AHURI BRIEF

Understanding international City Deals and other place-based deals

Learning from the US, Canada, UK and France to inform Australian policy

10 August 2020

Deliberate policy packages focussed on encouraging economic development in specific geographical areas have come to be known as place-based deals or ‘City Deals’. Their aim is to bring together separate powers, responsibilities, funds, programs and expertise into a cohesive ‘package’ designed to reflect place-based conditions and priorities.

As such, these Deals offer an important framework for integration of policy areas such as urban and regional development, planning, infrastructure investment and housing, which often straddle different tiers of government as well as multiple portfolios. International evidence suggests institutional fragmentation at the metropolitan scale is a drag on productivity growth.

City Deals are being seen by the Australian Government as a way to encourage Commonwealth, state/territory and local governments to work closely together, to stimulate economic opportunities in suburban and regional areas.

International overview of place-based deals

New AHURI research has reviewed international place-based funding programs in four countries that provide lessons for Australian policy makers: the large-scale UK City Deals, France’s Contrats de Développement Territorial (CDTs), Canada’s Urban Development Agreements (UDAs), the US's Community Development Block Grants (CDBGs) and the Sustainable Communities Regional Planning Grant Program (SCRPGP). While the policy context varies by country, common imperatives relate to addressing socio-spatial variations in each location and benefits of economic growth.

UK: City Deals

UK City Deals were introduced in 2012 inside a larger process of decentralisation and fiscal austerity, with the UK government devolving responsibilities to the local level. Through the City Deals program, localities can access investment funds ranging from £450 million to £1.1 billion to use with a relatively high degree of flexibility over 20–30-year time frames.

PhaseDeal Key features

First wave (July 2012)

Approx. £2.3 billion over 30 years to largest eight English cities outside London Deals aimed to drive local economic growth by unlocking projects or initiatives to strengthen the governance arrangements of each city.

Second wave (2013–14)

Included the next 14 largest English cities plus the six English cities with the highest population growth during the 2000s Incorporates a core package of powers to address common governance problems and a bespoke element tailored to each city.
Third wave (2015 onward) Includes Scottish, Welsh and Northern Irish cities A tripartite agreement between UK central government in London, the devolved (Scottish, Welsh and Northern Irish) governments, and groupings of local governments (of relevance to Australia’s three-tier governmental structure).

The UK Deals enhance coordination between and across levels of government through the use of incentives (such as new powers and funds) and conditions (with funds linked to growth targets and governance reforms), and have involved the creation of new governance such as combined authorities, metropolitan mayors, and partnerships between local authorities and businesses.

Funding arrangements for City Deals comprise three elements:

  • baseline funding from a central funding pool
  • ‘earn back’ funding generated from City Deal implementation, providing the basis for a sustainable revenue stream for reinvestment
  • ‘self-help’ funding, wherein groupings of local government can decide to capture funds through revenues, tolls, tax increment finance, levies, developer contributions, and dedicated local taxes.

France: Contrats de Développement Territorial (CDT)

The CDTs are agreements between central government and communes (elected municipal councils) in the Greater Paris region to encourage housing and business development around metro stations on the under-construction Grand Paris Express, a €30 billion rapid transit megaproject due for completion in 2030. The core aims of the CDTs are to concentrate housing and employment, reduce car dependency and promote sustainable development.

Communes with CDTs are expected to deliver 35,000 new housing units each year. Social housing must make up 25 per cent of new housing stock according to national law, and therefore it is an integral part of planning for housing within the CDT context.

Despite some tensions between the communes and the state over urban amenities and the level of social housing, CDTs have proved effective in unifying priorities between central and local governments with communes joining the process in order to influence the outcomes.

Canada: Urban Development Agreements (UDA)

UDAs, used from the 1980s to 2010, coordinated funding across three levels of government and targeted housing, health, crime and social exclusion issues in deprived urban neighbourhoods in five Western Canadian cities: Vancouver, Edmonton, Regina, Saskatoon, and Winnipeg.

The UDAs rejected a one-size-fits-all approach, with each city’s agreement differing significantly in terms of needs and size, and included collaboration with non-state actors such as community groups and businesses.

The UDAs offer an example of the strengths and weaknesses of place-based deals. Bringing different levels of government together with community and business offers a powerful opportunity to drive economic and social outcomes. However, sufficient funding is required to deliver on promises to benefit lower-income groups, while a longer time frame and wider political commitment is needed to deliver lasting outcomes at scale.

USA: Community Development Block Grants (CDBG)

The CDBG scheme was established in 1974 and is disbursed annually by the Federal Government, and it remains the core federal tool to fund urban policy. Local communities have discretion about how funding is spent as long as at least 70 per cent of each CDBG grant fund benefits for people on low to moderate incomes (defined as below 80 per cent of the median income of the local area) and interventions meet the program’s three objectives: benefiting low-income people, preventing urban blight and addressing urgent needs.

Housing is a key component of the CDBG scheme. In the 1980s, about 40 per cent of the CDBG budget was spent on housing. However, in the 2017 fiscal year, this had dropped to around 25 per cent, while the largest expenditure (over a third) was allocated to public infrastructure.

Between 2005 and 2013 the program assisted 1.1 million people to improve their houses, created or retained 330,546 jobs and provided public services to over 105 million people.

USA: The Sustainable Communities Regional Planning Grant Program (SCRPGP)

The SCRPGP was established as part of the US Government’s stimulus package following the Global Financial Crisis. The grants assisted development of three-year regional plans that addressed economic prosperity, social equity and environmental protection. Economically distressed communities were prioritised for funding and 74 regions were awarded grants, 45 in the 2010 fiscal year and 29 in 2011. The average grant in 2010 was US$2.1 million.

Regions had to include affordable housing strategies in their plans, however, a review found many of the grantees did not comprehensively address affordable housing and the proposals contained few concrete plans to target low-income earners (such as inclusionary zoning). The US experience shows that even with a focus on equity outcomes in funding grant criteria, affordable housing objectives need to be translated into clear mechanisms for delivery in order to be delivered in practice.

Nevertheless, the SCRPGP was regarded as successful in promoting sustainability in regional American planning, increasing intergovernmental collaboration and encouraging public engagement. At the regional level, the program led to significant connecting of federal, state/regional and local levels of government and agencies.

Comparing international place-based deals

In examining the international examples, recent AHURI research was particularly interested in how the different models address housing. The UK and French models focus primarily on the provision of new supply (incorporating affordable housing targets in new developments) while in the US and Canada, housing is often addressed as part of wider regeneration strategies.

UK City DealsFrance CDTs Canada UDAsUS CDBGsUS SCRPGP
Role of housing Varies significantly— housing ‘on the menu’ for some Objective to build significant housing near new metro stations Varied—but regeneration without displacement is a goal One of multiple objectives; focus is on rehabilitation as well as new supply Focus is on ensuring housing is planned sustainably and with strong transit and active walking connections
Role of affordable housing

Concrete strategies lacking; housing packages announced for some in 2018

Under national law 25% of new housing must be social housing Varied - preserving low-cost housing and providing new single-room occupancy units was integral to the Vancouver UDA Critical as funds must benefit those on lower incomes Equity was a core objective of the program, with guidelines requiring affordable housing planning
Levels of government involved Central government and combined authorities of local governments, some with elected mayor Communes and central government the region (e.g. Île-de-France) sets the CDT boundaries, which can be amended by the communes Federal, provincial, local

Most grants are awarded by federal government (HUD) to local government some grants administered by states

Joint grant administered by federal departments (HUD, EPA and DOT), awarded to local government
Local government power Devolution of certain powers, complicated by austerity measures No change No change No change No change—seeking to encourage local government regional collaboration
Total budget £2 billion (first wave) Metro cost: €30 billion Varied—Vancouver Agreement total budget: CAD$28 million US$3 billion per annum US$100 million (2010)
Timeframe

30 years for each City Deal first-wave deals signed 2012

2010–30 (metro construction period)

5 years+ (discontinued 2010) Annual allocation since 1974 real-terms budget has diminished significantly over time 2010–11

Understanding place-based deals in practice

Some of the lessons for Australia from understanding international deals include:

  • the need to ensure that urban improvements benefit disadvantaged groups
  • the need to ensure that overall housing supply objectives are supported by measures to deliver affordable outcomes
  • the importance of robust and transparent governance arrangements
  • the importance of clear frameworks for monitoring and measuring performance.

In addition, there are obstacles to delivering place-based policy, including knowledge deficiencies at higher levels of government and difficulties in agreeing to what are the priorities that should be acted on first in different parts of the country.

UK City Deals have been particularly influential in the Australian context, which are explored in Part 2 of this AHURI Brief series.