1.  The Housing Market Renewal Programme (the Programme) is attempting to transform neighbourhoods in the North and the Midlands where high concentrations of difficult to let or sell properties have led to neighbourhood decline and deprivation. Unlike many previous regeneration interventions, the Programme aims to change the housing market by altering the housing stock to encourage people and businesses to return to the areas involved. Intervention includes refurbishing property, acquiring surplus and obsolete property, demolishing and replacing property with new buildings, and environmental improvements. Over 40,000 homes have been refurbished under the Programme, and 10,000 have been demolished and replaced by over 1,000 new ones.[4]

2.  The neighbourhoods within the Programme are characterised by a long legacy of decline and de-industrialisation which has weakened local economies and led to high levels of deprivation, anti-social behaviour and poor public and private facilities (Figure 1). The Department believed new administrative structures and funding streams were needed to achieve the scale of change required and helped to establish nine new sub-regional partnerships or 'pathfinders'.[5]

3.  Each pathfinder comprises a partnership of between two and five local authorities, working with partners in the public and private sector including the Government Office, Regional Development Agency, Local Strategic Partnerships, the Housing Corporation, Police Authority, Strategic Health Authority, and lead developers.[6] The number and range of partners and the fact that pathfinders do not have planning powers to enforce the implementation of their strategies means there has to be effective co-ordination to avoid unnecessary bureaucracy and achieve alignment between plans.[7] The Government has also recently announced plans to increase the targets for new homes built in the North and Midlands. This could fuel migration of people out of pathfinder areas, potentially threatening pathfinders' efforts to achieve a sustainable housing market revival.[8]

4.  The Department for Communities and Local Government and its predecessor, the Department for Transport, Local Government and the Regions, committed £1.2 billion to the Programme between 2002 and March 2008, and a further £1 billion has been allocated to March 2011.[9] In the first phase of the Programme, pressure to spend funds while pathfinders were being established, led to many projects being 'off the shelf' schemes which local authorities had not previously been able to implement due to a lack of resources.[10] Many of these early interventions included double glazing, external cladding, roof-work and insulation and did not benefit from detailed master-planning, heritage assessments or engagement with communities.[11]

Figure 1: Many different factors affect the demand for housing

Source: C&AG's Report, Figure 17

5.  There is a risk that interventions have a depressing effect on neighbouring areas due to the regeneration and investment in pathfinder areas, housing restraint policies in neighbouring authorities, and displacement, effectively shifting problems of low demand into these neighbouring areas. In the Department's view collaboration between local authorities in the affected areas is the solution.[12]

6.  Revitalising neighbourhoods is a long-term project and the Programme was envisaged to last between 10 and 15 years. The acquisition of properties for demolition and rebuilding by Compulsory Purchase Order takes around five to six years, for example. Until recently, the Department had committed funding in two year tranches for each pathfinder. Longer term funding was uncertain, creating a challenge for pathfinders as they attempted to match funding with overall Programme goals, and potentially impacting adversely on investor and community confidence.[13] In October 2007, the Department announced the commitment of a further £1 billion to the Programme for the three year period 2008-2011.

7.  The Value Added Tax regime may impact on decisions about whether to demolish and rebuild or refurbish properties.[14] Most reconstruction work, excluding fees to architects and other consultants, is zero-rated. Some renovation and refurbishment (for example, converting a non-residential building to residential use), and renovation or alteration of housing that has been empty for three years or more is charged at 5%. Most other work to housing is charged at the standard 17.5%. In the case of the Chimney Pots project in Salford, for example, the decision was taken to demolish more of the structure of the original properties than had been planned in order to reduce the Value Added Tax liability by £2.8 million. Under the European Union Value Added Tax Directive, there might be scope to apply a reduced rate, which must be at least 5%, to "provision, construction, renovation and alternation of housing, as part of a social policy" but changes to the Value Added Tax regime are a matter for the Chancellor of the Exchequer.[15]

5   The neighbourhoods were Newcastle and Gateshead; Oldham and Rochdale; East Lancashire; Hull and East Riding; South Yorkshire; North Staffordshire; Merseyside; Manchester and Salford; and Birmingham and Sandwell. Back

6   Q 8; C&AG's Report, paras 2.1; Figure 7 Back

7   Q 9 Back

8   Q 78; C&AG's Report, para 2.1 Back

9   C&AG's Report, Figure 17 Back

10   Q 86; C&AG's Report, paras 2.9, 2.10 Back

11   C&AG's Report, paras 2.11, 2.12 Back

12   Qq 19, 44 Back

13   C&AG's Report, para 2.19 Back

14   C&AG's Report, para 2.14; Figure 10 Back

15   Qq 10-11, 83, 106, 112; Ev 32 Back