An adaption of the financing model first used successfully in the Capital to deliver the Northern Line extension to Battersea would drive economic growth and housing development, according to a report published today by campaign group BusinessLDN and consultant WSP.

The transformative model could generate up to £4.5bn over 25 years, unlocking land for over 100,000 new homes and creating more than 10,000 jobs, says the report.

The report, titled Generating Land Value to Grow London: A New Residential Funding Approach, proposes an evolution of the tax increment financing (TIF) model.

This approach would allow local governments to borrow against future increases in stamp duty and council tax revenue generated by new housing developments enabled by transport improvements.

Residential TIF model could help fund three priority TfL projects and support 100,000 new homes:

• Docklands Light Railway extension to Thamesmead
• Bakerloo Line extension to Lewisham
• West London Orbital extension to the Overground network

John Dickie, chief executive at BusinessLDN, said: “Against a backdrop of stretched public finances, the Government needs to consider innovative approaches to get shovels in the ground.

“Letting local government borrow against future tax revenues to fund infrastructure investment is a common-sense way of supporting growth.”

The report recommends granting the Mayor of London authority to integrate the residential TIF model with the existing commercial TIF framework, allowing for a flexible approach suited to different locations.

To address concerns about local government budgets, the report clarifies that only a portion of additional future council tax from new developments would be used, without affecting existing revenue streams.

Other funding sources, such as Section 106 agreements and the community infrastructure levy, would also be leveraged to share investment risks.

Chris Whitehouse, Technical Director at WSP, highlighted the potential impact.

He said: “By evolving proven funding models like tax increment financing, we can enable critical projects that drive economic growth, create jobs, and enhance communities, not just in London but across the country.”

The report’s release comes amid an ongoing inquiry by the Housing, Communities and Local Government Select Committee into how land value capture can support the Government’s goal of delivering 1.5 million new homes within the current Parliament.