Regeneration of urban areas like East London could become a major casualty of the recession unless swift action to develop alternative financing models is taken, the chief executive of the London Thames Gateway Development Corporation (LTGDC) said today.

In his written evidence to the All Party Urban Development Group, LTGDC chief Peter Andrews said that the regeneration of inner urban areas is in jeopardy because the business model employed by developers over the last 10 years, which relies upon high levels of project finance and pre-sales, is ‘effectively broken with no apparent replacement’.

Building sister publication Property Week reports that despite the Olympic Village development, housing delivery numbers in the LTGDC’s area will fall by over one third and government targets will only be achieved with a ‘drastic improvement in market conditions’.

‘East London is the toughest corner of the block and the complete failure of this business model, which has been a major plank for the delivery of homes and renewal, poses a serious challenge to regenerating the area,’ he said. ‘East London has already suffered more than most areas from historic market failure but the current situation could arrest the programme for sustained future regeneration.’

He also said he was particularly concerned that starts for large mixed-use urban regeneration schemes have fallen dramatically as a result of the credit crunch and that house builders are moving away from complex inner city schemes to ‘their comfort zone’ of low density housing.

‘Unitary Development Corporations are uniquely placed to devise innovative strategies that maintain the pace and intensity of regeneration in these straitened times. But the precise challenge is to find a solution to effectively remove the risks to the private sector while stimulating development in urban regeneration areas,’ said Andrews.

In the LTDGC’s submission to the all-party group into the financing of regeneration projects during the recession, Andrews pinpointed the steps it is taking to spearhead regeneration within its area.

It said it has devised and delivering the following strategies:

• Site assembly, clearance, remediation, enabling work and securing planning consent to create 'shovel ready' sites.

• Reducing market risk by entering into joint ventures with developers where the public sector contributes its land and seeks a return linked to future revenue.

• Actively reviewing planning gain policy in the LTGDC area.

A final report by the all party group will be published in June/July this year.