Why the time has come for a High Street Property Holding Vehicle

This government, as others have before it, has recognised the centrality of high street decline to our politics. The problem is, once again, that the challenge of tackling a complex, wicked problem doesn’t have easy solutions. There are no silver bullets. This will require policymakers to draw from a toolbox of different solutions. Some of it will be psychological. How do we draw people back into town centres when so many of the things we used to do there can now be done from pieces of technology in our pockets? It will require imagination. If, as some estimates suggest, we have a 40% oversupply of retail space on our high streets, how can we repurpose these spaces to create civic high streets fit for the future?

How are the government doing so far?

To reshape high streets, the government will need to use the wide range of policy tools at their disposal. This is something they have been doing over the past 18 months. New powers to enable communities to play a greater role in high street renewal via a community right to buy, check. Incentives and investment to facilitate new place leadership collaboration, via a £301 million High Street Innovation Partnerships programme, check! Plans for a new High Street Strategy with cross-government leadership to encourage other departments, beyond the Ministry for Housing, Communities and Local Government, and the Department for Business and Trade, to think about how their agendas overlap with the mission to revive high streets, check.

In short, we’ve made a lot of progress. The core diagnosis of a 2022 report I co-authored, Why now is the time for a High Street Buyout Fund (HSBF), has been borne out. We’re seeing a shift away from the retail-dominated model, and mixed-use civic high streets are increasingly held as the future ideal in policy and practice circles. Many of the calls we made in the 2022 paper have shaped the interventions mentioned above, and we’ve also seen progress on the transparency of high street property ownership, via the Economic Crime Act 2023, introduced by the previous government.

Despite all this positive activity, there is still an essential tool in the toolbox that the government has yet to touch. The single most important idea in that report – a fund that moves at the speed of private capital to acquire assets on behalf of communities – remains conspicuously absent from what has been delivered. This is where the Property Holding Vehicle (a clearer, snappier name for the HSBF) comes in.

What would the Property Holding Vehicle do?

It aims to tackle an issue that comes up time and time again when I speak to the community businesses out there building the civic high streets of the future. It goes something like this.

“This local building is an eyesore, and people are fed up, so we asked them what they’d like us to do with it instead. We’ve used this information to work up plans for the vacant property. In many cases, we’ve even managed to identify the owner, after lots of digging. But all this work goes to waste when the property eventually goes up for sale, and we don’t have the money to move quickly and compete with those in the commercial property market. In the most egregious cases, we’re pipped by a commercial buyer, and this property ends up sitting vacant for another few years.”

Too often, community businesses are trapped in a cycle whereby they can’t buy an asset without money in the bank, and they can’t secure the money without an asset. They don’t usually have the coffers of private property developers, so they can’t compete. The Property Holding Vehicle seeks to fill this gap.

Fundamentally, it aims to intervene in a broken market with, and on behalf of, communities. Again and again, communities bear the brunt of decisions made elsewhere, using numbers in a spreadsheet, with little to no understanding of the neighbourhoods these decisions are impacting.

The Vehicle aims to give communities an equal chance in this fight. It would do this by moving quickly to buy high street properties that communities have an interest in, when they come up for sale, and transferring them into community management or ownership over time. It would combine commercial property expertise with deep roots into communities. This synthesis of skills and expertise is vital. One without the other doesn’t stack up. You need the commercial property expertise to compete in and navigate that market. You need community roots and insight to drive the decision-making on where and what to buy, and what those properties should become.

Importantly, though, this process can’t be too onerous. For the vehicle to be agile, it can’t require hugely detailed business plans from communities before it moves to buy properties. This comes with risk. Some of the punts the Vehicle takes won’t work out, from a community development perspective. They would need to be sold on to recoup costs. Of course, risk is famously something which government isn’t hugely comfortable with – which brings me back to their role.

What do we need from the government and the civic high streets movement?

As our original proposal made clear, we certainly don’t expect the government alone to be the institution that drives this thing. We’re expecting them to be the first mover and anchor investor. We already know there are lots of funders and investors that want to invest in a brighter, community-led future for the high street and will do so if the government takes the first step.

The Vehicle itself would be a lean, agile, independent entity staffed by people with the necessary expertise. The modelling we did at the time, with Resonance, suggested that £100 million of government grant could leverage in £250 million of social and commercial investment. We also undertook modelling for smaller, regionally focused funds.

Clearly, the economy has been through, and continues to go through, many changes since then. Interest rates and their future direction have a direct impact on these numbers. Rates will also have an impact on how quickly a government grant could be repaid. Our initial modelling suggested that this could happen after 12 years or, better still, sustain the creation of a perpetual fund. We plan to collectively explore these policy and fund design questions in the coming months, with policymakers and others in the broad civic high streets movement.

Since the publication of our report in 2022, people have taken this idea forward in interesting ways. Kindred CIC has been leading the design of a Liverpool City Region Asset Holding Company to do this at a regional scale. Polly Mackenzie has called for a Troubled Buildings Programme, which draws on some of the thinking in our report. Others have applied similar thinking to assets beyond the high street. We’re keen to work with all these people and institutions, and others we haven’t spoken to yet, to get this right.

Let’s grasp the opportunity of the High Streets Strategy

It’s not lost on me that the title of our 2022 report argued that “now is the time”, and here I am arguing the same, four years on. The best time to introduce the Property Holding Vehicle was 2022, the second-best time is now.

The underlying fundamentals haven’t changed. Vacancy rates are still high. The share of online shopping as a percentage of the total retail market continues to grow. The disaffection people feel with politics and the economy as they see shuttered fronts on their high street, shows no signs of dissipating.

If the government wants to start seriously grappling with this issue, it needs to get on the front foot. It needs to start intervening in a market that is fundamentally broken. Giving a Property Holding Vehicle the mandate and investment to do so should be a bold piece of the forthcoming High Street Strategy. Not a silver bullet, but a vital tool in the high streets policy toolkit.