Devolution White Paper will have a significant impact on the real estate sector

The Devolution White Paper will bring the biggest change to local government in England since the 1972 Local Government Act. Yet, between the release of the new NPPF and the Planning and Infrastructure Bill, it has been overlooked in many real estate boardrooms. The paper will, however, have a significant impact on future regeneration and development schemes, presenting both risks and opportunities.

Universal devolution, mayoral leadership and local government restructures

The government will extend devolved decision-making powers to all areas of England, with elected mayors leading a ‘strategic authority’. Strategic authorities are partnerships between more than one local authority, overseeing geographical areas of over 1.5 million people. The extent of the devolved powers and funding will depend on their tier: foundation strategic authorities (least powers); mayoral strategic authorities (mid-tier); or established mayoral strategic authorities (most powers, including integrated settlements).

Local authorities will also be reorganised, into single-tier unitary authority models (replacing the two-tier county/borough system), each serving more than 500,000 residents. Local authorities will combine into strategic authorities while retaining local service delivery.

Expect economic development to become increasingly place-centric

Due to its heavy centralisation, the UK has the highest level of regional economic inequality in the G7. Without London, the rest of the UK would be poorer than Mississippi. Decentralisation via devolution is therefore a key strategy for this government, which is why mayors, and their strategic authorities, will be given increased power, responsibility and finance for key policy levers like economic development, regeneration, strategic planning and infrastructure.

It is believed that this will lead to greater place-based growth because regional leaders can combine local knowledge with increased freedom to make decisions, allocate resources, and use funding to further regional priorities. The challenge for mayors will be ensuring that this economic growth complements, or better still, enhances local identity and community cohesion/inclusion. The developers who can facilitate this balance via best-in-class stakeholder engagement and exceptional systems for rapid/accurate learning around locality, needs and identity, will have a significant competitive edge in becoming trusted advisors to mayors and their strategic authorities.

Increased impetus on securing private sector investment will unlock opportunities

When it comes to place-based growth, particularly via regeneration schemes, up-front public investment is required for private capital to follow. Currently the UK is ranked in the bottom 10% of OECD countries for public and private investment. The white paper acknowledges this is a barrier to regional growth and is empowering mayors/strategic authorities to unlock private capital. They will receive streamlined funding, with mayoral authorities, gaining integrated settlements – allowing flexible spending within their remits. Funds could be allocated to unlock complex regeneration schemes that lacked viability previously, for example, where brownfield sites had complicated land ownership patterns or where the costs of infrastructure development and/or land remediation were too high.

Mayoral development corporations, with the increased function/power set out in the recent Planning and Infrastructure Bill, will also be available to further public-private collaboration. Mayors will also need to champion their region, backed by the newly formed National Wealth Fund (NWF) and the Office for Investment – driving growth through private investment. Developers should start planning for these opportunities, and reconsider regeneration/development ideas that were previously dismissed on account of viability/complexity, as long as they can demonstrate economic and social improvements.

Reorganisation of local government will bring significant risk (and maybe opportunities)

There are 317 local authorities in England currently (not including parish councils). Restructuring could reduce them to approximately 200. Some authorities will disappear completely, others will merge, taking responsibility for and sharing the burdens/needs of larger geographical areas and populations. The loss of strong relationships puts existing mid to long-term regeneration/ development plans at risk, especially if they do not correspond to mandatory mayoral spatial development strategies.

The speed at which the government is expecting these re-organisations to happen (full plans must be submitted before November), means a tough transition ahead and potentially adverse impacts on planning services in the short-term. The reforms will unlock opportunities too, especially through land and property disposals.

Questions remain about fiscal devolution, the consistency/amount of funding the government will provide, as well as how standards and accountability will be reformed to enable devolution to work, but devolution is happening and will be formalised into law soon. The board rooms that start planning for the change now, will get the chance to shape places and grow themselves.

Christopher Kerr is head of ESG at Davitt Jones Bould