TIF 'could be used to unlock housing schemes'

Tiffany Cloynes, partner and head of public services at Cobbetts LLP, comments on the viability of Tax Increment Financing in social housing.

“Tax Increment Financing (TIF) has been banded about for many years as a viable alternative funding steam for public sector projects. Now more than ever, supporters are looking to the Government to push the legislation through, as the public sector struggles to find financial support for regeneration projects.

“The TIF model has been an extremely powerful tool in the USA for over 50 years, and is designed to provide a strong economic incentive for projects which would otherwise have found it difficult to find sources of finance. However, in terms of social housing, much will depend on the specific terms of the legislation that will govern TIF projects and what, if any, can be directly applied to social housing. While the Coalition Government is making all the right noises about passing TIF through, currently it is far from clear what sort of mixed use scheme will be entitled to be included. At present, the emphasis seems to be on infrastructure and other key capital projects.

“As it stands however, TIF could be used to unlock a housing scheme. In essence, if a housing association was, for example, part of a Local Enterprise Partnerships (LEP), and the local authority had a TIF fund which unlocked a site, an income stream may be freed up to cross fund a housing association project within the LEP.

“However, TIF is not the only possible alternative funding stream for social housing schemes. A consultation document due to be released this week will discuss the empty home scheme, where Central Government is proposing to invest £100 million to bring empty homes back into use as affordable housing. Self financing will also see changes with a one-off settlement payment determined by a valuation of each local authority’s social housing business, their needs over 30 years and level of housing debt. A policy document on this is due to be published in January 2011, with new arrangements to be introduced in April 2012.

“Government cuts are inevitable if the UK is to restore trust in the UK economy and effectively erase public borrowing over the next five years. It is important that the cuts do not constrain growth, and it is positive that the Government is looking to alternative schemes such as TIF to cushion the blow. However, we need to understand exactly what type of TIF regime will be introduced. It could certainly be key in the promised shift in power from central to local government, but the main issue is how much flexibility local authorities will have and how wide their universal power of competence will be.”

For further information contact:

Tiffany Cloynes

tel: 0845 404 1603

tiffany.cloynes@cobbetts.com