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Councils looking to redevelop their estate – not just sell it off

Source: Public Sector Executive Oct/Nov 2014

Alex Thomson, chief executive at Localis, talks to PSE about the changing mentality of local authorities in dealing with their land and assets — a theme endorsed by housing minister Brandon Lewis MP. David Stevenson reports.

Local authorities appear to be moving away from the mentality of simply selling buildings and land for one-off capital receipts, and instead looking to redevelop assets to derive revenue income that they can use to help support public services.

This is according to a new report from think-tank Localis, which highlighted that many councils are seeking, over the next five years, to increase the proportion of ‘redevelopments’ of assets from one-third of all current disposals to a majority of disposals.

In 2013, the Cabinet Office’s Government’s Estate Strategy revealed that the value of public land held by local authorities is approximately £170bn. That strategy argues that the public realm is asset-rich but cash-poor.

Housing and planning minister Brandon Lewis MP, at the September 2014 launch of the Localis report, ‘Public Land, Public Good: Getting maximum value from public land and property’, said: “Now, perhaps more than ever before, realising the value of the land and the property that we manage in the public sector can play a key role in the provision of services for local people.”

He added that it does need a level of commercial acumen, but it isn’t just about selling land, or building houses; “it is about bringing together different parts of the local government and central government family”.

“Public land and assets have been left, I have to say, for far too long to gather some pretty expensive dust,” said Lewis.

Selling properties undervalue

The report highlighted, however, that one in six chief executives said they have been forced to dispose of assets for less than their optimal value, with the need to make savings (42.9%), the need to generate capital receipts (41.7%) and the need to provide sites for residential development (41.2%) being cited as the most common factors.

Richard Upton, chief executive of Cathedral Group, which sponsored the report, said: “Public land is a vital asset for the whole country and we need to act quickly before we lose the opportunity to transform our town and city centres and provide much needed new amenities. Once this land is sold, it is gone forever.

“With the ongoing austerity, local authorities are being put under increasing pressure to make a quick buck, and many simply don’t have the resources or expertise to work creatively with the private sector to keep land under public ownership.”

Two-thirds of respondents also believed that closer integration of public services is necessary to realise the maximum return on their assets.

Alex Thomson, chief executive of Localis, told PSE: “It is vital that local authorities maximise their assets going forward. This forms part of a general shift in local government becoming much more entrepreneurial in how it does lots of its business.”

He added that back in the day when money was plentiful, councils would sometimes strike up deals in which they would give up their land for very little – if they thought something positive would come out of developing that land.

“They’re probably not in that position anymore, especially as the report makes it very clear that land is an extremely valuable asset and when it is gone it’s gone,” said Thomson. “So, we argue, it should be treated a bit differently, and there needs to be more of a ‘custodian’ role adopted over public land because it is important it doesn’t get squandered.”

Asset opportunities

The report revealed that while the Audit Commission’s most recent estimate puts ‘surplus’ local authority assets at a total of £2.5bn, Localis argues that this is likely to be an underestimate.

It said its analysis suggests councils in England are planning to sell and redevelop £13.5bn of their own assets in the next five years. And, while the think-tank envisages a ‘good proportion’ of this could be used for housing, it says the money should also be used for reshaping public services and boosting local economies.

Thomson told us: “What local authorities really want is to strike a balance and get an arrangement where they can receive ongoing cash flows. We argue that local authorities are best-placed to decide what the optimum mix of developments for a given location should be.”

He added that in some areas that will involve housing, but it isn’t just about houses. “It is about other public amenities, public services and potentially moving more than one service into a single building, for instance,” he noted, “but it is up to local authorities, with their unique local knowledge and accountability to lead this process.”

It has been recommended that, in order to support public sector bodies to continue their attempts to extract long-term best value from their assets, the wording of HM Treasury’s best value guidance should be amended to focus more on long-term best value.

Councils taking the lead locally

Another recommendation of the Localis report is that local authorities should be made responsible for drawing up a pan-public sector land strategy in their locality, and other public sector bodies should be obliged to provide them with the relevant information.

Brandon Lewis is in agreement with this type of recommendation. The minister said: “The whole of government, both central and local, must work together if we’re to make the most of the public assets we have in our trust. Central government cannot, and I don’t think should, prescribe the right solutions across the country. These will be different in every area. I think local authorities are best placed to know what will work for them in their local area.”

The minister added that there is no way the public sector can get away from the fact that land and asset management is growing in importance, and is becoming a principle mechanism for councils to fund their service change and enable them to deliver better business for themselves and for their local residents.

“The need for good asset management in the public sector has never been greater,” said Lewis. “And local government has done a phenomenal job in delivering more for less, but we need to ensure that all assets are being used to meet public needs.”

‘Hit squad’

The Localis research also found that nearly 50% of local authority respondents believe that having more skilled officers to undertake negotiations and redevelop assets on their behalf could yield a better return in the future.

It recommends the creation of a local government led and owned ‘hit squad’ of highly experienced senior officers from across local authorities, who would have the specialist skills to assist other councils to make the right decisions and strike the right deals.

Additionally, Localis has suggested that all arms of central and local government should be required to produce an annual register of assets, made available to the public. This is intended to help with transparency, as well as both supply and demand. It would, in theory, apply to local authorities, central government departments and their offshoots (the NHS, fire and rescue services, police forces etc), and the wider public sector (e.g. universities).

This recommendation is in line with the DCLG’s ‘Local Government Transparency Code 2014’, which states that local authorities must publish details of all land and building assets.

Lewis said: “Making local authorities publish details of their land holdings through a transparency code is vital. Although it will not itself identify what land may be suitable for housing, it will allow the local public to identify sites that they believe could be better-used.”

PSE was told by Thomson that the register is extremely important in delivering “real accountability and transparency”, especially in attempting to gain public support.

“It’s vital that we get maximum use out of public assets – not just now, but for the long-term benefit of local communities. Our research shows that local government is ideally placed to catalyse the development of public sector land and assets in their area,” he concluded.

Government cities advisor Lord Shipley, a Lib Dem peer, added that local authorities hold land as custodians of the public interest.

“They are not there to do the job of developers, but they do have a core responsibility to use their public land holdings and powers to encourage development and drive long-term growth,” he said. “I welcome the recommendations in this report, not least the need for a pan-public sector land strategy led by local councils.”

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