A SLIC proposition to get Britain building

Published by Fiona Mannion for TCPA in Housing and also in Local Government

Leading housing and planning charity, the Town and Country Planning Association (TCPA) has published a SLIC propositionin a new paper by John Walker. SLICs are a type of Strategic Land and Infrastructure Contract which hold the key to unlocking garden cities and suburbs today, as well as many other locally planned large developments. This type of contractual arrangement enables timely and predictable provision of essential infrastructure to be committed at an early stage, enhancing both investor and community confidence in the quality and deliverability of new garden cities and suburbs.

John Walker, author of this latest paper in the TCPA’s Tomorrow Series, said:

“A new generation of garden cities and suburbs will not be delivered today without access to long-term patient investment to meet upfront infrastructure costs. De-risking development for investors is the only way to unlock the potential of high-quality new communities.”

“History shows that, properly managed and underwritten by the capture of land value increases, combined with predictable levels of patient investment, large-scale new developments are good for business, the economy and society. This combination was the crucial and highly successful funding model used in the development of the original Garden Cities and the post-war New Towns.”

Kate Henderson, TCPA Chief Executive said:

 “John Walker’s new paper takes the Association’s highly successful Garden Cities campaign a step further, by making an important contribution to the debate about how we deliver sustainable new communities through capturing land value and creating certainty by focusing on de-risking the development process.”

“John’s paper highlights that land value increase is the only truly new financial resource created by and available to the growth process. We must capture as much of this added land value as possible (and commercially viable) in order to use it to support infrastructure provision. This is both morally defensible – much of the value is created by public sector policy decisions – and commercially sensible – development can proceed more rapidly and successfully if it is backed up by adequate and timely infrastructure.”

The paper suggests that the best form of organisation to oversee the delivery of a SLIC would be a locally based and controlled version of a New Town Development Corporation (NTDC). These were purpose designed to deliver large scale joined up developments and did so effectively over 40 years. The Act under which they were created still exists and although NTDCs were seen as agents of central government this could be overcome if Government could find a way of allowing local authorities to create, and effectively own, the NTDC. This would then allow successful partnerships to be formed with private landowners. Other organisational options are also considered possible.

 John Walker added:

“Before anyone shouts ‘we can’t afford it’, just remember the conditions in which the early New Town Development Corporations were created in the late 1940s and 1950s: austerity, including food rationing, far worse than anything we see now; and massive government debt – about 2.5 times bigger even than today! The New Towns were funded by central government loans which were repaid with interest 40 years early leaving the Treasury with a healthy surplus of over £1bn of remaining assets which have been used to part fund the activities of the HCA ever since. What is affordable now must be judged in the context of what will pay dividends over the longer term.”

Some key principles of how SLICs work:

• A SLIC involves a collaborative process which links the delivery of strategic, as well as local, infrastructure to the contribution of funds from landowner/developers. These contributions would supplement, not replace, government funding.
• SLICs act as a contractual agreement between the landowner and the infrastructure provider. They need a broker. This role might be played by the local authority (where it has the capacity to do so) or another relevant delivery agency such as the Homes and Communities Agency (HCA).
• They also need a banker to provide interim finance on suitable terms, which will be easier to find once the SLIC is in place and has had the effect of de-risking the development.  Ideally, this is patient, low interest finance, possibly from a mixture of public and private sources.
• SLICs need ‘ringmasters’ who take responsibility for actual delivery and management of agreements once they are in place. The localised NTDC could play this role, but other options could include partnerships between capable local authorities and landowner partners.
• Landowner and developers in areas identified for large-scale growth should be incentivised to think and act strategically so that they get the benefit of reduced development risk, and the local community gets the benefits of an earlier commitment to a greater share of their increased land values. The premise underlying this approach is that there is this mutual benefit.
• Government could support the use of SLICs by focusing their financial resources on areas which have successfully put this type of de-risking arrangement in place.
• SLICS do not require any new legislation.

The TCPA will be debating whether garden cities and suburbs are part of the solution to housing the nation at the Labour party conference in Manchester on Tuesday 2^nd October, 6-7.30pm, Walters Suite, Radisson Edwardian Hotel with Shadow Housing Minister, Jack Dromey MP, Leader of Southampton City Council, Councillor Richard Williams and Chris Tinker from Crest Nicholson.