Construction News! New ￡4.5bn Funding Model Could Unlock 100,000 Homes and Boost London's Economy
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A new financing model, first used successfully to extend the Northern Line to Battersea, could drive economic growth and housing development, according to a report published today by BusinessLDN and consultancy firm WSP, and this is exactly the kind of construction news we want to hear.
The report,?Generating Land Value to Grow London: A New Residential Funding Approach, suggests adapting the tax increment financing (TIF) model to unlock up to ￡4.5 billion over 25 years. This approach could facilitate the construction of over 100,000 new homes and create more than 10,000 jobs.
A New Approach to Funding Transport and Housing
The proposed Residential TIF model would enable local governments to borrow against future increases in stamp duty and council tax revenues generated by new housing developments, which are made possible through transport infrastructure improvements.
The model is particularly suited to funding three key Transport for London (TfL) projects:
Unlocking Growth Amid Public Finance Constraints
John Dickie, Chief Executive at BusinessLDN, emphasised the importance of innovative funding solutions:
“Against a backdrop of stretched public finances, the Government needs to consider new approaches to infrastructure investment. Allowing local authorities to borrow against future tax revenues is a practical way to drive growth and get shovels in the ground.”
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The report recommends giving the Mayor of London the authority to integrate the Residential TIF model with the existing commercial TIF framework. This would provide a flexible funding approach tailored to different locations and projects.
To safeguard local government budgets, the model proposes that only a portion of future council tax revenues from new developments would be used, ensuring existing revenue streams remain unaffected. Additionally, other funding mechanisms, such as Section 106 agreements and the Community Infrastructure Levy, would be leveraged to distribute investment risks.
A Proven Model with National Potential
Chris Whitehouse, Technical Director at WSP, highlighted the transformative potential of the approach:
“By evolving proven funding models like tax increment financing, we can unlock critical infrastructure projects that stimulate economic growth, create jobs, and strengthen communities — not just in London, but across the country.”
The report's release coincides with an ongoing inquiry by the Housing, Communities, and Local Government Select Committee into how land value capture can support the Government’s target of delivering 1.5 million new homes within the current Parliament.
If adopted, this innovative financing strategy could help address London’s housing crisis while accelerating economic growth and infrastructure development across the capital.
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