Understanding international City Deals and other place-based deals

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.

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.

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.

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.

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.

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.