Cambridge report recommends integrated approach to transport and housing - using public development corporations and private funding - to deliver its ambitious housing targets and improved connectivity.
Summary
The new Labour government plans to build 1.5 million homes over the next five years as part of a strategy to enhance economic potential by improving connectivity across regions. The Chancellor has emphasized that this investment must not harm the public finances.
This report urges the government to reconsider plans to use Private Finance Initiatives (PFIs) for transport infrastructure alongside the speculative housebuilding model, warning that this approach will fail to deliver the homes promised. The report proposes an alternative market funding model that integrates housing and infrastructure – unlocking billions in investment while protecting the public finances.
It discusses a £17 billion urban extension along the Oxford-Milton Keynes-Cambridge corridor, funded mainly through market sources. The Levelling Up and Regeneration Act 2023 (LURA) is key to this approach, enabling land to be bought at its use value, with the public authority capturing the increase in land values through the sale of serviced plots after the infrastructure has been delivered.
To improve on the UK’s poor governance and delivery for large infrastructure projects, the report recommends using development corporations to raise finance directly from the capital market, contract out the delivery of both infrastructure and housing, while paying back investors from market sources of funding including land value capture. Projects such as the expansion of Cambridge or the integration of housing with the Birmingham-Manchester HS2 line are cited as prime candidates for this approach, thereby avoiding the high costs associated with PFIs and deliver better value for money. This is why the government should rely on proven funding mechanisms rather than experimenting with complex new public-private partnerships.
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