Residential-led Regeneration: A tale of winners and losers

Residential-led regeneration has long been a politically sensitive key-driver for economic growth in the UK. Despite the regularity of central ‘missed’ house-building targets, the construction industry, as a whole, contributes 7% of the UK’s GDP and just under 10% of the UK’s workforce.

Building new homes on the scale required is easier said than done with planning restrictions, funding, volatile raw material prices and space demands creating issues that have long been challenging ones for businesses in the sector.

Insurance powerhouse The Phoenix Group sponsored four regional roundtable discussion forums with the second of those taking place in Leeds, a city with a reputation for playing its housebuilding part, particularly via its large-scale, brownfield city centre developments.

The future shape of our towns and cities proved a popular area for debate as the contributors assessed the needs of the next generation, how investment and partnerships can be secured that can deliver local visions plus how residential-led regeneration can drive economic growth.

Property consultant Gerald Jennings outlined the enormous benefits that can follow when public money is spent well and it entices private investment.

He said: “We heard this morning that the West Yorkshire Combined Authority’s £40 million investment in brownfield funding has resulted in £1 billion- plus of private sector development because they enabled a site to be investable and developable so that’s where the support can come.”

James Farrar, chief executive of the York and North Yorkshire Combined Authority, agreed with the 20:1 benefit ratio but explained that new bodies like his face restrictions on how they can spend money while, there is, effectively a two-tier operating system for local and regional governments.

“So if you look at where devolution is going, we have a plethora of ring-fenced funds to do different jobs. On this one what we’re talking about is purely money to unlock brownfield housing. If you look at where Manchester and the West Midlands are going with what’s called single settlement, then there is much greater flexibility across transport and housing and skills to move some of the investment to where it can make a greater impact and therefore take that joined-up approach.

“The prize we’re all seeking, as a combined authority – and West Yorkshire will be there soon – is this single settlement which provides the opportunity to think strategically and join the dots, whereas, at the moment, when you start you get silo money because the government have got to have trust in you that you’re going to manage public money and manage it to the highest possible standards.

“From a combined authority point of view, we are new and learning. We want to learn where it works well. I don’t have any preconceived ideas about how we need to do this. We want to put in place something that works and enables the public sector and the private sector to get what they need. Don’t expect us to have all the answers but we want to talk to you and hear from you because we are really ambitious and we’ve got the opportunities.”

Connor McBain, who is head of group public affairs for The Phoenix Group, explained that the investor giants are keen on the regions gaining greater autonomy.

He said: “We are big supporters of devolution because pushing the power down to the local and combined authorities will, over time, make sure that places are able to be better made and communities supported. You will speak to officials who think there should be national plans rather local and regional led. We as an investor, who thinks about public policy, would want to see that flipped on its head.

“It’s so important for central government to hear that case for regional lead development and for it to reach the officials, not the ministers, because they’re the ones, at the end of the day who advise when ministers are getting bashed over the head on a daily basis by the newspapers and that’s all they’re thinking about. They then go to the expert advice from the officials.”

The Phoenix Group, which has almost £300bn of assets under administration thanks to brands such as Standard Life and SunLife, is also keen on an increasing focus on long-termism.

Senior investment manager Anand Kwatra said: “For us, as an investor, we’re looking across horizons of 30 years so we want investments that are going to perform and be sustainable over those 30 years and create an impact. Not something which is going to go belly up. One of our ethos, as a pension provider, is the role of intergenerational transfer. We take the money from pensioners and it’s got to be effectively recycled back into the real economy to help the younger generation.

“Also one of the things we have encountered in the last couple of years is the high interest rate environment and how it’s influencing projects and decisions to be postponed and that does beg the question: Is a financing model, as currently set up, really incentivising long-term decisions?”

When considering the needs of the home owners of the future, Unity Homes CEO Cedric Boston made a powerful case regarding the need to think of regeneration in terms of more than just erecting structures at speed.

He said: “I mean in terms of our journey it’s no longer about what we build it’s about the people who live in the properties. We realised that people weren’t actually using it as a springboard. That the people we were putting in these properties started off with quite huge disadvantages and they faced discrimination and if they were going to improve their life chances they needed other things and that’s when we moved into buying and renting out low-cost business units to help people set up their own business and provide education.

“Now if you look at that in terms of the UK history what that tells us is most regeneration schemes fail and most fail because they don’t focus on the needs of the people. They assume it’s all about the quality of the build and design the infrastructure where did you get it right they create gentrification and all that means is that people with higher incomes move to the area and the areas that they come from re poorer as a result.

“What you’ve got to do, along with building the houses, is creating opportunities with them to build a better life and again on a UK perspective, I think there is no real regeneration unless the people who live in the area – and might traditionally lose out – get the opportunity to do better.”

Paul Kelly, group development director from the Scarborough Group, also highlighted the need to focus on people and their needs.

“I think it’s putting people at the centre of the masterplan and, to use Thorpe Park as an example, it was originally a business park, leisure and retail amenity but it’s also the support infrastructure that’s allowed the development to have 7,000 new homes added in, plus a train station is going to come along and support it. It’s going to come and flow through Thorpe Park and spread into the wider area and I think the key phrase is sustainable and successful settlement or community.”

Prew Lumley,  at legal firm Squire Patton Boggs, has been watching some of the bigger Leeds city centre development grow from her office window and used that as a positive example of developments that tick a lot of boxes.

She said: “I’m sitting across in my office looking at the Tower Works and the CEG stuff happening over there. That is a residential-led regeneration demonstrated right there and it is place-making. I think they’ve done a great job and it looks great and the whole of the area has been transformed.

“But it’s very easy for a city like Leeds which is driven to build but how do you do it in brownfield sites and do it in areas where there isn’t that immediate obvious hit.

“If you look around Leeds, build-to-rent is going up left, right and centre because that’s the thing everybody wants to do but is anyone building build-to-rent in Calderdale? Then you’re going out to North Yorkshire and it is completely different and you are looking at settlements.”

Peter Callaghan, a land director for the Clarion Housing Group, also highlighted the traditionally turbulent problem of one big group of people wanting to restrain development, set against the country’s new construction requirements.

He said: “But how do we unlock it? These conversations have been going on for a years. It’s the same conversations and we’ve all got the same common objectives. We all want to do it. The burning question is that no government has answered how we do it.

On a similar theme Chris Clingo, regional managing director of Keepmoat, explained that housebuilders also have to consider so much and it is not easy to strike a balance between large-scale businesses like his making money while also fulfilling their wider social requirements.

“Really it’s about what the future homes look like and the standards. What technologies they will include and what the house types will look like and how ultimately we fund that without passing it on to the consumer

The Residential-led Regeneration panel had a lot to say

“Much of what we think of in terms of technology is still newish and you could be building the slums of the future if you get it wrong and that sounds quite dramatic.

“But also who funds it because if you go all electric and decarbonise things what do we do and how do we do it? For example at-source heat pumps are perceived to be the way forward but they’re very ugly, they’re very big, they’re very hard and how do you manage all that and get the product right?”

With promises of further devolution, the regional and local authorities will have increasing influence over the coming years and decades and a big part of their job will be to add clarity to the development opportunities which might otherwise get missed.

Farrar said: “Opportunities in York & North Yorkshire are much larger. I think people look at York & North Yorkshire and think its a sleepy kind of rural area when actually there are some major opportunities for growth and there are a huge amount of sites that are in public or developer ownership.”

Kate McNicholas, assistant director for economy, housing and investment at Calderdale Council added: “In Calderdale, because of the geography, there is very little developable land. One of the things we’ve been looking at is development of that garden-based community, embedded within existing communities, and those opportunities within the lower valley.

“We would add into that critical transport infrastructure. So for us the new train station development at Elland would be would be an important ‘unlocking’ of that wider area.”

Housebuilder Citu has always put the emphasis on sustainability and Jonathan Wilson, its co-owner and managing director, highlighted the responsibilities the whole industry needs to address.

“When you look at what we need to do as a collective and one big part of that is the climate emergency and a question I’ll always ask in these types of forums is are we doing enough when it comes to the climate emergency and are we treating it like in emergency?

“Yes it’s about great places but it’s also about putting the right infrastructure in because that’s the way we will tackle the climate emergency through development and it’s about tackling those three biggest contributors in energy systems in transport and buildings.”

Anand Rajagopal, private markets sustainability lead at the Phoenix Group, outlined just how high a priority sustainability is, adding: “In terms of the nature of how we invest, 50 to 70% of our regeneration should be in sustainable or transition assets. In addition to that, there is also a 40 billion long-term commitment towards sustainable transition and productive assets.”

Addressing the needs of the next generation also include the sensitive topic of asylum seekers, many of which have been left in hotels because there just isn’t the housing for them. Stephen Boardman from the Verity Group highlighted this issue in terms of the lack of housebuilding urgency.

He said: “We have been working with a government department regarding people coming over from Afghanistan and Ukraine and wraparound services and the rest of it and ultimately we need all the reference service but for now we need houses and especially from the people have come from Afghanistan and I’ve done three tours over there so know what these guys have done for this country.

“There’s a hotel on the Otley Road housing 180 asylum seekers and some of those guys have been here two years and is it really right that they spend that amount of time in the hotel?”