Lisa Taylor Local Economy, Post-Covid world

Learning From Crisis: Immediate Economic Response

How can we, as individuals and organisations, support vulnerable groups now to collectively pull out of this “V- or W-shaped” economic dive? How can we start to deliver the re-imagined town centres and local economies we want and not leave people behind?

In the first of a three-part series exploring the local economic response to the Covid-19 crisis, this Future of London webinar invited effective operators leading the Covid response daily to share their experience and perspectives on communities, the creative industries, small business and rough sleepers – vulnerable groups, where the pandemic or the slump to come could be the blow that knocks them down.

FoL Executive Director and Coherent Cities Director Lisa Taylor hosted three great speakers:

  • Nabeel Khan, Director of Enterprise, Jobs & Skills at LB Lambeth, providing insight into the council’s economic scenario planning and priorities;
  • GLA Rough Sleeping Lead David Eastwood, outlining GLA and partner efforts to bring in and care for rough sleepers and the work underway to keep supporting them;
  • Aida Esposito, Tottenham Creative Enterprise Zone co-director and Founder/Director of Creative Thinking, on the pandemic’s threat to the creative sector and on tapping the potential of creative businesses and workers to adapt.

Check out the Future of London post for full resources and other Learning from Crisis events and write-ups.

Lisa Taylor Collaboration, Placemaking, Post-Covid world

Funding public projects in chaotic times

This post also appears at Future of London (my sometime other hat). You can find links to key FoL research below.

This post updates some of the findings in FoL’s Paying for Public Projects briefing, the product of three late-2019 roundtables and further research by 2016-20 Head of Knowledge Amanda Robinson. The programme was supported by Montagu Evans, Poly Group and Lewis Silkin.

Get ready to flex. Over the last 10 years, housing, infrastructure and regeneration delivery has been moulded by austerity and political flux; all sectors responded as well as they could. In the last three years, add the tragedy and deep impacts of Grenfell; climate declarations & court decisions; Brexit (remember that?); and now Covid-19, with its awful death toll, its policy and fiscal upheaval, and its economic ravages.

London’s incandescent glow was also starting to fade a bit before the pandemic, with medium-term value growth in the housing market forecast well below other regions and a cooler reception from central government as part of regional ‘levelling up’. That may seem fair in a national context, but it doesn’t help get projects funded.

Through it all, public project leads from all sectors have had to secure finance for upfront costs and funding for operations and maintenance. Budget cuts and housing policy were already pushing the public sector to risk more via joint ventures and council building programmes. Housing associations – partly in response to grant cuts and rent caps – reviewed activity, assets and tenure, embraced shared ownership; merged and morphed; and ventured into modular construction.

For councils in particular, finance has been a rollercoaster: removing the cap on Housing Revenue Account borrowing freed their aspirations; a year later, the 1% hike in Public Works Loan Board interest rates – partly in shock (…) at borrowing levels – slapped the curb back on and sent projects across the country reeling.

We will also lose EU funding – the Structural & Investment Fund alone is worth £5.3bn to England – but the replacement UK Shared Prosperity Fund is not yet defined and could be eroded by the flood of Covid-19 emergency spending.

To assemble finance and funding packages (and critical support), organisations of all kinds have been partnering more – from multinational masterplan partnerships to regional and local projects relying as much on social as on financial capital.

The fitness of other options, including municipal bonds, institutional investment and bank loans, will become clearer over the coming 6-12 months as the UK emerges from lockdown and assesses the economic damage.

Unfortunately, there’s a constant through all of this: a shortage of skills, capacity and understanding.

Whatever the tools, public project leads – especially at councils – can lack expertise, experience or just the time and headcount for effective funding and finance. Across the table, many investor and development partners still don’t understand the political or process realities of public delivery. Housing associations have been able to hire – though watch for the pandemic’s budget impact – but are increasingly challenged on ‘mission’. Having cash doesn’t mean the pressure is off.

Paying for Public Projects report

Early in 2020, Future of London combined its own research on the above with insight gained from three senior roundtables to produce a briefing on trends, risks and opportunities: Paying for Public Projects.

Supported by partners Montagu Evans, Poly Group and Lewis Silkin, the programme was designed to build public sector knowledge of funding sources and to help delivery teams and funders appreciate each other’s drivers and constraints. Covid fallout may shift the dial on best-fit funding, but the principles hold true.

The report provides cases and resources on trends including:

  • Investment shifting from inner to outer London. From 2015/16 to 2018/19, housing starts in inner London dropped by 57% while outer London marginally increased[1].
  • Investors attracted to assets offering revenue-generating potential and longer-term capital gains[2].
  • Climate issues affecting investor attitudes. Some are divesting from fossil fuels and applying ‘temperature scores’ to grade their portfolios[3]. Others heard the Court of Appeal decision against Heathrow expansion with trepidation. It’s under appeal, but it was a marker.

“Montagu Evans was delighted to support this programme,” writes partner Oliver Maury. “In the context of Covid-19 and its impact on society, our ability to share knowledge and experiences, in this case in relation to the funding of public projects, is more important than ever. As society turns its attention towards the recovery phase, we see organisations like ourselves and Future of London having an important part to play.”

So how can public project leads respond now?

There are still opportunities for public project funding – some perhaps growing as priorities shift…

  • A stronger emphasis on placemaking has been creating more resilient neighbourhoods that build on local identity and respond to local need. This strategic approach to regeneration demonstrates public sector leadership, which in turn inspires investor confidence. What happens now, as battered small businesses struggle to recover or leave shops vacant, is critical – council and landlord actions and attitudes are key to sustainability in every sense.
  • Emphasising – and clearly defining! – social & environmental value are likely to become more of a factor, as are explicit community support and mandates such as estate regeneration ballots. Because of their responsibility to communities, public-sector organisations are more likely to call for projects that maximise these values – and attract the growing number of investors with similar ambitions (viz the rise of Environmental, Social & Governance or ESG investing).
  • Good asset management is linked to both of the above. Rather than selling off, local authorities and housing associations are using mechanisms like income strips[4] to retain control of assets and explore income-generating opportunities as landlords. Again, they need the skills to do this well and the resources to scan the horizon for risks and opportunities post-Covid.
  • In London, engage with the Mayor’s Good Growth theme, with funds and support for projects offering the above and/or citizen engagement and diversified local economies.
  • Look to outer boroughs: There was already a huge amount to do in Outer London ­– and outside the centres of most UK city-regions – as town centres and high streets struggled to evolve. There will be ten times more to do now that they risk being hollowed out – and there will be public and private money ready to invest. What is brought back or built will be critical.
  • “Be shovel-ready”: This from a Leaders Plus candidate in Greater Manchester, but applicable anywhere. The UK will emerge and central government – from Homes England to the Department for Transport – will spend to help rebuild the economy. Moving ahead with deals, design, planning, consultation and procurement will help capable entities stand out when those initiatives kick in.

How do we look further ahead?

Scan. Listen. Learn. Collaborate. Flex.

Stability is never permanent, and the funding landscape will continue to shift. A key takeaway from the last 10 years was that local authorities must be more resilient when it comes to economic shocks. A key takeaway from the last two months is that central government will spend in a crisis. It remains to be seen whether that means a revolution in fiscal policy – with a return to serious housing and care funding, for example – or it means the cost of repayment will drive councils further into the red. What can we do to prepare?

Scan: Public project leads need to understand what funding sources are available, which are emerging, which are safe, and who’s using what. Carve out time for your team to scan good publications – or commission summaries if you have the budget. Room 151 is good.

Listen: Talk with colleagues beyond your organisation, via Future of London, professional groups and live or online networking events. Mentoring and board service across sectors or disciplines are great ways to do this.

Learn: Take courses, read the FT, Economist or HBR, listen to brain-stretching podcasts. Look at successes and failures and go beyond the gossip to what actually happened. Take your CFO for a coffee and ask how things work!

Collaborate: Work with each other. Share knowledge. Share people via secondments. Try using consortia once in a while to keep things fresh. Do a project or have a meeting with a competitor.

Flex: Doing the above, using tools like Future of London’s report and wider network – and having trusted outside help where warranted – can give public sector officers the confidence to take on risk and make fresh decisions. At the same time, those practices can help savvy private-sector operators understand partners and clients better, and by extension help repair public trust in the development and regeneration process.

FoL’s Paying for Public Projects programme brought together cross-sector development, housing, regeneration and funding partners to help build mutual understanding. In 2020, FoL is set to launch a new training programme for public project managers. These courses will be designed to help practitioners enhance their commercial skills by learning about viability, asset management, contracts and negotiation. Find out more here, or contact FoL Chief Executive Nicola Mathers at nicola@futureoflondon.org.uk.

Download the full Paying for Public Projects report here.

Get involved with Future of London’s useful work and excellent 4,600-strong network here.

Footnotes

  1. MHCLG Table 253: permanent dwellings started and completed, by tenure and district. Inner/outer London definitions follow those used in the London Plan. Some figures imputed by MHCLG in the data table. bit.ly/32d7gyj
  2. Hugo James. “The rise of long income property as an asset class,” 15 Jan 2020. www.investmenteurope.net/opinion/4009153/rise-long-income-property-asset-class
  3. Simon Jessop, Matthew Green; Reuters. “Climate change pushes investors to take their temperature,” 20 Jan 2010. reut.rs/2V9PFFU
  4. Clive Pearce. “Freeths Real Estate Law Blog: Income Strip Leases,” 5 Sep 2019. www.freeths.co.uk/2019/09/05/income-strip-leases/

 

Lisa Taylor Communities in transition, Urban planning

Notes from a small, weird town

Just visited my old stomping grounds in Moab, Utah, pop. 5,200. A uranium town, adventure sport hub and now second-home magnet, this joyous mash-up of rednecks, hippies and everyone in between has boomed and busted repeatedly. It’s now at risk of becoming a municipal cautionary tale.

One of the better ones – but no sidewalk!

After years of gradual change, 2014-17 saw monstrous growth, and I use the adjective advisedly. The newest half of the 20-odd motels lining Main Street ignore local character and have no provision for staff accommodation, in a region where a cleaner’s one-way commute can be above 180km. The explosion of road-legal 4x4s called Razrs has meant this formerly seasonal town is now rammed 9-10 months of the year and rental homes are sprouting like mushrooms. Rooms are renting for US$600-800 each and the median home price is US$355,000. Median household income is US$41,500, but the bulk of jobs are at or below minimum wage.

The construction mini-boom is all by the book, which is part of the problem. With one trained planner and a five-person planning commission v. an ardent and noisy pro-development lobby, city planning can barely keep up with applications and enforcement, and has no scope for strategy or policy review. (Their third agenda item for 22nd Feb is “Updated list of barriers to affordable housing”.)

Like all American municipalities, Moab operates on zoning (Wiki primer here) – the system has lots of fans because of its simplicity, but in resource-strapped towns like this one, zoning can be seriously out of date and no longer fit for purpose. And while zoning allows for variances, there is no scheme-by-scheme negotiation as in the UK, and there is usually no affordable housing requirement for new development. In a town where the bulk of employment is low-paid tourism work, that is massively counter-productive.

This is also high desert, where precipitation is tracked religiously and running out of water is not an idle threat (viz Cape Town, SA). Moab caps an 18-mile-long valley, the southern half of which is in an adjacent county not known for planning or environmental restraint. San Juan County wants another 5,000 homes at that end of the valley – doubling the area population. While the county promises a new reservoir and infrastructure provision, any water or sewer failure is likely to be blamed on Moab, which will be the new subdivision’s services hub.

There is also a lot to be admired here (aside from the national and state parks, wilderness trails and snow-capped mountains at its doorstep). Moab City is home to the Best Small Library in America (2007), lovely bike paths, new schools and sports facilities, geothermal heating for municipal buildings, strong community and recycling support and a disproportionately large Pride festival; it has not forgotten locals in the scramble for tourist dollars.

Much of the town’s success is due to leadership: it had a hugely progressive city manager for 21 years, and its new and equally forward-thinking manager,  formerly Chief of Staff for Salt Lake City, is focused on strategy over catch-up. The City also seems to be getting along better with the surrounding and much more traditional Grand County, but time will tell.

Moab’s resilience is also due to the entrepreneurial and sometimes anarchic attitude locals and ‘seasonals’ – especially boating, biking and climbing guides – have about helping each other. Events like the Trashion Show raise funds for recycling, and landowners house needy kindred spirits in anything they can lay their hands on. Moab Valley now feels like a cross between (old-school) Burning Man and Pleasantville – not home to me any more, but still working for a lot of people.

Does this microcosm of tourism and development have any lessons for London and/or other places in the UK? Aside from the above about leadership and the long view, we could learn from them and pursue a tourism or transient room tax of some kind to mitigate the burden visitors place on infrastructure (and our patience!). We can also take heart that for all its shortcomings, we are actively working on the relationship between jobs and housing, on improving the environment, and on allowing room for the kind of entrepreneurial spirit that thrives in these weird and wonderful places.

This post first appeared at www.futureoflondon.org.uk