment by enabling funders to spread their property investment risk more effectively. New arrangements for pooling public and private money in long-term investment funds could also help to overcome a number of existing difficulties. Joint funds established to support regeneration projects, would be especially attractive to institutional investors.
Greater macroeconomic stability, lower long-term interest rates and structural reforms designed to raise productivity can help to create a much-improved environment for investment. To increase flows of private investment, helping enterprises across all sectors develop their potential the following should be done:
|Encourage the availability of risk finance.|
|Provide a range of measures to stimulate enterprise and wealth creation in under-invested communities including new commitments.|
Regional development agencies should establish regional investment companies to raise funds for regeneration projects by issuing debentures in return for 'subscriptions' from institutions. Attention should be given to the potential for Public Private Partnership (PPP) and Private Finance Initiative (PFI) schemes. It should be possible to structure a private finance scheme focused on estate renewal and management, but with incentives for the provider to tackle wider neighbourhood needs.
Private rented accommodation, currently at low ebb, is another area where institutional investment could contribute to urban revival. The American model of Real Estate Investment Trusts can be reviewed with a view to creating a new instrument, combining sufficient yields for investors, reasonable fund management costs and acceptable rents for tenants. Incentives for small landlords could be created through tax concessions, including an extension of the 'rent-a-room' relief on rental income.
Other fiscal measures should focus on the proposed urban priority areas. As a means of assisting developers, Stamp Duty on property acquisitions should be removed or reduced and a special capital allowances on the costs of site reclamation should be introduced. To attract incoming residents and retailers, also Stamp Duty on residential sales, tax relief on home contents and car insurance and concessionary rates of council tax and business rates should be removed or reduced.