Ownership matters…

We are in an era of the politics of slogan, think “Take back control”, “Brexit means Brexit”, “Global Britain”, and “Levelling Up’, rather than doing. As well as failing to improve people’s lives, all these initiatives have one other thing in common; they are top-down, devised and controlled, and often abandoned, in Westminster and Whitehall.

It is time for a new approach; one that builds from and with communities, not dictates to them. The work of the Community Ownership Commission (COC) confirmed what the Co-operative Party has been saying for a long time, ownership matters. Control of an asset creates a strong platform to provide the facilities communities want in their area.

This is not a new idea. Community ownership is an important and growing part of the UK’s economic landscape. We estimate there are 7,000 to 8,000 assets owned by communities in England today. Many of these assets are used by the more than 11,000 community businesses employing nearly 42,000 and supporting 126,000 volunteers in England.

When communities take control of assets in their local area, everyone who participates believes they have a stake in the success of each venture. Having spent time exploring the state of community ownership in England over the last 18 months, the members of COC were left in no doubt that community ownership offers a huge potential to transform our economy and society. We must take the opportunity.

…so why are we not doing more?

However, it is clear the known demand for asset ownership is much higher than current levels, and the potential demand is even higher still.

• Power to Change estimate there are 450 assets identified by communities which are ready to be acquired now, and another 900 on the horizon.
• After the introduction of the Localism Act in 2011 to the end of 2022, there were 6,680 nominations as an Asset of Community Value (ACV) – the main route to acquiring privately owned assets – but less than 200 successful acquisitions. Owners face little pressure to use assets effectively and, if they choose to divest their asset, no obligation to sell to a local community.
• One in five applications for ACV listing is rejected, often the more innovative schemes, with local councils being wary of either risk-taking or rapid change, albeit on occasions because resource constraints limit their ability to do comprehensive assessments.
• Many assets are out of the reach of communities. Vacancy rates of 11.4% on high streets and persistent vacancy rates (properties being empty for at least 3 years) of 5.2%, suggest significant numbers of buildings are not being used to their full potential. In addition, local authorities and other organisations (such as the NHS) have large property portfolios with unrealised community potential.
• The Community Ownership Fund (COF) introduced in 2022, is the primary source of public funding available to support community ownership only one fifth of COF’s available funds for England had been allocated at the halfway point of a four-year programme.

We are especially concerned that the places most in need of support are relatively less likely to be able to secure ownership of key assets in their areas. Although areas of higher need measured by the index of multiple deprivation) performed strongly in Round 1 of COF funding – 56% of funds went to the 30% most in need places – this fell to 31% in the first tranche of Round 3.

Because we lack an integrated approach.

Community ownership is not at the levels existing demand and future potential suggest it should for several reasons.

The Right to Bid regime is ineffective in incentivising owners to bring assets to market. While the lack of pressure on owners to sell is the main factor hampering asset transfers, difficulties in identifying the owners of assets, wide variations in the resources and approaches of local authorities to community ownership, and the process to list an ACV all act as a drag on progress.

Funds are currently allocated to support capital and revenue expenditure once an award has been agreed. There is no funding available to invest in development activity to help communities build their capabilities and evaluate potential opportunities for asset ownership. More resource is required to support communities, especially those in more challenged areas, to undertake the early-stage capability development, opportunity pre-feasibility and feasibility development activity crucial to supporting long-term, sustainable ownership.

While there appears to be a significant amount of public and private capital available, for many groups and projects, the level, structure, and cost of funding create significant barriers to community ownership.

• Firstly, because community businesses are less well understood than traditional for-profit enterprises and typically generate smaller surpluses to service funding costs, 48% operated in the 30% of most disadvantaged areas in 2022, securing finance is relatively more challenging than for the average enterprise.
• Secondly, community (and social) investment funding typically relies on a blended model that combines public and/or philanthropic capital with other sources of funding to allow for differential rates of return between providers. Compared to the USA, the UK offers significantly less public support for community investment. When public funding for communities, and levelling up more generally, has been provided it has been through a competitive top-down basis.
• Thirdly, the terms on which private capital is provided do not always fully reflect the social value of an investment. If public capital is being used to deliver competitive market returns for private capital, where is the private social impact?

 

After more than a decade of cuts to real funding, local authorities are facing major resource challenges in the current economic current environment. This allied to the general lower level of understanding of community assets and businesses means we were not surprised to find that many local authorities are not providing the level and breadth of assistance communities require to take on the ownership of assets.

It is time for change.

To help communities realise the full potential of ownership we must increase the volume of assets coming to market, support communities through the full project lifecycle, provide sufficient, appropriately priced funding and enable local authorities to play a central role as partners working to facilitate community ownership. These changes must be delivered in an integrated manner. COC made the following recommendations to unleash community ownership.

 Increase community access to assets: The current Right to Bid is ineffective in supporting communities acquire assets of value in their local areas. Stronger incentives to encourage owners to engage with communities about the future of the assets they control are essential to increase community ownership. Communities should be given the Right to Buy listed Assets of Community Value (ACV) that come to market and vacant and derelict property. Local authorities and other organisations with significant estates, such as the NHS, should be required to review their portfolios to identify assets which can be transferred or sold to communities. Changes to the ACV regime are required to embed these new rights.

 Support communities to acquire assets in their places: While introducing a Right to Buy will increase the supply of assets coming to market, communities, especially those in more deprived areas and from marginalised groups, require more support to enable them to acquire and operate assets. Labour should ensure the alignment of the objectives and operation of the Community Ownership Fund (COF) with Dormant Assets, especially the proposed Community Wealth Fund. A share of COF should be allocated to support communities as they transition into feasibility development activity.  A minimum of 50% of all COF public funding for projects should be awarded to projects originating in the 30% of areas with the highest levels of need, measured by the Indices of Multiple Deprivation (or another appropriate measure of need).

Alongside the primary allocation of COF to local areas, a share of resources should be allocated to enable nationally operated funds to provide additional support in areas of specific opportunity such as:

• To acquire properties on behalf of communities not in a position to execute a transaction such as a High Street Buyout Fund.
• For sectors like football, music, heritage, the arts and health where other bodies could provide funds to support extended community ownership.

The experience of community housing and initiatives such as More Than a Pub, demonstrates how beneficial knowledge and expertise sharing can be in improving the success rate of acquisition attempts and building investor confidence.

Move to a place-based funding model: The next Government should move to a place-based funding model by allocating a majority share of COF up-front to local authorities to distribute (sector-based allocations should receive the remainder), the allocation to be based on needs based local growth and development plans, co-developed with communities. Building on the recommendations in Labour’s Scale Up Start Up Review, the availability of place-based finance should be boosted by extending the mandate of the British Business Bank to cover community businesses through direct investment, additional support of Community Development Financial Institutions and the wider use of guarantees.

Maximise the incremental benefits of public funding: The aim should be to increase the incremental number of assets acquired with COF support to 150 annually within 2 years of introducing reform and to 300 within 5 years. We estimate this will require £231 million over 5 years of which £26 million should be allocated to engagement with communities to build a future acquisition pipeline.

Reshape local engagement: Communities should be formally incorporated into decision-making and governance. This should be based on a process that requires the approval of a partnership of locally accountable community organisations for the local growth and development plan, and the allocation of community ownership-related funding. Local authorities should be encouraged and incentivised to play a leading role working in partnership with communities to transform their places. This will require increased resources for local authorities to engage more with communities, deal with the increased volume and complexity of activity caused by a Right to Buy, connect with potential funders, and provide tailored support to community businesses.