Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Can Crossrail 2 be funded without the public purse?

Capturing the rise in capital values of existing residential and commercial developments could fund transport infrastructure improvements.

A number of funding options have been considered by Carter Jonas and more widely across the industry for Crossrail 2, including pooling funds from developers’ contributions to community infrastructure levy.

At the moment, however, we understand that the mayor is forecast only to receive around £300m if targets are achieved by 2019 from CIL contributions. That leaves a significant funding gap for an infrastructure project of this scale which is expected to cost around £15bn.

Other funding mechanisms could include reviewing how Section 106 contributions are dealt with and whether or not there can be contributions added to fund major infrastructure programmes.

“Forecasts for 2031 are for around £32bn capital value rise in real terms for residential estate and only around £6bn for commercial”

There is of course also the capital value rise of existing residential and commercial sectors, as a result of the improved transport improvement. The critical question here is: how could any capital value rise be captured? 

Traditionally, residents and businesses have to pay tax through their business rates or council tax contributions. Business rates are linked to the rent, which of course is market adjusted. So, where significant price inflation occurs on rent, that can be captured back through a business rates mechanism. 

But forecasts for 2031, the date which Crossrail 2 could become operational, are for around a £32bn capital value rise in real terms for residential estate and only around £6bn for commercial, along the line of the route proposed.

In order to capture some of that capital value rise, there would need to be a full review of the way council tax is allocated for spending. In particular, whether it is possible to share a percentage of the uplift in council tax to help fund major infrastructure improvements.

Looking at the fiscal system in general, London is not so good at capturing either its contributions from the private sector or through the fiscal system.

Earlier this year, London First found that only 7 per cent of London’s economic output is retained and put toward infrastructure improvements for the residents and businesses of London, compared with 50 per cent in New York.

“Looking at the fiscal system in general, London is not so good at capturing either its contributions from the private sector or through the fiscal system”

I have worked on a number of joint ventures with London boroughs, most recently setting up the joint venture between Westminster and developer PMB Holdings to redevelop Berwick Street, in Soho. 

I also helped set up a residential joint venture to develop Hammersmith & Fulham’s major residential sites with Stanhope, which was signed in February this year.

The public-private JV with Stanhope is one of the first of its kind in central London and is a model we hope will enable previously unviable sites to be developed.

The onus is on the private sector developer and investor to obtain a good planning consent and then manage development or redevelopment of land assets for the public land owner. This mechanism is flexible with regards to land value, which will move with the market. 

The structure overcomes some of the weaknesses of the local asset-backed vehicle (LABV) structures which were widely promoted in the ‘noughties’ as being a good fix to develop public land, but which have struggled to deliver full regeneration. 

Tim Shaw is head of central London development at Carter Jonas.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.