Financing the future

Following the government’s confirmation of twelve new towns, Francis Truss, Partner at Carter Jonas, explores how strategic finance and delivery structures will determine whether these ambitious developments succeed.

The cost of ambition 

New towns are once again rising up the policy agenda. With the recent government announcement on the locations for the next twelve new towns, we could be on the brink of the biggest strategic planning exercise in England for decades. But it will take more than the government’s stamp on the New Towns Taskforce report to make these new towns viable and deliverable. Success or failure of these new settlements will depend on whether the right finance and delivery structures can be put in place from the outset.

Post-war new towns benefited from generous public funding and the ability to purchase land at agricultural values. Today, the context is starkly different. Government finances are more constrained, ‘input’ land values are higher, and the role of the private sector is far more prominent. New towns now need to be funded in partnership, blending public and market capital. But this model brings its own complexity, and new towns will not happen without bold thinking and decisive action.

Why housebuilders alone can’t carry the risk 

Housebuilders will play an essential role in the construction of new towns, but their business model is designed around housing delivery and quicker returns, rather than decades-long infrastructure programmes. Projects of this scale bring exposure to economic cycles, planning uncertainty, political change and sub-regional infrastructure.

Housebuilders are not set up to deliver – at such scale – the social infrastructure, utilities, highways and public realm that must come first. This is the core challenge: the need to invest heavily up front before a single house is sold. For most housebuilders, the financial risk is simply too high, and the returns too back loaded. That is why organisations with a longer-term outlook and remit are required to de-risk these schemes.

The case for a master developer model 

One option is for a master developer to coordinate land assembly, infrastructure, planning and phased delivery. Unlike housebuilders, master developers are set up to play the long game, investing in upfront infrastructure and curating the place over time.

This model has already delivered success. At Wirral Waters, Peel Waters is working with Wirral Council and Homes England to deliver over 13,000 homes in partnership with multiple private developers. Similarly, the MADE Partnership (a joint venture between Barratt Redrow, Homes England and Lloyds Banking Group) shows how public and private finance can come together at scale. Urban & Civic is delivering a number of new settlement projects following this model.

Master developers can act as ‘supermarkets’ for development-ready plots, selling serviced land to housebuilders under a single design code. With the right governance and funding, they can ensure quality, consistency, and efficient infrastructure delivery. But they too require support – particularly access to ‘patient’ long-term funding and strategic land partnerships to ensure control.

Unlocking institutional capital 

Long-term capital from pension funds and other institutional investors will be critical. These investors seek predictable, inflation-linked income streams over long periods – in principle a good match for the infrastructure-heavy, slow-return profile of new towns.

However, current delivery structures give institutions limited opportunities to deploy long-term capital. The most obvious route to attract long-term capital is to fund the delivery of investable residential assets such as Build to Rent (BTR) and affordable housing, where income is stable and secure. In particular, BTR can play a catalytic role – offering early housing delivery, creating a sense of place, and helping to de-risk the wider site. 

Location matters. Investor appetite is strongest in the South East and in areas with proven demand and connectivity to major employment centres. For new towns outside these hotspots, more work is needed to build investment cases and generate confidence. The product mix will also be key. A successful new town needs a wide spectrum of homes, from much-needed shared ownership for first-time buyers through to senior living for an ageing population. 

Currently, later living and retirement rental remain under-supplied, despite strong demographic drivers. Encouraging institutional investment into this sector – through planning policy or financial incentives – could unlock another important funding stream.

Reviving the Public-Private Partnership (PPP)

Public-private partnerships (PPPs) offer a tried and tested delivery mechanism. Though central government has moved away from PPPs in recent years, they remain highly relevant for new towns. 

Under a PPP model, the private sector finances and delivers the infrastructure, recovering its costs through user charges or government payments. For new towns, this could mean developers repaying investment through levies on land sales, property transactions or occupation. The key is to create a reliable, structured revenue stream – whether through planning policy, infrastructure tariffs or tax incentives – to reduce uncertainty for private investors.

Used selectively, PPPs can bring delivery discipline, innovation and financial capacity that the public sector alone cannot provide.

The case for deregulation 

Another mechanism to aid deliverability is to radically reduce planning risk through deregulation. The creation of Simplified Planning Zones (SPZs) could offer master developers a pre-approved development framework, removing planning delays and giving investors greater certainty.

Further incentives could include tax breaks, Green Belt reform, and reduced affordable housing requirements in designated growth zones. These are politically contentious measures – but if the aim is to attract long-term investment, accelerate delivery, and innovate, they should be part of the debate.

The Freeport and Investment Zone models provide a precedent. Both combine regulatory flexibilities with financial incentives to stimulate private investment in defined areas. A similar approach could be developed for new towns.

A new role for public funding 

In the current economic environment, it is unrealistic to expect large-scale public funding for new towns, but well-targeted public investment still has a vital role to play. 

New towns will only succeed in progressing beyond the masterplanning stage if the government uses its balance sheet and policy tools to enable (and in many cases fund) the riskiest elements of delivery – land acquisition, site remediation and core infrastructure – thereby unlocking much larger sums of private capital. This could take the form of direct investment, loans, guarantees or land assembly through compulsory purchase.

The proposed Planning and Infrastructure Bill, which aims to streamline compulsory purchase order (CPO) processes, could support this by enabling public authorities to assemble land at scale more effectively.

In June, the government launched the National Housing Bank, backed by £10.5 billion in investment capital. While most of this is earmarked for social housing, the Bank’s guarantee and loan facilities could be extended to new town infrastructure – helping to crowd in private investment without expanding the national debt.

Making land value capture work 

Post-war Development Corporations funded themselves by capturing the uplift in land value that came from granting planning permission. Today, that model is harder to replicate – partly due to higher input land prices and legal protection of ‘hope value’.

Section 106 and the Community Infrastructure Levy (CIL)  capture some uplift, but not at the scale required to wholly fund new towns. Reforms to enable more meaningful land value capture are under active review. Proposals include removing hope value in CPO cases and creating long-term stewardship vehicles that retain ownership of land and assets to fund ongoing development.

The Milton Keynes tariff model provides a modern precedent. Here, a flat-rate developer contribution – £18,500 per home – enabled the council to borrow against future receipts, funding infrastructure up front. The Elizabeth Line also used business rate supplements and Mayoral CIL to capture value from improved transport connectivity. 

These models show what’s possible. But to scale them for new towns, government must provide legal certainty and consistent policy to support long-term investment decisions. 

Conclusion: build the framework, then the town 

No one model will solve the challenge of financing new towns. What is needed is a suite of solutions that works for housebuilders, master developers, institutional investors, PPPs and targeted public funding. 

Land value capture must be modernised: compulsory purchase could become more efficient, and the government should use its financial strength not to replace private investment, but to unlock and leverage it. 

The goal is to reduce risk, build confidence, and create conditions in which private capital can flow at scale. That means regulatory certainty, political consistency and early investment in place-making.

The financing of new towns can only be achieved by creating the delivery structures, financial models and investment frameworks that allow the market to step in. With the right strategy, the private sector will deliver.