This is an essay which was originally published as chapter 17 in a book called Regeneration in a Downturn published by The Smith Institute

The past 20 years have brought a phenomenal urban renaissance to Britain’s cities. They have undergone great regeneration, developing and changing at a pace unprecedented since Victorian times. The benefits of this change are palpable for anybody visiting our great Northern cities, but now there is a real danger this renaissance will come to a shuddering halt and the huge strides that have been made will go into reverse. There are some lessons to be learnt from this and some hopes for the future.

Investing in quality architecture
When I came to Manchester in the 1980s to study at the university, I was struck by the huge number of empty, drab Victorian warehouses. They were lying empty, unloved and blackened by generations of soot. If they happened to be occupied, it was typically only on the ground floor, often next to level car parks which, on investigation, were usually bomb sites left like that since the Second World War.

As I started in business, I noticed a paradox; the property industry said those Victorian buildings, which were mostly of great architectural quality, would never let and were not suitable for “modern uses”. In contrast, the small amount of new development occurring at the time was, to my mind, of poor architectural quality, expensive to lease and largely institutional. Owners only wanted to lease to established companies with good covenants.

I started in the property industry – not even knowing what a covenant was – by leasing or buying those old, unloved buildings and exposing the great Victorian features that lay hidden inside them. We leased them to young, entrepreneurial, creative companies; first as retail space at Afflecks Palace in Manchester and The Palace on Slater Street in Liverpool, later as workspace in buildings such as Ducie House in Manchester and finally as residential loft apartments, such as Concert Square in Liverpool and Smithfield Building and Sally’s Yard in Manchester. This brought in a new generation of people, who wanted to live, work, eat, drink and have fun in city centres that had, until then, been empty beyond 6pm.

Concert Square, Liverpool

Smithfield Building, Manchester

Forward-looking civic leaders added to the city-centre vibrancy. They made great use of the new lottery funding, investing in a series of great cultural buildings: theatres, concert halls and galleries. By the mid 1990s, large developers and house builders, seeking to follow the success of niche firms such as Urban Splash and Manhattan Loft Company, entered the market, where they saw money was to be made. House prices rose, and a financial model emerged of pre-selling apartments off-plan and securing development finance, with debt from banks on the strength of planning permission and pre-sales. A mass of developers entered the race to refurbish every underused building and construct exciting new mixed-use developments on the former bomb-site car parks. The new residents who inhabited them brought great spending power into city centres. They paid council tax, and were often educated, articulate, active citizens. This encouraged councils to improve city-centre services and retailers to take advantage of a new breed of customer, who wanted all that the cities had to offer.

Rotunda, Birmingham

Developers provided, through the buy-to-let market, a much-needed supply of quality (for the most part) private rented accommodation. They improved derelict buildings and replaced unsightly bomb sites with gleaning new architecture; sometimes very good, occasionally bad or, all too often, mediocre. But, whatever the architecture, they succeeded in rebuilding city blocks, fuelling the construction industry and bringing people into the city centres.

Lending – and building – comes to a standstill
In August 2008, the party stopped. Just before this time there had been murmurs of the market overheating. Prices had, in fact, been stagnant for a couple of years, with increases in headline prices being matched by increases in incentives and discounts offered by developers. But the autumn of 2008 saw the collapse of Lehman Brothers, the banking crisis and an almost immediate stop in both development and mortgage lending (in August 2008 mortgage lending was down 97% year-on-year). Inter-bank lending stopped and every financial institution tried to call in as much debt as possible. Individuals who, until then, had expectations of obtaining mortgages of 90%, 95% and even 100% of their properties now found it difficult to secure even 70% finance. Banks, which had previously been competing to lend us money, effectively closed up lending. By October 2008, even for sizable, very good commercial investment properties of, say, £50 million there were only four active lenders, only one of which was a household name. None were high-street banks and none would lend at more than 60-70% loan-to-value. No banks were lending on speculative residential developments.

Money does not make the world go round, but it does certainly keep the development industry going. In August 2008, the tap was literally turned off. The larger house builders all had to seek serious refinance, while smaller developers went into receivership after receivership. Individuals working in regeneration and the building trade, who only six months before had been in real short supply, began to lose their jobs.

So now, in 2009, where does this leave us? In many ways, nothing has changed. The values of good architecture, mixed uses, mixed tenure and sustainable development have never been more to the fore. The effective use of public-private partnerships has never been more necessary and the demand for quality housing is as great as it has ever been. Individuals are now renting rather than buying, because they either are unable to get mortgages or anticipate that values have further to fall. I believe that what is needed now is new forms of finance. It is no longer possible for local authorities to rely on private developers to subsidise regeneration through housing. No longer can new developments provide the locality with spin-off benefits through cross-subsidy section 106 agreements, nor can developers provide the required levels of affordable housing. If we are to see regeneration continue, we need stronger partnerships between the public and private sectors. The need for the public sector to take the lead has been recognised by the government, and the new Homes & Communities Agency has the potential to lead on this. Schemes such as Park Hill in Sheffield – where we have just commenced work on the first phase of the Grade II Listed building’s redevelopment – show that when the public sector is prepared to take the lead in a partnership even the most challenging regeneration project can proceed.

The current low land values and spare capacity in the development and construction industries provide a unique opportunity to try and help resolve the affordable housing shortage. In addition, giving a stimulus to the construction industry is a quick, easy and effective way to create employment, utilise skills and prevent the dole queues from growing.

Keeping regeneration going
Although the past 12 months have been an incredibly difficult period for the regeneration industry, I believe that the next few years will offer the best opportunities of my lifetime. In this next period, we can create a real difference and push the urban renaissance. At the moment, nothing stacks up in conventional development appraisals, so every scheme we do needs innovative thinking and innovative funding. We should be able to create some exceptionally interesting architecture and creative regeneration schemes in the next few years, but it will require a longer-term view on investment, and new forms of funding, with perhaps the public sector taking more equity stakes – sharing more of the reward as well as the risk – and working ever closer with good developers to create great neighbourhoods.

The past 20 years have seen the transformation of most of the major cities, but the job is far from over. The public sector and private companies must consider areas beyond the core city centres; within half a mile of most city centres lie doughnuts of deprivation most of which have not changed at all. There are exceptions, though. Successful regeneration has occurred in patches, such as, to give three examples from Manchester: the old 1970s Cardroom Estate in East Manchester which is being transformed into New Islington, the old Victorian Langworthy Road terraced houses in Salford that have been reborn as Chimney Pot Park and are home to a thriving community, and the former Dalton Street 1960s tower blocks in Collyhurst, now known as 3Towers.

Chimney Pot Park, Salford

3 Towers, Manchester

These schemes are the exception, not the norm, and there is a mass of social housing estates and Victorian terraces that still need to be transformed. The urban renaissance, as well as not affecting the doughnuts around city cores, has also bypassed many smaller towns. There are, again, exceptions; schemes such as Longlands in Stalybridge, Royal William Yard in Plymouth, the Midland Hotel in Morecambe and Lister Mills in Bradford show what can be achieved with catalytic schemes, giving confidence to run-down towns and smaller cities. However, without new forms of public sector support it is difficult to see how these sorts of schemes are to be tackled and how these towns can regenerate themselves.

Midland Hotel, Morecambe

I believe that the regeneration industry is now at a crossroads. If we are not careful, our towns and cities will be allowed to go into decline. We will lose the momentum gained over the past 20 years. Skilled practitioners will lose their jobs and regeneration will be left only to the private sector – but the private sector will not have access to the finance or debt to develop, at least not in the locations where the renaissance is most needed. Alternatively, we can grab the opportunities, we can take the benefit of low land values and of spare capacity in the regeneration, development and construction industries in order to work now in true partnership to continue the urban renaissance and create wonderful new places in our towns and cities.

For more before and after images of Urban Splash schemes visit our Urban Splash Flickr page