• Issue 34

  • Mar 2018

The Source

The North Loses Housing Infrastructure Funding

The Housing Infrastructure Fund set up by the government, offers around £866m worth of funding towards key local infrastructure projects. These are projects essential for the building of new homes, such as the creation of new roads, cycle paths, flood defences and land remediation work. However London, the East and the South East has received around half of the allocation (£434m), despite constituting only a third of the regions.

In response to this unequal distribution, the metro mayors of Liverpool, Manchester, the Tees Valley, the West Midlands and the West of England have written a letter to the Prime Minister, declaring that they were ready to “deliver ambitious plans to build more homes”, but they are losing out to London and the South East. As Andy Burnham, mayor of Greater Manchester stated, investment in transport and housing has “for too long…been skewed towards London and the South East.” Across the above combined authorities there has been a total allocation of £124m in funding, only £13m more than London received on its own. In addition, the West Midlands and Liverpool have had only one scheme each being funded.

One reason behind this imbalance in funding, is down to the government’s reliance of a formula designed to calculate the benefit to cost ratio (BCR) of any funding given to projects determining which schemes receive funding. This BCR considers land value uplift caused by any intervention, resulting in area with higher land values obtaining a much better BCR. Work by Lichfield’s, economic consultant James Tindale, explains that public investment of £20m to produce 2,000 homes in London will produce a BCR that is three times that of a similar investment in Yorkshire or the West Midlands.

Some believe that this larger investment in the South is due to circumstances facing the south, the higher housing need and demand, and the greater challenges which face housebuilders. The think tank Centre for Cities believes that: “Funding should be determined by what are places’ key challenges. Housing is probably the number one economic challenge in the south east, but if you look further north housing isn’t as big an issue. If you argue that every where’s just got to get the same, it becomes an exercise in jam-spreading, and you don’t really focus on the problems we face.”

This appears to some extent to reinforce a cycle that because there is less investment in the Northern areas of the country, people move to areas of greater opportunity predominantly in the south which drives up the demand for housing. Instead of investing in the North and enabling the redistribute of population and economic performance around the country, reducing England’s reliance on London and the South East. However, with the introduction of a “rebalancing toolkit” being announced by the government to prioritise infrastructure investment in less productive parts of the UK, this situation may be being addressed to some extent.