Monthly Archives: January 2013

EU reforms may include EU regional policy

The idea of an EU referendum is politically divisive, but all sides support EU funding reform. EU regional policy and funds look set to change, but what might these changes look like?

This month the UK Prime Minister has set out how an EU referendum might happen around 2018; and the Labour Party front bench has made media comments on their agreement in the UK seeking reforms of EU regional policy including the EU structural and cohesion funds (SCF).

This could be the policy pendulum swinging back to the 1970s.

Prior to being outlawed in 1988 in the UK there was quite a move, especially within local government, to promote ‘contract compliance’ by which progressive and anti-discrimination practices could be written into taxpayer-funded contracts.

And prior to 1992 it was possible for countries in the EU to operate regional and industrial ‘preference schemes’ to channel aid to areas and industries in or at risk of decline. The politics of the 1980s reduced and then ended these ‘state aid’ schemes, characterised as ‘lame ducks’. More recently, the former EU Commissioner and UK politician Peter Mandelson noted wryly: ‘these schemes were less about governments choosing failing businesses, and more about failing businesses choosing government support’.

Over time the EU single market law took a deeper hold and any forms of local protection became outlawed, to be replaced by grants and loans through the new SCFs run by the EU. These new funds were also improved: projects were bundled together into five-year programmes with devolved administation, avoiding (it was hoped) the Brussels bottleneck.

Maybe some or all of these changes from the 1980s will now form part of the EU reform negotiations. It is an open secret that the UK Treasury does not like the SCFs, seeing it as an inefficient way to be paid back around 60% of the UK’s financial contribution to the EU, and with strings attached. However, local politicians like the SCFs for the same reason, that it provides a significant pot of money which the Treasury cannot confiscate.

So much of the public debate has been about the quality of the activities funded by the EU through these SCFs such as the European Social Fund (ESF) and the European Regional Development Fund (ERDF). The Open Europe organisation, not the EU’s greatest fan, published its view in a booklet in 2007: ‘Why the EU should not run regional policy’ which included anecdotes such as:

‘In the South East an ESF grant was given to a “cafe van”, whose owner is meant to tour the country for the purpose of teaching builders about sustainable development. (Building, 27 Oct 2006)’ which by the Executive Summary had become a burger van for builders. To be fair, the booklet also makes some more measured points on the limitations of the chosen method of economic statistics in targeting funds on the most deprived areas.

Where next?

The very topic of regional policy was an anathema to the Coalition Government in 2010, though the increasing North-South gap and the lack of growth are becoming more politically visible as time passes. The report on enabling regional growth by Lord Heseltine has become a rallying point for many politicians north of London, of the left and centre if not the more neoliberal right.

So perhaps the next stage is a reform at the EU level of competition policy within the single market, to allow again for subsidies in areas of greatest need. EU competition policy assumes a level playing field which it preserves by law; it is useless when the field is built on a steep hill and the poorer regions are forced to play uphill. A new regional remedy may be part of the reforms. Lord Hesletine has spoken in favour of the French system of compulsory membership for businesses in their local chamber of commerce. He may also like the French ‘Colbertist’ culture of strategic state subsidies too.

Are we over-constructing our buildings?

This Monday (28 January) the UK’s BBC Radio 4 Today news programme included an interview suggesting that the UK construction industry regularly uses too much material in making a modern building.

Dr Julian Allwood, at Cambridge University, was speaking about his new report on how we use too much material when we make stuff, including buildings. He suggested that one reason is that staff time is expensive when compared with the cost of materials, so shortcuts are made at the design stage by adding in extra construction materials ‘just in case’ rather than taking the time needed to design the building in a more efficient way. He also questioned why new buildings are expected to last 200 years when the evidence suggests that they will only last 40 years before being demolished and replaced.

One question, at least in the public sector which accounts for 40% of UK construction, is whether the new UK requirement to include Building Information Modelling (BIM) processes from the design stage onwards will help achieve the efficiency savings in the whole life costs (WLC) of a new building.

Links:

BBC Radio 4, 28 January 2013

07.23am “Dr Julian Allwood,(www.lcmp.eng.cam.ac.uk/welcome/people/julian-m-allwood) from Cambridge University, explains a report that he authored that says industries must radically cut the amount of materials they use to combat resource shortages and climate change.” www.bbc.co.uk/news/uk-21227152

Cambridge University

“The Low Carbon and Materials Processing group is a research group within the Department of Engineering at the University of Cambridge. Our work [includes how] … engineering can contribute to a low carbon future, particularly through reduced energy demand in industry.” www.lcmp.eng.cam.ac.uk/welcome/introduction

Social Value, the latest addition to public procurement in construction

This month sees the start of a new law in UK public procurement. The Public Services (Social Value) Act 2012 was passed in March 2012 and started to take effect in January 2013. This law applies to public bodies in England, and some in Wales.  In summary it makes possible for all authorities to follow the best practice that has already been implemented by a few in using their procurement processes to better promote the well-being of their local communities.

One example of how this might work is given by Social Enterprises UK as follows:

“A housing Arms Length Management Organisation (ALMO) contracts a private sector company to undertake repair work on their properties. As part of the contract the private company states that they will provide greater social value by promoting careers in construction and trades to local schools, and they commit to employing young people and the long term unemployed. The social value comes through local jobs for local people and raising the aspirations of local pupils.”

The local authority must, as before, only accept the most economic advantageous tender. What this Act confirms is that the previous practice of ‘social considerations’ can be part of the public procurement process provided that any social considerations are (1) included in the list of various selection criteria in the call for tenders; (2) not used to exclude any bidding organisation from being scored, even if the social value element of their score is zero; and (3) can have their performance measured in an objective manner; and (4) do not disadvantage any bidder from an organisations anywhere in the EU.

The four requirements above are sometimes known as ‘local performance criteria’. This means that a tender must be open to any competent enterprise based anywhere in the EU to apply and have their tender considered fairly, but that it is possible to specify that, wherever they may be based, the local impact of the service is X. One common example is that the provision is based in a local office. Another example, more likely now, is that the provider must engage with a local Young Offenders Institution.

Further reading:

www.guardian.co.uk/voluntary-sector-network/2013/jan/24/impact-measurement-essential-winning-contracts

www.socialenterprise.org.uk/policy-campaigns/campaigns/social-value

Regional Growth Fund: a checklist

There have been significant difficulties in the RGF processes for Rounds 1 to 3, including reports of approved-but-later-withdrawn projects because of compliance and due diligence issues post-approval. The causes of these difficulties are partly due to the lead applicant having to be a private sector company.

 

–          For SMEs only, using supply chain clusters and open-door events so that the project passes due diligence for State Aid compliance;

–          Focus on areas of highest worklessness;

–          Lead application to run the project office at cost, open book;

–          Possible public sector delivery partner/s who could later enhance project with an ERDF bid, because systems are already compliant for State Aids, procurement, publicity, etc;

–          Need to quantify jobs created and safeguarded; and

–          Need to quantify the capital plant investments aligned to the project’s growth.

 

Round 4 bids, minimum bid is £1m, deadline is 12:00, 20 March 2013. Free booklet on compliance etc available on request, sae or pdf.

City centre living for active older people

In the field of urban regeneration there are discussions about sustainable future uses for some city-centre apartment schemes.  In the last five years the growth in student renting as a niche market has been helpful, and this note is to suggest that a similar niche market could be developed for older active people, with some outline thoughts as follows, using the Castlefield area in Manchester as a Case Study to explore ideas.

Locational Benefits

Castlefield is often used as a film set, being an urban quarter with sensitive, historic and strategic features including Roman and industrial revolution connections. It has a complex canal waterfront, monumental transport viaducts, a YHA café, YMCA fitness centre and pool, a major museum nearby plus the city centre core within walking distance.  Nearby there are the Concert Hall, the Art Gallery, the Royal Exchange and other theatres, plus Deansgate and King Street for premier shopping and the usual range of ‘metro’ supermarkets, as well as the whole range of city centre activities.

There could well be an opportunity in locations such as this to be re-marketed with developments aimed at aspirational retired professionals looking to downsize, to let go of the car or drive less often (cars can be hired by the hour now), and to relocate their home in order to easily maintain their access to the prime leisure and cultural offers of the city centre while living in a quieter urban quarter with a waterfront or similar advantages.  The fact that some developments are currently stalled or only built to shell allows for a re-thinking of some of the internal features.  People with retirement income can be less affected by a recession, with their purchasing power no longer dependent on their (previous) employment.

Design Benefits

The internal fit-out could well be informed by the Lifetime Homes standards, and all apartments with two or more bedrooms.  This might involve costs in changed designs and drawings, but the marketability will be worth the effort, as well as keeping a work flow for in-house design teams. Some planners suggest that more amenity space would also be attractive to older purchasers.  There is sometimes adjacent underused land (such as empty light industrial and former car showrooms) which might make well-designed public and/or private open space.

The benefits of active frontages at the ground level are well documented, and with goo design a mix of small general retail plus health care could be attractive and viable.  Many city centres still need to build up the social infrastructure of GP or nurse-lead health services, and a mix of commercial and non-commercial income may make such frontages more viable. 

Facility Management

Important features for prospective purchasers could include:

  • covenanted limits on occupation, use and transfer
  • visible, proactive and reassuring property management with a concierge service
  • acceptance of usual non-threatening companion pets even though apartments.

Initial Feedback

Since first circulating a version of this note in October 2009, feedback from a private sector letting perspective has identified a current barrier in the inability currently for home-owners to sell their existing properties in order to finance such a move.

Therefore, there may be a need to include with the discussions people from a financing background.  The requirement would be for one or more financing organisations which has a trusted and ethical brand to be included, in order to provide a wrap-around service which could include the following options:

  • Selling
    • Immediate open-market sale of suburban property and purchase or rental of city centre property, with (if needed) post-employment residual mortgages based on retirement income
    • Delayed open-market sale of suburban property (achieved by an immediate sale to a financial institution for a fair price as an ethical equity release) and purchase or rental of city centre property
  • Renting
    • Managed rental of suburban property and income used for rental (or purchase) of city centre property, based on guaranteed minimum payments, with the asset retained
    • Lifetime-of-couple rental and service charges of city centre property paid in a lump sum on moving in, based on actuarial tables
    • Renting funded from retirement state benefits (but being aware of proposed changes to Housing Benefit limits).

First published: 09 August 2010

Could city retrofit plans be self-funded?

In New York, 80% of carbon emissions are caused by the energy used in buildings, and the single largest owner of buildings in the city is the council, which has set itself a carbon reduction target of 30% in the next seven years. To acheive this high-profile reduction, the city council has agreed a wide-ranging programme of works called ‘PlaNYC‘ and the city’s ‘Greener, Greater Buildings Plan‘ is a large part of this programme.

Having lower energy bills in buildings makes economic sense as well as environmental sense. The beauty of the New York Greener, Greater Buildings Plan is that it includes a refurbishment programme of works which is income-positive after three years, and balance-positive after five years, where the income has fully paid for all the works to date.

Already the city council has measured and benchmarked 2,790 buildings, which includes every city-owned building over 10,000 square feet. The measures include electricity, gas, steam and fuel oil; as well as the building type, year of construction, number of workers and total floorspace.

As Michael R. Bloomberg, City Mayor said, “You can’t manage what you don’t measure, and benchmarking the City’s buildings lets us determine where energy costs can be reduced”.

Leadership

It is also about leadership, where he added, “As the largest building owner in the country’s largest city, we can serve as a model for all building owners”. Commissioner Martha K. Hirst for the Citywide Administrative Services said, “As we continue to target buildings for comprehensive energy audits, new retrofit projects, and simple improvements in routine maintenance, this [benchmarking] data will show us where we can achieve the greatest gains for every dollar spent”.

By May this year the council’s Division of Energy Management has completed 84 retrofit projects and has 145 planned projects, due to save over 87,000 tonnes of greenhouse gases.

One of the key retrofit projects is to cool one million square feet of rooftop space this year, announced last year with Al Gore, simply by applying a reflective white coating to roofs so that the summertime air conditioning load in the city is reduced. This project also includes the buildings of City University NY and the New York LaGuardia Community College. The Cool Roofs project includes corporations, city agencies, nonprofit organisations and citizen volunteers.

NYPD Blue – going Green via White

Already cooled with a white roof is the NYPD’s 40th Precinct House in the Bronx – NYPD Blue has truly got to green via white.

For new buildings, the city’s 2008 Building Code requires most new roofs to have a reflective coating on at least 75% of the roof area. A cool roof absorbs 80% less heat than a traditional dark roof, and can lower the roof temperature by up to 60F and lower indoor temperatures by between 10F and 20F on hot days. As well as reducing air conditioning costs (up to 50% for a single-storey building) the cool roof also extends the lifespan of the roof by five to ten years because of the lower heat stresses.

The NY Cool Roofs project is being monitored by Columbia University’s Centre for Climate Systems Research, and they are developing an online dashboard so that the public can see real-time performance data. Citizen volunteers as well as building owners can call the city council switchboard for details on how to give back by working to reduce greenhouse emissions.

In July this year, New York City Council added to its portfolio of works for greenhouse gas reductions from buildings by announcing a new energy code for the city, which extends the energy efficiency standards for buildings to a wider coverage for the city compared with the equivalent state codes. Under the state code, retrofits which apply to less than 50% of a building are exempt from many of the energy efficiency requirements, but the city’s tougher code will now apply to a further 50,000 building retrofits each year, based on last year’s figures.

Lessons for Britain

What does this mean for councils this side of the ocean? In recent years British local authorities have been allowed to undertake prudential borrowing.  For example, Kirklees Metropolitan Borough Council adopted a five-year capital budget in 2009 with £218m of prudential borrowing to fund projects such as the Warmzone Plus project. According to the council this “will significantly reduce the carbon emissions of homes in Kirklees, in funding alternative energy uses in Council buildings and by allocating resources to support a District Heating initiative”.

But more recent statements by HM Treasury have cast a shadow on the prudential borrowing powers of local authorities. It remains to be seen whether the new Government’s localism agenda will extend to self-funded green retrofit programmes. They can work in New York, but can we do the same here in Manchester?

First published: 02 August 2010

Building affordable homes and growing UK manufacturing – could we increase both?

There are two ways to build a house – brick by brick or in manufactured modules. With modules we could create more affordable homes and support UK manufacturing.

The theory for manufactured homes is straightforward. Cars today are more complicated than houses, yet cars can be made for a few thousand pounds. At scale, houses could be manufactured at this cost too.

The manufacturing of affordable housing will require new investors to be prepared to make initial losses and to have the courage to face the storm from current stakeholders. There is a cluster of expertise around Hull which has specialised in manufacturing static caravans, now threatened with the recent addition of VAT. While home extensions costs include VAT, new homes are zero rated. The manufacturing firms around Hull in particular could be well placed to disrupt and sell into this new market.

The transportation costs and delivery costs would be higher than for cars, and these logistics favour UK manufacturers with shorter supply chains over importers. Delivery by road is limited to loads which are under three metres wide, so modular assembly on arrival is standard. The modules are placed on compatible foundations with service connections. Some sellers may integrate the foundation making within their service; others may outsource the groundworks to specialists.

The benefits of offsite manufacturing include good design, ultra-high energy efficiency and a culture of zero defects. Air-tight final assembly and good insulation are key to the long term performance of houses similar to the Passivhaus standard, with a ten year warranty as for traditionally built homes.

Software could ensure that design choices comply with local planning requirements, both in terms of the foundations (distance between properties, setting back, orientation, height, street overlooking) and in terms of finishes (brick type, slate and ceramic tiles, rendered walls, sash windows in conservation areas). Architectural practices could design bespoke exteriors. Vertical integration can include the decorations and curtains, as well as design options for the exterior shape and finishes.

There could be open-source standards for compatible foundations, with templates for small bungalows, large bungalows, end terraces, mid terraces, semi-detached and others. Most UK houses are not detached, so a process would be followed for the second half of two semi-detached houses to be matched to compatible buyers.

A public body with land and with an interest in affordable housing could provide new homes at a low cost to people, with covenants to prevent future super profits being extracted by others. A social landlord or an owner-occupier could probably buy a new house in this way for under £50,000 including the land rights.

Disruptive technologies

So, what is wrong with the theory? Offsite manufacturing could be a disruptive technology which changes the market fundamentals. We say housing is being treated ‘as a commodity’ when we wish to caution against a policy or a practice which ignores the social dimension of housing. Yet an item ‘becoming a commodity’ also means that its high price and exclusiveness has ended, and it can now be made in high volumes for a low unit price and profit margin.

A classic reason for a disruptive technology not being able to change the market is that the barriers to entry are too high. The ownership of land is one example, where large companies hold on to land banks to protect their market position by drip-feeding new houses to maintain scarcity. The lack of information known to buyers, especially first time buyers, also provides rich pickings for the dominant players.

But it isn’t just the private housebuilding firms that have extracted super profit from new buyers. Public bodies have also looked to new homes as an income stream, whether from section 106 payments, from new public buildings within the development, or for compulsory highway improvements. The utility companies have extracted their share too. And political parties have extracted value, especially with compulsory discounts such as the right to buy.

Affordable renting

Which begs the question, how many young adults today would risk becoming an owner occupier so soon after the 2008 property crash, rather than renting?  The number of people renting in the private sector is still growing fast, and expected to soon exceed the number of people renting in social housing. The pressure to protect standards by better regulation will continue to grow, as is already seen with the ‘sheds with beds’ issue of unregulated development.

Many young adults already see housing as a commodity to the extent that they do not trust it to be an investment in the way their parents did. In retirement the value of your house is reduced by the local authority looking to recover social care costs. The value can also be reduced by central government in terms of reduced eligibility to welfare benefits when compared with renting. Being able to sell your home in retirement to gain a lump sum is less of an option now. Your home may be your castle, but every stone can have someone else’s name on it. Lower cost housebuilding will enable affordable rents and affordable purchases.

 First published: 08 May 2012