Shared Assets is proposing ‘Local Land and Savings Trusts’ as a new financial vehicle to support land stewardship. This blog sets out the problems with current funding and how we think this could help.
Parks and green spaces are vital parts of our infrastructure. From flagship parks to small neighbourhood green spaces, there is a growing recognition of the social, environmental and economic benefits they provide. They are also places that inspire deep personal passions such as love, connection, belonging and a sense of place.
However, there is a looming crisis in the management of many of our parks and green spaces. The recent ‘State of U.K Parks’ report found that 86% of public sector park managers have seen their budgets reduced since 2010 and 45% of local authorities are considering selling off their parks and green spaces. Austerity, localism and devolution mean that changes in the ownership and management of parks and open spaces are likely to accelerate but we have not yet established the new financial and business models that will enable their long-term survival.
The endowment model – where a capital pot is raised and the income from its investment used to support the ongoing revenue costs of green space – is one of the few proven models for the long-term stewardship of green spaces that removes them from local authority funding. At the national level The Land Trust, which owns many reclaimed collieries and landfill sites, is funded through an endowment that is invested to cover the day to revenue costs of their management. The high quality green spaces in Milton Keynes are owned and managed by the Parks Trust, established and endowed when the new town was planned. The National Trust and Sheffield and Manchester councils currently working to develop a 21st century endowment model as part of Nesta’s Rethinking Parks programme.
The model of creating an endowment that can then fund the upkeep of green spaces is a proven and attractive one. However, there are a limited number of sources where funding of the scale that is needed to create an effective endowment can be secured, and rapidly growing demand-side pressure for new forms of revenue funding for parks and greens spaces as public funds are withdrawn.
Whilst there is significant public interest and growing participation in new crowd- based forms of investment and lending none of these are suitable for long term revenue funding. Crowdfunding, like funding from trusts and foundations, tends to be short term, with a focus on capital improvements or asset purchases rather than ongoing revenue costs. Community share issues and other longer-term investment mechanisms are usually predicated on an asset or service with some potential for generating a return on investment, even when the level of profit is low and investors are not expecting to make a significant or immediate financial return.
Investment in land, whether in parks or green spaces, woodlands, coastal areas or other environmental assets, is different. The long-term stewardship of these assets is crucial, and charitable or community ownership is usually based on the principle that
it is protecting the land by taking it out of the market entirely. This removes any opportunity for investors to receive a return on their investment even when land values rise.
We need a new model of investment in land, one that enables mass participation by individuals and institutions at a scale that can build effective endowments capable of providing a sustainable revenue income to support long-term stewardship.
Shared Assets wants to investigate the feasibility of creating local or regional “land and savings trusts” which would own land for public benefit. Public (or private) landowners would be able to transfer land into the ownership of the trust. Individuals, companies or institutions would be able to invest in, save with, or donate to it, motivated by, and at the same time reinforcing, their sense of local connection and belonging to the land. The low potential for returns may require the application of tax relief or other incentives for drive investment.
The trust would be able to lease productive land to organisations that will manage it for social, environmental and economic benefit, and use the return on its capital to fund the management and maintenance of the unproductive part of its portfolio.
Models in use elsewhere which may provide useful learning include the German model of regional banks such as KfW, and La Foncière in France which uses share capital to purchase farmland and facilitate new entrants to farming.
Land and Savings Trusts need more research to understand what is possible and the best ways of introducing a pilot. This means testing interest in the proposal amongst the finance and community finance sector, and exploring other models which might be adapted or adopted to create asset-based ‘land and savings’ trusts. We are particularly interested in:
- Potential mechanisms and vehicles for facilitating shares, savings, and donations
- The scale at which a land and savings trust would need to operate
- Potential for the application of tax relief or other incentives to investment
- The legislative and regulatory issues associated with the establishment of a trust
This blog was first published as part of our proposal for the Stephen Lloyd Awards in July 2015.