Local authorities are missing out on potential income tied up in their property portfolios and need to work more closely with the private sector to develop property-based funding solutions, according to Simon Bedford, head of Drivers Jonas Deloitte in the North West.
Bedford says many of today's funding alternatives are property centric: bond issues, Section 106 planning conditions, the Community Infrastructure Levy, the New Homes Bonus, Jessica, asset backed vehicles, private finance initiatives, Regional Growth Fund.
Bedford comments: "The likes of Aviva, Legal & General, Barclays, Deutsche Bank are all looking at new funding models based on public sector property portfolios and the more savvy local authorities are already working with the private sector to deliver new opportunities.
"Both public and private sides need to do more to understand each others needs and requirements. Private sector organisations need to strengthen their communication and knowledge sharing with public sector clients and they, in turn, need to look at how private sector goals of scale, cash and revenue certainty can be adapted to create value for taxpayers.
"There is no doubt that the public sector property portfolios have the potential to unlock much needed funds for local authorities across the country. However many of the traditional financing routes are coming under commercial and political pressure and the way forward is for the private and public sector to work closer together to bring the innovation necessary to unleash funds and deliver value and return for both parties."
The public sector has £385bn of property under management. As other avenues of finance have become increasingly restricted, the use of local authorities' substantial property portfolios to provide an additional income stream has been a recognised strategy for a number of years. Drivers Jonas Deloitte argues that by continuing to rely on, for instance, the Public Works Loan Board, local authorities are missing the opportunity to develop powerful commercial partnerships with the private sector that can deliver significantly greater yields.