The road to renewal

The early development of the Housing Market Renewal programme in England

Ian Cole and Brendan Nevin

The Joseph Rowntree Foundation has supported this project as part of its programme of research and innovative development projects, which it hopes will be of value to policy makers, practitioners and service users. The facts presented and views expressed in this report are, however, those of the authors and not necessarily those of the Foundation.

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Contents
Acknowledgements vii
Executive summary viii

1. Introduction 1
2. The development of the Market Renewal Pathfinder programme 6
The need for a market renewal initiative 6
What is market renewal? 9
Developing the evidence base on housing market renewal 11
The Pathfinder programme 13
Progress to date 16

3. The distinctive nature of the Pathfinder programme 18
The place of space 18
The focus on integration 20
Autonomy, regulation and innovation 23
Looking outwards and making connections 24

4.Different starting points, different contexts 27
Maturity of policy responses 27
Local drivers of market change 28
Alignment with other local initiatives and programmes 31
History of community engagement 33
Governance arrangements 33

5.Developing the strategies 36
Preparing the Market Renewal prospectuses 36
‘Acknowledging diversity’ in strategy development 37
Risk assessment and management 38
Adjacency effects 40
Thinking strategically, acting flexibly 42

6.Mapping the course of housing market change 44
Identifying areas ‘at risk’ 44
Trajectories of market change 46

7. elivering the programme 50
Planned spend and balance of activity 50
Plans for demolition and remodelling 52
The Audit Commission perspective 56
Linking strategy, analysis and intervention 59

8.The next steps for the programme? 61
Clarifying programme aims and objectives 61
Diversity within the programme 62
The costs of market transition 62
Building capacity in the programme 63
A multilayered process 64
Delivering the programme 65
Monitoring market change 66
From prospectuses to proselytising … 67
Preparing for the long term 68

9.Conclusion 69
References 71
Appendix 1: A summary of the HMR Pathfinder areas 75
Appendix 2: Governance arrangements for Pathfinders 87

Many people have provided information, advice and helpful comments on earlier drafts of this report. We would especially like to thank those members of the HMR Pathfinder teams who have made reports available to us and offered positive and constructive suggestions. Members of the Project Advisory Group have helped us throughout the development of this rather unusual project over the past year – Tina Golton, Alistair Graham, Phil Leather, Derek Long, Mike Maunders, Ann Pittard, Simon Pinnegar, Jill Preston and Stuart Whyte. Several members took the time to make extensive comments on two earlier drafts of this report and we are sure that the end product has been considerably improved as a result.

Members of the ODPM Housing Market Renewal team have provided very helpful advice and support to us during the development of this project, in the midst of an exceptionally busy period for them while the Market Renewal programme was taking shape. Duncan Campbell, Stephanie Couchman and James Cruddas have been especially helpful. However, we should stress that all the opinions and judgements about the programme in this report are solely our own responsibility and do not reflect the views of ODPM officers, the Audit Commission or any other representative of a government agency. It is an independent assessment of progress so far. Also, while we have tried to ensure that the information in the report is as up-to-date and accurate as possible, we alone are responsible for any remaining omissions or inaccuracies.

We would like to thank colleagues at CRESR (Centre for Regional Economic and Social Research) for their contributions to the rapidly developing field of analysis of housing change. Dr Sue Whittle in particular was heavily involved in devising the original programme of work and in the development of the seminar programme in the earlier stages of the project. Melanie Hall and Dr Kesia Reeve undertook careful analysis of the vast documentation contained in the HMR Pathfinder prospectuses and the Audit Commission scrutiny reports. This publication could not have been written without their essential contribution.

Last, and definitely not least, thanks to Theresa McDonagh of the Joseph Rowntree Foundation, who has supported us closely in shaping, reshaping and reshaping yet again the nature of this programme as the policy agenda has moved on. She has worked with us throughout, as well as chairing the Advisory Group, and has always shown a judicious balance of trust, patience and critical acumen sufficient to keep us on our toes, and to keep us moving forward despite other demands on our time and energy! This report owes a lot to her support to the project, and to the idea of producing a report along these lines, though we accept full responsibility for any remaining deficiencies it may contain.

Acknowledgements

In April 2002, the Government announced the creation of nine Market Renewal

Pathfinders in the North of England and the Midlands. These areas all exhibited housing market weaknesses, which were evident through high vacancy rates, increasing population turnover, low sales values and, in some cases, neighbourhood abandonment and market failure. The areas experiencing these trends were often extensive and the evidence suggested that the traditional neighbourhood approach to urban policy would not be sufficient to reverse the decline. A holistic sub-regional approach to planning, economic development and housing market restructuring was required to ensure that the older urban areas could compete at a regional, national and international level.

The Market Renewal initiative has subsequently been supported by a Housing Market Renewal Fund, introduced to ensure that housing market restructuring could proceed in tandem with improvements to the environment and the economy. Initially, £500 million was made available for the first three years of the programme and this has subsequently been increased, when the Comprehensive Spending Review revealed that the Housing Market Renewal Fund will expand to £450 million per annum by 2007/08 from £290 million in 2005/06.

The Market Renewal programme has been developed at an unprecedented pace. Following increasing evidence of rapid neighbourhood abandonment during the mid- 1990s in Merseyside, Greater Manchester and Tyneside, a coalition of housing organisations developed an evidence base between 1999 and 2001, which suggested that radical changes were required to the urban policy framework if neighbourhood abandonment was not to become a common feature in the older urban centres of the Midlands and the North. A bid for resources was then made to the Comprehensive Spending Review in November 2001, funding was made available by central government eight months later and, within a year of the proposal being made to the Comprehensive Spending Review, nine sub-regional partnerships had been created to develop strategies and deliver the first three-year spending programme.

This report is the first to examine in detail the origins of the programme, the scope and scale of its activity and the series of complex issues that the nine Pathfinders will have to overcome if the Market Renewal programme is to be successful.

The Office of the Deputy Prime Minister (ODPM), which administers the Housing Market Renewal Fund, has allowed the programme to develop through a highly devolved process. Market Renewal trategies have emerged without a restrictive framework being designed by Whitehall and then imposed on the target areas. This devolution of responsibility and the freedom for local partnerships to design and Executive summary.

Executive summary

Implement solutions in response to local drivers of change is a distinctive feature of this programme and marks a radical change in the relationship between central government and those localities undergoing such changes.
Given that the aspiration of the Market Renewal programme is to develop a holistic approach to the economy, environment and housing at a sub-regional level, a significant step change in the level of co-ordination of urban policy and expenditure programmes both within the target areas and at the regional level will be required.

Progress is being made over co-ordination, and good practice is evident, but a much greater level of strategic and operational integration will need to emerge in the Market Renewal Areas over the next two years as the increased resources allocated from the 2004 Comprehensive Spending Review become available.

A review of the drivers of change and the characteristics of the urban environment in the nine Market Renewal Pathfinders tends to validate the decision to allow local strategies to develop without an overly prescriptive framework. Although the Housing Market Renewal Fund was made available on the basis of evidence suggesting a strong connection between housing market weakness and a progressive cycle of urban decline, it has become apparent that there are different causes and manifestations of the problem in those areas experiencing the most profound changes. The larger metropolitan areas are characterised by more widespread problems of neighbourhood abandonment than the medium-sized settlements that often form part of an industrial hinterland for the major cities. However, outside the larger cities, a progressive loss of function and form can be witnessed, as the original economic rationale has disappeared and a new economic future has yet to be defined. A review of the context for each Pathfinder also reveals a significant difference in the organisational capacity of the local partnerships in terms of their ability to deliver such a large redevelopment and renewal agenda. This organisational capacity deficit is related to the history of urban policy and its traditional focus on a number of core locations, and, conversely, the relative neglect of other areas where a significant decline in the economy and local housing market has now become entrenched.

The extent to which a Market Renewal Area has been subject to previous intensive and targeted regeneration activity is reflected in the balance of the national programme from 2003/04 to 2005/06. For example, the three bids for resources received by the ODPM from the northern metropolitan Pathfinders in Manchester/ Salford, Newcastle/Gateshead and Merseyside accounted for 50 per cent of the value of the bids made by the eight Pathfinders that had submitted their strategies by March 2004. These three locations were also collectively predicting that they could secure 78 per cent of the projected match funding included in the eight bids. This The road to renewalreflects the extent to which other complementary public sector programmes are available and the relative success in securing private sector investment that is now evident in the Core Cities of the North and Midlands.

The OPDM has planned a commitment for working with the Market Renewal Pathfinders for a period of 15 years. The programme is therefore very much in its infancy. However, the scale of the renewal task is daunting. It is likely that the scale of clearance that the programme will seek to deliver will be around 100,000 dwellings over the lifetime of the initiative, and this will be complemented by an ambitious programme of redevelopment and restructuring. Additionally, a further 800,000 properties located in neighbourhoods that are characterised by relative or absolute decline will benefit from interventions that will support house values, reduce vacancies and provide support for the vulnerable groups that are disproportionately located in areas with declining popularity.

The Market Renewal programme has now entered a critical phase of development. It will be vital for central government and regional partners to agree and finalise the policy framework within which Market Renewal will operate up to 2019. On the basis of our review, we have set out 39 issues which we feel will need to be addressed by ODPM, local government, regional agencies and the nine Pathfinders during this process. These issues are grouped into a number of themes, summarised below.

Clarifying programme aims and objectives

There is a need for a greater degree of clarity at the national, regional and local level about what the Market Renewal programme is trying to achieve.

Diversity within the programme

The different operational contexts for the Pathfinder teams in respect of market trajectory will have to be accommodated as the programme develops. The scale of decline and capacity to deliver will need to be incorporated into the national evaluation of the programme and a review of delivery mechanisms.

The costs of market transition

The social pressures created by transitional markets are extremely difficult to manage. The revenue costs associated with the renewal process are not currently considered when central government allocates resources to local authorities. This issue will need to be addressed; however, local authorities will also have to demonstrate how they are allocating mainstream resources to facilitate market renewal.

Executive summary

Building capacity in the programme

There is a shortage of staff with the skills required to deliver the Market Renewal programme. It is important that nine Pathfinders collaborate, pool thinking and expertise, and develop skills and techniques in community engagement and communication strategies. The needs of the programme should be reflected in national and regional training strategies.

In recognition of the wide variation in the current level of capacity to deliver regeneration among local authorities, it is suggested that, in future, the Audit Commission should conduct an audit of capacity prior to the allocation of large-scale regeneration funding. This would enable a programme of capacity development to be agreed and tied into the appropriate scale of resources in a sequenced and managed way.

A multilayered process

There is a considerable body of work necessary to integrate initiatives such as the New Deal for Communities programme and Market Renewal. Additionally, there is further focus required to ensure that there is alignment between regional economic development, planning and housing strategies and the Market Renewal programme.

Mechanisms will have to be developed to resolve conflict where contradictions in the public policy framework emerge.

Delivering the programme

The efficiency and effectiveness of this initiative will be greatly enhanced by greater co-operation and closer working between the government agencies that are tasked with delivering the Urban Renaissance agenda. In some cases, joint or co-located teams may be necessary. More robust linkages between the public sector and developers and financial institutions will also be vital. However, these private sector interests will expect a ‘joined-up’ approach from the public sector.

Monitoring market change

Unlike the clearance programmes of the 1950s and 1960s, the initiative is responding to and anticipating market change. A much more sophisticated approach to gathering intelligence will need to be developed to capture changes in aspirations, to measure the impact of interventions and to assess sub-regional market changes.

Some important development work is now in process at Pathfinder level. A research management framework that encompasses ODPM, academics, regional agencies The road to renewal and local government should be developed to oversee this process. The emerging national programme evaluation will provide one avenue for these links to be fostered.

From prospectuses to proselytising …

ODPM, Regional Offices/Assemblies, local authorities and Pathfinders will need to ensure that a wide and robust form of ‘ownership’ of the market renewal approach is secured.

Having marked out a ‘path’ to market renewal, other agencies need explicit encouragement from regional and central government to follow it. Market renewal is essentially an ‘outward-facing’ process : this philosophy needs to be reflected in how the programme is taken forward, ensuring that regional bodies, local authorities and other housing and regeneration agencies learn more about revising their policies and priorities with perceived changes in local housing markets.

Preparing for the long term

Pathfinders are currently creating financial, legal and moral commitments up to a decade in advance, as discussions with communities affected by the renewal process proceed. Government has entered legal agreements to support schemes up to 2019. However, no explicit, long-term, forward financial commitment has been given. This approach runs contrary to previous practice with UDCs (urban development corporations), HATs (Housing Action Trusts), City Challenge, NDC (New Deal for Communities) Partnerships and the Private Finance Initiative. For confidence to be maintained, central government needs to make a statement about the scale of long-term financial commitments it is prepared to plan for.

1. The purpose of this report is to consider some of the main strategic, intersectoral and delivery issues that have arisen during the first phase of the Housing Market Renewal (HMR) Pathfinder programme. The report also looks ahead to some challenges that will remain as the strategies for market renewal are implemented and start to make a tangible impact on communities in various parts of the Midlands and the North of England.

The past 18 months have witnessed a frenetic period of strategy development, programme review and negotiation involving the nine Housing Market Renewal Pathfinders (in Merseyside, Manchester Salford, Oldham Rochdale, Birmingham Sandwell, Newcastle Gateshead, North Staffordshire, South Yorkshire, East Lancashire, and Hull and East Riding). It might be argued that, rather than further reflection and review at this stage, it is now ‘time for action’. But the innovatory and radical nature of the programme – in terms of its genesis, focus and development – has generated intense policy interest, and it was considered useful to offer some informed comments at this relatively early stage and to identify the opportunities and challenges for market renewal that are already emerging.

The original idea for this report stemmed from a review of the project jointly funded by Joseph Rowntree Foundation and the Pathfinder programme to develop a mutual learning network among those involved, in different capacities, in housing market renewal. The thinking behind this project anticipated that the radical nature of the HMR programme would test the skills, capacity and experience of all those involved in its development. The research proposal therefore sought to inform the development of the first Pathfinder strategies through an interactive process, which, in a series of seminars, would highlight common issues and challenges, and identify potential solutions to them.

It was intended to use these events as a means of building up a learning network among Pathfinders, to assess the different strengths and weaknesses of dealing with neighbourhood decline and market failure, and to produce a guide with key pointers on strategy development, planning and delivery. Three seminars have been held – on delivery vehicles, community cohesion and strategic planning. During this process, it was suggested that it would be valuable to undertake a review of the genesis and subsequent development of the HMR programme, and to identify some of the main questions for strategy, policy and delivery that had arisen so far. In addition to this focus, it was agreed that the report should offer an independent view on issues for future policy development at national, regional, sub-regional and local levels.

1. Introduction

2. This report does not seek to cover similar ground to the contribution made by the Housing Market Renewal team in the Office of the Deputy Prime Minister (ODPM) or by the Audit Commission, unravelling and assessing each Pathfinder plan in turn.

Rather, it uses material from these and other sources to look across the programme as a whole at common issues of strategy, planning and delivery. It derives from the perspective of one author (Nevin) who had been directly involved in launching the strategy and programme in one of the nine Pathfinders and another (Cole) who had been closely observing policy developments from an independent standpoint during this period.

Both authors have been involved in the development of the policy debate around market renewal over the past few years. Nevin was a leading member of the CURS (Centre for Urban and Regional Studies) team at the University of Birmingham that undertook much of the original research identifying markets ‘at risk’ across parts of the North and Midlands; he also became involved in the Core Cities ‘lobby’ for market renewal funding and acted as an adviser to the ODPM in the early stages of the HMR programme. Cole published one of the first reports on the responses of social housing agencies to falling housing demand (Cole et al ., 1999) and has been involved in several local housing market studies. Both authors were engaged as specialist advisers to the Select Committee inquiry into ‘Empty Homes’ in 2002, which proved influential in attracting national political attention to the incidence of ‘market failure’ in parts of the North of England and the Midlands (Transport, Local Government and the Regions Select Committee, 2002).

This report therefore provides a commentary on the development of the Housing Market Renewal programme to date (September 2004). It is based on a review of the Market Renewal strategies (termed ‘prospectuses’), which have been submitted to ODPM, discussions with key participants in the programme and the authors’ own experience in developing housing market research and renewal strategies over the past six years. We recognise that the Market Renewal programme is in its infancy and that, given its ambitious scope, it will take a number of years for the public policy framework to adapt in order to facilitate market restructuring and renewal. Given this context, the report is designed to contribute to the wider understanding of this approach to regeneration and to influence the debates about how policy should develop in the years ahead.

The resources to facilitate urban and regional regeneration have significantly increased since 1997. The Market Renewal programme is predicated on the integration of various programmes to promote a holistic approach to the renewal of older urban areas experiencing significant changes in employment, land and housing markets. The Housing Market Renewal Fund (HMRF) was therefore originally Introduction.

3. created as the missing piece in the urban policy jigsaw (Nevin, 2001). As Annette Hastings has put it in reviewing the changing emphasis of government policy:

The reliance on short-life, special initiatives and projects appears to have been replaced by a more ‘strategic’ approach that emphasises the role of mainstream government and public sector activity in determining the trajectory of neighbourhoods … the new policy advocates a ‘multilevel’ approach, in which the importance is recognised of governance arrangements operating at a range of spatial scales.

(Hastings, 2003, p. 85)

It is therefore implicit in this programme that, in some geographical areas, HMRF will provide the major resource input, where housing-led regeneration is appropriate. In other areas, however, the process of renewal will follow or confirm existing trends in local or regional economic development, in demographic change or in patterns of land use.

Given the multidisciplinary and multisectoral nature of the market renewal process, this report is intended for a variety of audiences. It is hoped it will improve understanding of the aims, objectives, scale and scope of the programme among local authority officers and members, especially those involved in economic development, planning and corporate strategy and service delivery. The report may also be useful to members of Regional Development Agencies, Government Offices for the Regions, Regional Housing Boards, the Housing Corporation and housing associations. Many of the dilemmas facing the programme – balancing immediate priorities against longer-term perspectives, dealing with conflicting community priorities, working through partnerships structures – will no doubt have echoes for those working in other regeneration and neighbourhood-based initiatives.

As the programme develops, it is likely that an increasing number of private sector stakeholders, both institutions and individuals, will be affected and lively debates are likely to be in prospect about the distributional consequences of intervention, the spatial impacts and the direction and focus of local strategies. These debates have been sharpened by the publication of the Comprehensive Spending Review for 2005–08 (HM Treasury, 2004b), which has allocated continuing resource support, building up to a fund of £450 million for the HMR programme by 2007–08, and which

will in future allow for the full recycling of capital receipts. The Market Renewal programme will therefore have access to more than £1.5 billion of resources during the first five years of the programme, piecing together resources from HMRF, English Partnerships and the Housing Corporation. As the pace of change accelerates, the impact on both private sector interests and many local communities across the North The road to renewal and Midlands of England will become more tangible, and this report may help to provide some wider context and rationale for the major transformations planned at neighbourhood level in the next few years.

Finally, this report argues that many aspects of the HMR programme are distinctive and innovative – adjectives that have often been over-used in urban policy debates in the past, but which have some credibility here, for reasons set out in the following two chapters. This report, while providing only interim observations from the early stages of a long-term policy initiative, is nevertheless intended to contribute to ongoing academic and policy debates about the changing shape, function and effects of urban policy programmes in a context of new patterns of governance, localism and community (see, for example, Cochrane, 2003; Raco, 2003).

Earlier drafts of this report were discussed with members of the Pathfinder teams, and the idea of producing an overview of this kind received an enthusiastic response. In the process of setting up the delivery mechanisms, establishing lines of accountability, estimating resource requirements, developing and revising trategies, and setting out proposals for community consultation, it is not surprising that Pathfinders have been absorbed in their own areas and priorities. This report is intended to encourage a glimpse over the parapet towards further horizons, more than two years on from the original announcement of the Market Renewal programme and 18 months on from the designation of the nine Pathfinder areas to be included in the programme. It is an independent, but hopefully constructive, summary of what has been achieved so far, while offering an informed view on the main challenges ahead, as a basis for further debate.

The report therefore sketches some of the major issues and challenges that have arisen, using illustrative examples from the Pathfinders. It should be noted at the outset that most of the case study examples are drawn from the first eight Pathfinder programmes to be approved by ODPM. The ninth Pathfinder, Hull and East Riding, had a later start and will not submit its prospectus until the end of 2004.

The next chapter looks at the concept of housing market renewal and considers the main reasons for the development of the Pathfinder programme. Chapter 3 explores the thinking behind market renewal and suggests that its assumptions differ from many previous area-based interventions in English urban policy. Chapter 4 examines some of the points of diversity within the programme, linkages with other strategies and processes of governance and community engagement. Chapter 5 identifies some of the key challenges that have emerged from the initial development of the Market Renewal strategies by the Pathfinders.

Introduction

4. One of the more unusual aspects of the HMR programme is the extent to which the selection of the Pathfinders has been shaped by research evidence on ‘low demand’, rather than through a local authority bidding process. Chapter 6 examines how Pathfinders, now they are up and running, might monitor trajectories of change in the different sub-markets in their areas, not least to assess the impact of their own interventions. Chapter 7 outlines Pathfinders’ proposed interventions and reviews the scale of resources envisaged to deliver the first stage of housing market renewal in the eight areas where prospectuses have been submitted so far.

Housing market renewal is not based on a precise set of interventions that can be easily scoped and replicated in different contexts. The Pathfinder programme is hinged on an approach of ‘learning by doing’, building up a reservoir of skills, ideas and programmes in neighbourhoods with diverse problems and priorities. The programme is therefore expected to develop organically, as programmes are adjusted to meet changed market conditions, and as a result of Pathfinder experiences elsewhere. Chapter 8 of this report therefore contains a series of suggestions intended to strengthen future strategic development and programme delivery, and focuses on the need to strengthen links with other interventions and policy sectors. This leads on to the Conclusion. Further details on the Pathfinder areas and governance arrangements are appended for background information.

5.The need for a market renewal initiative At the time of writing, the British economy is experiencing its longest period of economic growth since the Second World War. This period of growth has been accompanied by a prolonged bout of house price inflation, which has seen house price–income ratios reach even higher levels than those that preceded the peak of the last housing market boom at the end of the 1980s. The economic impact of the current national housing shortage has recently been delineated by Kate Barker (HM Treasury, 2004a) in her report on future investment. This report concluded that the market for housing in Britain was ‘abnormal’, as the supply of dwellings did not respond to changes in price. Additionally, Barker estimated that some 120,000 extra houses would need to be added annually to the supply to ensure that, in the long term, house prices were restricted to the European annual average of 1.1 per cent real growth.

The failure of the housing market to adapt within an acceptable time frame to changes in the balance of supply and demand is a national phenomenon. One might, of course, debate what is meant by ‘acceptable’ here – one can imagine that a response from a neo-classical economic perspective would be that, in the long term, the market will simply establish a new equilibrium. The key policy question here is whether Government can simply observe from the sidelines as the social and economic costs arising from this restructuring process increase, or whether it should intervene to minimise them. And, as Keynes pointed out, in the long term we are all dead.

The housing debate in the popular media has tended to be dominated by issues of housing shortage, house price increases, the impact of new developments, planning restrictions and ‘nimbyism’ rather than issues of market failure. However, government-sponsored research four years ago had estimated that some 850,000 homes in England were affected by ‘low demand’ (Bramley et al ., 2000). In fact, this number is probably an underestimate, as the research was based on a methodology that asked local authorities to identify individual dwellings affected, rather than clusters of homes located in neighbourhoods experiencing decline. If this broader area-based definition is adopted, then it is conceivable that some 5–6 per cent of homes in England are currently located in areas that are at risk of market collapse.

It might still be argued that, despite this evidence, a special government initiative is not necessary, given that only one in 20 dwellings overall are affected. As stated above, it might also be claimed that the market is simply in a transitional phase,
The development of the Market Renewal Pathfinder programmebefore it eventually returns to a state of equilibrium, albeit from a new starting point.

However, as the Barker Review (HM Treasury, 2004a) suggested, it is optimistic in the extreme to characterise the housing market in England as self-regulating; and many of the problems evident in vulnerable neighbourhoods are the manifestation of long-term processes of decline, restructuring and dislocation, not a temporary blip in an otherwise healthy market context.

Finally, it might be argued that a new programme is not needed given the existing array of area-based government initiatives in housing and urban renewal. For example, the Government’s current agenda aims to improve service delivery through the Neighbourhood Renewal Fund, to enhance community cohesion and to make good a commitment ‘to close the gap between the most deprived areas and the rest of the country’ (HM Treasury, 2000). These objectives were initially reflected in the National Strategy for Neighbourhood Renewal, which sought, among other things, to turn around the incidence of low demand by 2010 (Cabinet Office, 2001). However, it became increasingly apparent that achieving this objective might be at risk unless a more strategic, sub-regional emphasis was given to public intervention. The subsequent creation of a Housing Market Renewal Fund was an acknowledgement by central government of the coalescence between areas of weak housing markets and concentrations of severe deprivation. The interaction between these processes was threatening the success of ‘single-strand’, locally focused interventions and might undermine the Treasury’s aspirations to reduce socio-economic disparities between different regions in England.

Therefore, prior to the launch of the Housing Market Renewal programme, several factors associated with vulnerable housing markets had begun to pose sharp questions about the impact of existing government strategies, the viability of their core assumptions and the effectiveness of programmes designed to reduce social exclusion and effect urban renewal.

Residential volatility

The neighbourhoods experiencing low demand for housing also tended to be faced with residential volatility (Pawson and Bramley, 2000). There is more recent evidence to suggest that, once critical thresholds relating to vacancy rates and residential turnover have been exceeded, then the pace of neighbourhood abandonment increases (Lee and Nevin, 2003). This residential volatility has a profound impact on the demands made on local service providers and also creates significant problems in terms of neighbourhood management (Cole et al ., 1999).

The road to renewal

7.Market failure Since the mid-1970s, successive central government regeneration initiatives have been focused on making conditions more favourable for private sector investment.

Therefore the picture that began to emerge from the mid-1990s – of wholesale abandonment, tracts of empty properties and homes that had no value at all – came as something of a shock to policy makers and politicians. However, the assumed prevalence and scale of those areas that have actually experienced market failure – i.e. neighbourhoods where no price, no matter how low, can clear the market – has perhaps exerted too strong an influence on recent debates about housing market renewal. Comparatively few areas have experienced this phenomenon; many more, however, were thought to be at risk of collapse.

Where the market has collapsed it has tended to be a rapid process. In the West End of Newcastle, for example, eighbourhoods become abandoned within a three year period (Keenan, 1998) with properties subsequently being offered for sale for 50 pence (Blacklock, 1999). In North Manchester, an area of 5,000 pre-1919 terraced properties, vacancies increased by 40 per cent and house prices fell by 25 per cent over a five-year period (Manchester City Council, 2001). While actual market collapse has been confined to relatively few inner-urban suburbs in the North of England, ‘abnormal markets’ were becoming more apparent over comparatively large areas of older ex-industrial suburbs and council estates in parts of the Midlands and the North. It was the potential scale and apparent intractability of the problem that challenged the adequacy of existing urban renewal initiatives to devise an effective response.

Inefficiency in investment programmes As the issue of changing housing demand moved to the centre stage of the urban policy agenda, the limitations of conventional small area-based approaches to neighbourhood restructuring were increasingly recognised. Many of the areas now included in the Housing Market Renewal programme had already received resources from Estate Action, City Challenge and the Single Regeneration Budget in the recent past, and some areas experiencing acute decline had been in receipt of virtually every government urban policy initiative since the introduction of the Urban Programme in 1968. The need for a fundamental review of the way in which public sector investment was being deployed in areas with weak housing markets was thrown into sharp relief with the announcement that 50 units of social housing were being demolished in the North East only three years after they were built, having never been let ( Housing Today, 1999).

The development of the Market Renewal Pathfinder programme

8.The perverse impact of economic growth During the early 1990s, the resources available to fund housing and integrate this within a holistic regeneration framework diminished considerably, as the Estate Action programme was wound down and the Housing Action Trust (HAT) programme (in its second incarnation) was limited to six projects. The subsequent City Challenge initiative and the six rounds of Single Regeneration Budget allocations shifted resources towards skills, training and employment agendas in the belief that the previous focus on ‘bricks and mortar’ had neglected the competitiveness of residents who lived in disadvantaged areas (Nevin et al ., 1997). However, even before the end of the decade, evidence was emerging that successful economic regeneration in the absence of significant improvements to the quality of the urban environment could increase residential volatility, as residents were ‘empowered’ – but only to move out of the poor quality neighbourhoods they lived in (Kleinman and Whitehead, 1999).

This oscillation in policy between ‘people-based’ and ‘place-based’ programmes, and the lack of integration between housing strategy and changes in the wider economic and urban environment, became a key campaigning point for policy makers, politicians and housing practitioners. They pressed for a new programme and source of funding – and the end result was the introduction of the Housing Market Renewal Fund.

What is market renewal?

Adopting a definition of market renewal is an important building block in the process of developing a sub-regional strategy with meaningful aims, objectives and outcomes. The original submission to the Comprehensive Spending Review (explicitly) and the eight Market Renewal prospectuses (mostly implicitly) produced to date have defined market renewal as a philosophy that integrates housing, planning and regeneration strategies to produce a process of renewal that reverses the negative socio-economic trends that cause decline of housing markets within a sub-region. The approach attempts to restore choice and balance in housing markets that have become increasingly ill-suited to the preferences and aspirations of existing residents or potential incoming households.

For this approach to work effectively, it needs to nest within a framework created by a sub-regional economic development strategy, aligned with a high quality transport strategy and a positive vision for the urban environment as a whole. This broader framework allows the Market Renewal Strategy to plan for the provision of a target population and shape the urban form according to likely migration patterns, demographic change and fluctuations in income and wealth. (It might be argued that The road to renewal

9. ‘market restructuring’ is a more accurate description of this process, but the more positive sounding term ‘renewal’ gained currency after the publication of the Government’s Sustainable Communities Plan [ODPM, 2003a].)

The change in local housing markets may be manifested through three analytically distinct processes:

1 stock obsolescence : where the characteristics of the property have been outstripped by changing tastes, aspirations and income levels

2 surplus housing stock : where underlying changes in the economic base of the area and the consequent shift in population, often through high levels of outmigration, cause a mismatch between supply and demand

3 unpopular neighbourhoods : where a range of factors, such as unpopular property design, stigma and high levels of perceived crime and anti-social behaviour, interact to reduce external demand and result in a high proportion of existing residents wanting to leave the area. Where these three processes come together, it leads to the phenomenon of neighbourhood abandonment, the most deep-seated challenge for any programme of area-based renewal.

OBSOLESCENCE
SURPLUS UNPOPULAR
NEIGHBOURHOODS
A = ABANDONMENT

The development of the Market Renewal Pathfinder programme

10.As Figure 1 indicates, abandonment is one extreme form of housing market change, as a self-reinforcing process sets in. At a sub-regional level, ODPM deemed that each of these three processes had to be present to merit interventions of the scale and nature of Market Renewal Pathfinders. However, at neighbourhood level, specific market renewal interventions may need to respond to just one or two of these processes, depending on local circumstances. Highly localised drivers determine the distribution of properties located in one or more of the categories of surplus, obsolescent or unpopular neighbourhoods, and the relationships between these factors at the neighbourhood, city and sub-regional level will determine how the problem manifests itself locally. It would therefore be entirely inappropriate for central government to set out what a renewed housing market would look like, as recently suggested by the Royal Institution of Chartered Surveyors (RICS, 2004).

Localised drivers of housing market change cannot simply be wished away.

The evidence culled from a collective reading of the eight Pathfinder strategies produced to date suggests that greater clarity may be needed over how the aims and objectives of programmes supported by the Housing Market Renewal Fund (HMRF) are contributing to locally agreed reductions in surplus, obsolescence and the degree of neighbourhood unpopularity. Furthermore, it will be important for Pathfinders across the programme to be realistic about the timescales they are adopting to make progress in influencing the local drivers that are affecting market trends. Otherwise, they may be subject to premature criticism in advance of the scheme taking shape in terms of its investment programme, the extent of policy integration and impact on neighbourhoods (RICS, 2004).

Developing the evidence base on housing market renewal

In February 2001, the Centre for Urban and Regional Studies at the University of Birmingham completed the research Changing Housing Markets and Urban Regeneration in the M62 Corridor (see Nevin et al ., 2001). The report examined housing market change across 18 local authority areas and mapped areas at risk of changing demand, using indicators that appeared to be significant drivers of area abandonment and declining demand. This mapping exercise highlighted areas at risk of changing demand, which, taken together, contained 280,000 households – affecting 690,000 residents in total.

The areas at risk could be divided into three types of location: peripheral housing estates; the centre of old industrial towns; and the inner core of the large metropolitan conurbations. A clear message from this research was that, because of large-scale risk associated with multitenure neighbourhoods in the core of the older urban areas, and given the scale of the problem, a new approach to regeneration The road to renewal and renewal would be needed. This research on the M62 Corridor started the debate about the need for the creation of Housing Market Renewal Areas and a Housing Market Renewal Fund to facilitate holistic regeneration in the older industrial centres.

An unusual characteristic of the M62 research was the fact that the contractor had a large number of clients, reflecting the widespread interest in understanding the dynamics of change that were adversely affecting housing providers in the North West. (The research was subsequently extended to other regions.) The large number of contributors to the study facilitated an interactive research process that enabled data and assumptions to be checked with housing providers all the way through the project. Additionally, this process allowed a swift transfer of knowledge and facilitated an effective political lobby of MPs, senior councillors and public officials to emerge at a regional and national level.

The lobby for an effective response to changing housing markets in Northern England was successful in getting the issue on to the agenda of the Transport, Local Government and the Regions Select Committee, which conducted an inquiry into Empty Homes. The ensuing Select Committee Report (2002) supported the creation of a Housing Market Renewal programme and the findings of the report were subsequently backed by an Early Day Motion signed by 54 Members of Parliament. Prior to the completion of the Select Committee deliberations, the National Housing Federation, Chartered Institute of Housing, the Core Cities and three Regional Housing Boards commissioned a submission to the Government’s Comprehensive Spending Review for 2003–06. This submission referred to a series of case studies and argued for the introduction of a Housing Market Renewal Fund of £6–8 billion over a 15-year period (Nevin, 2001). The characteristics of the market renewal approach were set out as:

• a programme to be targeted at failing or weak markets rather than local authority areas

• a strategy that would be ‘tenure blind’

• a programme supported by a clear planning framework

• a funding stream that would be integrated with other regeneration funds to promote a holistic approach. The development of the Market Renewal Pathfinder programme

11. The Housing Corporation was also involved in briefing ministers in ODPM about the scale and nature of the ‘low-demand’ issue, and the possible impacts on the sector.

This culminated in direct lobbying of the Deputy Prime Minister in March 2002.

The Pathfinder programme

The Government’s response to this lobbying is summarised in Table 1. In April 2002, nine Market Renewal Pathfinders were announced, covering areas of market weakness in:

• Birmingham Sandwell

• East Lancashire

• Hull and East Riding

• Manchester Salford

• Merseyside

• Newcastle Gateshead

• North Staffordshire

• Oldham Rochdale

• South Yorkshire.

Following this announcement, a preliminary £2.66 million allocation was made to each Pathfinder from the Capital Modernisation Fund – a resource used by Government to pump-prime major long-term capital investment projects. This resource was made available to fund the following activity:

• research and other costs involved in developing the scheme

• recruitment of a development team

• early actions (‘quick wins’).

The road to renewal

12. Table 1 The development of the Market Renewal programme

Date Event April 2002 Nine Pathfinders announced with the aim of tackling the most acute and extensive areas of market failure.

May 2002 £25 million allocated from the Capital Modernisation Fund to develop Pathfinder strategies.

July 2002 Spending Review 2002–05 confirmed commitment of resources to the Pathfinder programme.

February 2003 Communities Plan confirmed funding for the HMR programme of £500 million over the next three years.

October 2003 Manchester Salford HMR Pathfinder allocated £125 million for first-phase activity. February 2004 Newcastle Gateshead HMR Pathfinder allocated £73* million for first-phase activity.

Merseyside HMR Pathfinder allocated £90* million for first-phase activity.

March 2004 East Lancashire HMR Pathfinder allocated £72* million, South Yorkshire HMR

Pathfinder £75* million, Oldham Rochdale HMR Pathfinder £57.5* million for firstphase activity.

July 2004 Birmingham Sandwell HMR Pathfinder allocated £50* million and North Staffordshire HMR Pathfinder allocated £34* million for first-phase activity.

July 2004 Announcement of continued support for HMR Pathfinder and other market renewal initatives in 2005–08 Comprehensive Spending Review, building to a fund of £450 million for the year 2007/08.

* Includes the £4 million of resources for each Pathfinder to fund the Early Action programme 2003/04.

To receive this resource, each of the Pathfinders had to fulfil four conditions:

• agree a boundary for the Market Renewal Area with officials from the ODPM

• agree which local authority would assume the responsibility as the Accountable Body for the Housing Market Renewal Fund

• set milestones in relation to the development of the prospectus

• set up a Non-statutory Partnership Board with ‘appropriate’ governance arrangements.

Throughout the first two years of the Housing Market Renewal programme, the ODPM has adopted a non-prescriptive managerial role, which has been enabling rather than controlling. The policies relating to the programme have been developed and monitored by a Pathfinder Project Working Group staffed by civil servants, including representation from the Housing Corporation, and directors or other senior staff from the Pathfinders. The Housing Corporation also seconded a senior member of staff to work with the ODPM team in developing the programme. There have also The development of the Market Renewal Pathfinder programme been meetings of Pathfinder Directors and Chairs of Pathfinder Boards, and four national conferences – three of these were mainly opportunities for Pathfinder teams to identify common themes, check progress and encourage wider networking across the programme (see, for example, Tim Dwelly in Partnership, 2004). The fourth conference was directed explicitly at elected members, to promote a wider awareness of the significance of market renewal in the context of local authority housing strategies. Where appropriate, specific policies on issues such as the development of prospectuses have also been designed by short-term task groups.

Market Renewal funds are not intended to replace existing funding streams and the ODPM has been careful to ensure that funding substitution is not integral to any of the market restructuring schemes it approves. Specifically, Housing Market Renewal funds can be used for:

• the cost of producing the Market Renewal Scheme and relevant associated staffing and consultation costs

• targeted renovation and environmental improvement grants

• acquisition costs (land and property)

• clearance of surplus and obsolete property

• associated legal and professional fees

• gap funding for housing for sale

• site preparation and reclamation

• assistance with housing association new-build/renovation programmes

• environmental improvements

• enhanced neighbourhood management service for neighbourhoods in transition and awaiting clearance.

There is an assumption by the ODPM that the revenue expenditure associated with the scheme will not exceed 10 per cent of the Housing Market Renewal Fund cost over the lifetime of the initiative. The Housing Market Renewal Fund does not operate with the flexibility to vire significant expenditure to non-housing issues. Some early critics of the programme interpreted this as a repeat of previous mistakes, where regeneration initiatives have been too narrowly focused. However, it is a requirement for local partnerships to develop their Market Renewal prospectuses in a way that secures the integration of the Housing Market Renewal Fund with other central government funded regeneration initiatives, the programmes of the Regional Development Agency and local mainstream revenue and capital programmes. The approach is therefore consistent with the original submission made to the 2003–06 Comprehensive Spending Review, which asserted that the failure to provide a fund targeted specifically at the housing element of market renewal was undermining the other government regeneration programmes, as population movement and abandonment could not be managed within the existing public policy framework.

Progress to date

The HMR programme has been the outcome of one of the fastest moving agendas in British urban policy over the last three decades. A policy framework was designed over a 12-month period in 2001/02 through a constant dialogue between academics, practitioners, senior civil servants, MPs, and local authority elected members and senior officers. Within two years of the announcement of the creation of the HMRF, eight of the nine Pathfinders had submitted their Housing Market Renewal prospectus to ODPM. (Hull and East Riding embarked on the process of preparing the prospectus at a considerably later stage and is expected to submit by the end of 2004.) The work required to develop a prospectus is considerable, and encompasses strategic development, gaining community and political consent, and setting out programme development and delivery. The key tasks can be summarised as:

• assembly of the evidence base relating to market change

• strategic alignment of policies, programmes and spending priorities at neighbourhood, district and sub-regional level

• development of a communication and consultation strategy

• design of intervention priorities, policy tools and delivery vehicles

• delivery of an Early Action programme of physical investment and land acquisition.

All eight of the Pathfinders had received approval for their programme (with due revision and modification) by July 2004. These schemes had been subject to independent scrutiny by the Audit Commission, which was appointed to this task by The development of the Market Renewal Pathfinder programme the ODPM in December 2002. The Commission has now published scrutiny reports on the eight Pathfinders’ prospectuses. During the strategic development phase, the Audit Commission has operated as a ‘critical friend’ to the Pathfinders, providing support and challenge to the local partnerships, as well as its more familiar role of ‘scrutiniser’. The Audit Commission is now developing a programme of activity to encourage joint working and mutual support among those Pathfinders that have now passed through the scrutiny process. The first of this series of ‘Learning Lessons’ events for Pathfinders was held in July 2004.

The next chapter takes a step back from the chronology of events and explores some of the more innovative aspects of the Market Renewal programme in the context of previous area-based housing and urban policy initiatives.

12. In this chapter, some of the underlying features of the Housing Market Renewal Pathfinder programme are explored – the spatial nature of the programme, the emphasis on a holistic approach, processes of accountability and control, and the philosophy informing the plans for area-based interventions.

The place of space

A feature of urban policy in England over the last 30 years has been a basic uniformity of approach, driven by a broad consensus about the causes of economic decline, the process of decentralisation in residential settlement patterns and the concentration of social and economic disadvantage that has characterised the larger towns and cities. Most of these spatial policy initiatives have been scripted at central government level and focused on the ‘locality’ (for example as a ‘priority estate’, ‘education priority area’, ‘SRB area’ or ‘neighbourhood renewal area’). While some programmes have had a wider reach (such as the Urban Development Corporation initiative), there has been relatively little attention to interventions at the intermediate level, between the ‘national’ and the ‘local’.

This approach is still manifest in current policy programmes, such as the National Strategy for Neighbourhood Renewal, in which a common template has been devised for localised interventions in deprived communities across the country. The centrepiece of the programme, New Deal for Communities (NDC), has been introduced in 39 areas of broadly similar size, receiving approximately the same amount of additional resource (£50 million) over a ten-year period to mitigate the causes and consequences of social exclusion. Clearly, the context in which these NDC partnerships are operating can differ sharply, but a similar approach, and a common emphasis on community-led strategies, has been adopted for all neighbourhoods in the programme – whether they are in Plymouth, Islington, Leicester, Knowsley or Newcastle.

However, there has been increasing recognition of the need for a more sophisticated and multilayered approach in urban policy, as Duncan Maclennan has recently argued:

… effective policy design and governance has to marry local knowledge and capacities to an understanding of wider processes and policy initiatives … an overall spatial perspective on policy is required, so that neighbourhood, city, regional and national policies are connected and complementary.

(Maclennan, 2004, p. 31)

The distinctive nature of the Pathfinder programme