Manchester City Council Item 3 Executive 24 June 2014
Manchester City Council Report for Resolution
Report to: Executive - 24 June 2014
Subject: A Stimulus for Residential Growth
Report of: The Chief Executive
Summary
This report sets out proposals to establish two collaborative partnerships: one between the City Council and the Homes & Communities Agency (HCA) and one between the City Council and Abu Dhabi United Group for Development and Investment (“ADUG”) and/or its subsidiary companies, an investment and development company owned and controlled by His Highness Sheikh Mansour bin Zayed Al Nahyan. Both partnerships are designed to stimulate and sustain residential growth within Manchester.
Recommendations
Executive are recommended to:
1. Agree that the City Council establish a partnership relationship with the Homes and Communities Agency to be known as ‘Manchester Place’ for the purposes as set out in this Report.
2. Agree that Manchester Place will be overseen by a Project Board which will be chaired jointly by the Chief Executive of the Council and the Regional Director of the HCA
3. Agree that the first Investment Action Area for Manchester Place will be Ancoats and New Islington; and that an Annual Strategic Plan on Manchester Place's activities will be reported to the Executive.
4. Agree that the City Council participates in a collaborative relationship with ADUG and/or its subsidiary companies to deliver Manchester Life and becomes a shareholder in Manchester Life Development Company Limited, for the purposes as set out in this Report.
5. Delegate authority to the Chief Executive, City Treasurer and City Solicitor in consultation with the Leader of the Council and the Executive Member for Finance and Resources to finalise details of the legal relationships and structures of the partnerships and to approve the business case and details of other documentation required for the partnerships.
6. Delegate authority to the City Solicitor to enter into and complete all documents or agreements necessary to give effect to the recommendations in this Report
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7. In accordance with paragraph 14 of Part 4, Overview and Scrutiny Procedure Rules of the Council’s constitution, and having consulted with the relevant statutory officers, to approve the matter as urgent, in that any delay caused by the call-in process, would seriously prejudice the legal or financial position of the Council or the interests of the residents of Manchester and exempt it from call in.
Wards Affected: All
Community Strategy Spine Summary of the contribution to the strategy
Performance of the economy of An efficient and well functioning housing market is the region and sub region essential for the economic wellbeing of the city If Manchester is to meet forecast population and employment projections there is an urgent requirement to increase the supply of good quality housing to underpin future employment growth
Reaching full potential in If housing delivery is accelerated jobs will be education and employment created across the supply chain and the development cycle, providing a positive impact on the performance of the local economy and the availability of local employment
Individual and collective self There are examples across the city where good esteem – mutual respect quality housing and neighbourhoods have helped to develop a sense of self esteem and mutual respect amongst communities
Neighbourhoods of Choice The partnerships will support and promote the creation of high quality neighbourhoods of choice across the city.
Full details are in the body of the report, along with any implications for:
.Equal Opportunities Policy .Risk Management .Legal Considerations
Financial Consequences – Revenue Any costs arising out of the recommendations in this report will be met from existing budgets.
Financial Consequences – Capital There are no capital costs arising out of this report. Further details of implementation and delivery costs are dealt with in the Part B report on this agenda.
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Contact Officers:
Name: Sir Howard Bernstein Position: Chief Executive Telephone: 0161 234 3006 E-mail: [email protected]
Name: Liz Treacy Position: City Solicitor Telephone: 0161 234 3087 E-mail: [email protected]
Name: Eddie Smith Position: Strategic Director (Strategic Development) Telephone: 0161 234 3030 E-mail: [email protected]
Background documents (available for public inspection):
The following documents disclose important facts on which the report is based and have been relied upon in preparing the report. Copies of the background documents are available up to 4 years after the date of the meeting. If you would like a copy please contact one of the contact officers above.
.East Manchester Strategic Regeneration Framework, Executive, 19th December 2007
.Draft Residential Growth Prospectus, Executive 26th June, 2013
.Ancoats and New Islington: A Draft Neighbourhood Development Framework, Executive 8th April 2014
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1. Introduction
1.1 In June 2013 the Executive considered a detailed report on the development of a Residential Growth Prospectus for Manchester. The Prospectus set out to encourage and guide the delivery of new housing across the city to accelerate housing growth, at the same time as delivering attractive and successful neighbourhoods where increasing numbers of people will choose to live; close to employment opportunities and all the other attractions to be found in a successful and growing city. The Prospectus clearly signalled the need for specific opportunities, and the mechanisms by which individual sites could be brought forward to be developed.
1.2 Against this background the past months have seen the convergence of two engagements about housing growth in the city.
.One between the City Council and the Homes & Communities Agency (HCA) on the requirement to stimulate the delivery of the city's residential growth strategy, and .The other between the City Council and representatives of ADUG on potential investment in the city.
1.3 It is now possible to bring these two elements together as one integrated strategy the result of which has the potential to transform the city's housing market, support its growth ambitions and provide the most robust platform for housing investment and delivery which the city has seen for many years.
1.4 Another report in Part B on this agenda provides further information on the detailed land transactions, investment and delivery proposals.
2. The City's Residential Growth Challenge
2.1 The city's population has increased rapidly over the last decade and it is expected by 2030 that the population will be well in excess of 600,000. The age and demographic profile of the city will continue to change too; the young working population (age 25-39) which increased by 40% over the last decade will continue to increase and this trend will be underpinned by the continued growth in professional and business services, creative and digital industries and a growing science and technology base. Whilst this pattern of change will clearly be influenced by the city's continued capacity to drive and diversify its economic base – forecasts suggest that the city has the potential to generate an additional 50,000 jobs by 2023 – a major challenge will be the provision of additional homes within the city to accommodate the new residents.
2.2 The city has made great strides in transforming a number of key neighbourhoods across Manchester, strengthening its housing markets, increasing the number of working families and reducing levels of dependency. However the impact of the downturn since 2008 has been that, in many neighbourhoods, the process of transformation has effectively stalled. New ways need to be found to regain the momentum for residential growth so that
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the long term economic growth of the city and its relationship with a strong reforming agenda for public service can underpin the city's long term success.
2.3 In June 2013 the Executive agreed a Manchester Residential Growth Prospectus which set out the following six key priorities:
Building more homes - the provision of high quality homes for sale and rent to meet future demand
Creating Stronger Pathways to Home Ownership - the delivery of more homes with mortgage products that people can afford to buy, enabling them to play a bigger role in the city's economy
Developing a quality Private Rental Sector (PRS) - good quality, well managed accommodation will make an important contribution to the city's housing - accounting for over half of all economically active households in the city Centre and the fringe
Bringing empty homes back into productive use - which is a critical priority particularly at a time when new housing is in short supply
Ensuring that the Council's planning framework and policies provide the appropriate support for residential growth - Manchester's Core Strategy sets out ambitious plans for growth including 55,000 new homes by 2027 at an average of 3,700 new homes per year
Developing a strong sense of place and high quality neighbourhoods - Neighbourhoods of choice require more than new housing development. The objective is to ensure the right mix of amenities and facilities and neighbourhood management arrangements which creates more high quality neighbourhoods of choice
2.4 To deliver these priorities the Council must establish new partnerships with investors, landowners and key stakeholders such as the HCA to create the platform for delivering a residential growth strategy. Key tasks include assembling and preparing land for development; facilitating effective place- shaping to support essential early investment, and setting new standards for the delivery of housing and place management. These are seen as essential requirements to restore and enhance the confidence in neighbourhoods (amongst residents and investors alike) particularly in places where the process of transformation is incomplete.
3. Build to Rent
3.1 Following the publication of the Montague Review in 2012 (a Government review commissioned to examine the barriers to institutional investment in private rented homes) the Government has unveiled a series of measures aimed at kick-starting institutional build-to-rent in the UK. These include:
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.a £1bn recoverable investment fund to trigger development – the Build to Rent programme being administered by the HCA; .£10bn of loan guarantees for the social and private rented sector; .new draft planning guidance on build-to-rent projects; .and a Whitehall Task Force overseeing the fund and loan guarantees.
3.2 Drawn by rising urban populations and the promise of stable, long-term returns, pension funds and other large investors are increasingly being drawn to “build to rent” investment propositions. Outside of London and the South East, Manchester is increasingly being seen as a location in the UK capable of attracting investment of this nature. City fringe neighbourhoods such as Ancoats and New Islington are prime locations for the development of well designed, well constructed and well managed “build to rent” style product.
4. A New Partnership with the Homes & Communities Agency: Manchester Place
4.1 Officers of both the Council and the HCA have concluded, that in the light of the above priorities and policy developments for residential growth, there is a need to formalise and strengthen the existing relationship and partnership arrangements between the Council and the HCA. A new collaborative partnership relationship - "Manchester Place" - is therefore to be established to harness the land resources and market intelligence assets of both organisations to support the delivery of the Residential Growth Prospectus.
4.2 This will manifest itself through the development of an Annual Investment Plan (based upon the city-Wide Residential Growth Prospectus) which will identify spatial priorities for investment from the public and private sector which can unlock residential growth. Such spatial priorities will be given a designation of Investment Action Areas (IAAs). Within identified IAAs it is proposed that Manchester Place will engage and encourage landowners to bring forward land for development; assemble land where this is necessary, including using compulsory acquisition powers where justified, and generally undertake all the activities to prepare land for development and shape places for long term success. This can include design, remediation, the provision of essential infrastructure, and the procurement of development expertise.
4.3 The new partnership will be rooted in the City Deal arrangements which were concluded in April 2012 and which will enable receipts from HCA land sales (including in relation to any land acquired by the Council from the HCA) to be re-cycled and re-invested by the HCA for housing and associated development within the city until March 2022 in accordance with the residential growth priorities to be agreed by the HCA and the city Council.
4.4 One of the earliest IAAs has been identified as the Ancoats and New Islington areas on the eastern city centre fringe. It is here that huge potential exists for the delivery of a critical mass of residential and associated mixed use development that will enable this part of the city to play a full role in becoming an established neighbourhood of choice for those who wish to work and live in the city. These neighbourhoods have long been recognised through
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successive East Manchester Strategic Regeneration Frameworks to have the potential to expand significantly the City Centre's residential market. There has been a number of radical interventions in Ancoats and New Islington to create a strong platform for residential growth including: addressing the fragmented land ownership in Ancoats through compulsory acquisition; the development of new public realm; significant investment in the Metrolink extension; and new health facilities and a new primary school which in New Islington in which has just opened. The owners of the adjoining Central Retail Park on Great Ancoats Street have recently secured planning consent for the extensive re-modelling of the site to provide a large foodstore, cinema and small retail units.
4.5 Members will also be aware that the Executive received an updated Draft Neighbourhood Development Framework for Ancoats and New Islington at its meeting on 8 April 2014.
4.6 This Draft Framework will be the subject of a Public Consultation exercise and a series of drop-in events has been arranged for local residents and members of the business community over the period 3rd – 27th July. The results of this consultation will be reviewed and incorporated into a final version of the Framework that will be brought back to the September meeting of the Executive for further consideration and approval. This Framework will provide a basis for the co-ordination of all development activity in the neighbourhoods, including proposals that are brought forward through the Manchester Place initiative.
4.7 Both the Council and the HCA own land within the Ancoats and New Islington areas. Officers agree with HCA officials that in excess of 3,000 new homes, principally apartments, can be delivered over the next 5 to 10 years with new major investors attracted into the city who will not only want to provide high quality accommodation, but will also play their full role in the essential task of place-shaping and in setting new standards of management which will be so important in enhancing the value of the housing market in this area and beyond.
4.8 It will be the role of Manchester Place not only to facilitate the successful introduction of new investors in Ancoats and New Islington but to ensure that through a proactive city-Wide market facing approach the full benefits of successful investment in this priority area will be captured by the city's overall housing market. This is key to enhancing long term equity value and to attracting the widest range of investors and developers to support the delivery of the city's residential growth strategy.
4.9 The activities of Manchester Place will be overseen by a Project Board, chaired jointly by the Chief Executive of the City Council and the Regional Director of the HCA and will include the city Treasurer and the Strategic Director of Strategic Development. The Manchester Place arrangement will for the most part be resourced by existing staff resources from the HCA and the Council deployed to work collaboratively on agreed priorities. Requirements for significant funding will be the subject of the existing internal budgeting processes within the Council and the HCA. There will however be a
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requirement for working capital to sustain Manchester Place’s day to day activities and this will be the subject of a further report once requirements have been accurately identified for 2013/14. The mobilisation phase of Manchester Place's activities is now underway and funding for this will be met from the Council's and HCA's existing budgets.
5. A New Investment and Delivery Partnership Structure – Manchester Life
i) The Evolving Strong relationship with the Abu Dhabi United Group and resulting benefits.
5.1 On 12th March 2010, Manchester City Council and New East Manchester Ltd signed a memorandum of understanding with Manchester City Football Club (“MCFC”), which is”)- wholly owned by ADUG, - under which the parties agreed to work together to develop a transformational plan for East Manchester focused on the area which is now called the Etihad Campus. The Council and MCFC, together with the Club’s group companies, have since created a partnership vehicle, approved by Executive on 16th March 2011 to build on the parties’ ambitions for East Manchester. Already this relationship has overseen crucial enhancements to the Etihad Campus including the city Football Academy (MCFA) and new community facilities which are now under construction. Proposals are also being developed for a Manchester Institute for Health and Performance, the phased expansion of the Etihad Stadium and other uses which will be designed to drive amenity provision on the site and the long term development of commercial and employment related activities. Progress in bringing forward specific proposals within the agreed Eastland’s Regeneration Framework for the area will be the subject of further reports over the coming months
5.2 Through Manchester City Football Club ADUG has come to know the City Council’s vision for regeneration and its ability to deliver major initiatives effectively. Given ADUG’s existing long term commitment to Manchester and the Council’s economic growth plan ADUG took the logical decision to look at ways to create a commercial partnership with the city to deliver the Council’s wider residential strategy. ADUG is effectively investing in the opportunities and positive circumstances created by its joint investments and partnership with the Council to date.
5.3 The wider relationship between Manchester and Abu Dhabi that has been accelerated by the ADUG investments in Manchester City FC and East Manchester has stimulated activities in both places. Local businesses have extended their activities in Abu Dhabi; Etihad Airways have made significant investment at the Airport in accordance with their plans to establish a European Hub and this has included a major customer contact facility creating over 200 jobs; there has been a growing exchange of people between Manchester and Abu Dhabi for tourism, and Manchester University has become particularly popular with Emirati students. Finally, the University of Manchester and Abu Dhabi are collaborating on various science activities.
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ii) Manchester Life Development Company
5.4 It is also proposed that a joint venture company (‘Manchester Life Development Company Ltd’) will be established between ADUG (or a subsidiary company) and the City Council, to deliver predominantly housing development. The first phase of the partnership focus will be the development of 6 sites within the Ancoats and New Islington neighbourhoods of the city which are in the ownership of the Council and which are expected to deliver around 830 new dwellings. Manchester Life will have access to a significant scaled investment capacity through ADUG, which will be expected to be deployed in the active pursuit of the city's growth strategy over a 10 year period.
5.5 Manchester Life will have the following priorities;
.Stimulating the housing market by building more homes, particularly for rent, to meet future demand; .Implementing high standards of managing the accommodation and the neighbourhoods; .Delivering green and energy efficient development; .Maximising the impact of development on the local supply chain, local employment market and opportunities for apprenticeships and .Identifying potential sites for future development.
5.6 Manchester Life will operate in accordance with commercial criteria and will produce an Annual Strategic Plan for approval by the City Council and ADUG setting out the direction of the Company, investment priorities and resourcing plans etc. All the necessary commercial agreements associated with this proposal and the Phase 1 developments are presented in a report elsewhere on the agenda.
5.7 The City Council will be able to appoint 2 representatives to the Board of Manchester Life. It is recommended that the Leader and the Chief Executive should be the Council's first Directors on the Board.
6. Build to Rent Application to Support the Manchester Life Initiative
6.1 The City Council has been in dialogue with the HCA for some time on the most appropriate method of bringing forward high quality development on sites available in the Ancoats and New Islington areas. In October 2013 the City Council submitted an Expression of Interest for the Build to Rent programme, in advance of identifying a development partner for these sites. This Expression of Interest has been shortlisted for further due diligence, subject to the City Council identifying the partner who will take the Build to Rent Loan ADUG (or a wholly owned subsidiary) has been identified as the partner who will take this loan and, subject to any further comments from the Executive, officers will assist ADUG work through the due diligence process required by the HCA.
6.2 A report under Part B of this agenda sets out more detail on this matter.
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7. Exemption from Call in
7.1 In accordance with paragraph 14 of Part 4, Overview and Scrutiny Procedure Rules of the Council’s constitution, and having consulted with the relevant statutory officers, the Executive is requested to approve the matter as urgent, in that any delay caused by the call-in process, would seriously prejudice the legal or financial position of the Council or the interests of the residents of Manchester and exempt it from call in.
8. Conclusions
8.1 The proposals described in this report represent a considered response to the challenges facing the Council in delivering its residential growth strategy – a response which in scope has only been made possible by the new investment partnership between the Council and ADUG.
8.2 The proposals will:
.Secure an integrated approach by the Council and the HCA, through Manchester Place, to capture the full benefits of investment by engaging landowners, third party investors and developers to stimulate faster and wider interest in the housing market in the city generally; .Provide, via Manchester Place, a proactive approach towards the creation of a development pipe-line for all investors and developers interested and willing to support the city's residential growth strategy; .Stimulate through Manchester Life and the collaboration with ADUG a scaled investment capacity which will deliver a step change in the building of more homes within the city with potential impact on the city's wider housing market which is almost immeasurable at this stage; .Further underline the significance of the city's Internationalisation Strategy (following on from last year’s announcement in China of the Airport city Enterprise Zone Development Partner) as one of the key influences on long term success.
8.3 The proposals will also provide new opportunities to set high standards for the effective management of accommodation and place; the promotion of low carbon and energy efficient accommodation; opportunities to drive skills development through the stimulus the arrangements should bring to the construction sector; and the opportunity to plan ahead to ensure the essential infrastructure is in place to absorb the continued growth of the city. All of these matters will be the subject of further reports in due course.
8.4 Detailed recommendations appear at the front of this report.
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