What can anybody do to help the pockets of deprivation in our prosperous cities – or is urban apartheid here to stay? Maybe America has the answer …

The announcement by the chancellor that we are to have nine “mixed communities” pilot schemes reminds me of the many attempts that have been made over the past 20 years to tackle our most deprived housing estates – to name but three: Estate Action, Housing Action Trusts and the Estate Renewal Challenge Fund.

Each had strengths and weaknesses. Estate Action extended the lifetime of properties but did not often address the long-term causes of social isolation and economic failure. Some of the Housing Action Trusts, such as Castle Vale in Birmingham, achieved transformational change, but at a prohibitive cost to the public purse.

So what is different this time? The Treasury’s intent is to turn mono-tenure benefit ghettos into mixed-tenure communities by persuading the market to invest, and by attracting other economic uses into these areas. The inspiration is the USA and, in particular, the Clinton administration’s Hope VI programme, which used a mix of tax incentives and generous zoning permits to attract the private sector.

In translating those lessons, the real question for us is, what is going to attract developers and investors to Canning Town, east Leeds and north Solihull? In my experience, there are four mechanisms that, if used in combination, can transform such districts. They are: asset transfer, densification, community leadership and fiscal incentives.

One of the characteristics of many of our most deprived estates is that they are often in areas of relative prosperity. This means that if you can unlock the assets, investors can often profit from a tide of rising values. The first step, therefore, is to get the council stock transferred to an organisation that can use the value of the assets to lever in private finance. This can be achieved through the permanent transfer of stock to a housing association, as at Willow Park in Manchester, or through a PFI, in which case ownership is retained by the council, as at Swarcliffe in north Leeds. The former appears to be the more efficient of the two, but it relies on a tenant vote.

The second requirement is densification. Many of the estates under consideration, which are often a mix of high and mid-rise from the 1960s, are of surprisingly low density. The original concept was to build the blocks within a park setting, which later turned into acres of car parking and unkempt “space left over after planning”. Excellent masterplanning, as exemplified by Clapham Park Estate in south London, can increase densities as much as 50%. This can mean the difference between a scheme creating a profitable cash-flow profile or falling short.

The real question for us is, what is going to attract developers and investors to Canning Town, east Leeds and north Solihull? In my experience, there are four ways to do it …

The importance of community engagement in any changes cannot be overstated. Existing communities need to be involved in their planning, and also directly involved in oveseeing their execution. There is, however, a balance to be struck here: we should not be so in thrall to the romance of a bottom-up approach that we fritter away the opportunity for renewal because of a lack of technical support and political leadership.

One way of achieving this balance may be to establish LIFT-style joint ventures, whereby a number of estates can be brought together under a single programme funding model.

This would help to diversify risk for the investment community and congregate limited professional skills.

The final ingredient is tax incentives. The government has already gone a significant distance in respect of stamp duty and allowances on land remediation. If the Treasury was inclined to go further, options would include time-limited tax increment financing, as used in south Chicago, the old chestnut of equalising VAT to reduce the costs of asset refurbishment, and the potential for extending enhanced capital allowances to other parts of the regeneration process.

Most of all we should have confidence. We don’t have to look to the USA for successful examples of estate renewal. From Holly Street in Hackney to the Gorbals in Glasgow, we know what tools have to be used. It is largely a case of whether there is enough collective will, particularly over the vexed question of long-term ownership, to allow these urban assets to flourish. The pilot projects will put this to the test.