Written evidence submitted by the
Architectural Heritage Fund

Introduction

The Architectural Heritage Fund (AHF) is the leading social investor in the heritage sector. We have been investing in communities, heritage-led regeneration and historic building reuse since 1976. We do this by providing grants, loans and advice to charities and social enterprises seeking to take ownership of historic buildings and conserve and adapt these for new uses. Over nearly 50 years, we have awarded over £91 million in loans and £38 million in grants to more than 2000 projects across all four nations of the UK.

Today, we are recognised as an innovator in the heritage sector, a highly responsive funder well-considered by those we support, and a reliable delivery agent of impactful programmes targeting key government priorities (such as our DCMS-funded £15.4 million Transforming Places through Heritage programme).

We are submitting evidence because we work directly with hundreds of heritage asset-based projects each year, across the four nations, and are therefore well placed to observe challenges across the sector as well as responses or conditions that help to mitigate these.

1)      What are the most significant challenges facing owners and operators of built heritage assets, and how are they affecting what those sites can offer?

• Funding/guidance: Communities require extensive guidance to successfully navigate complex processes and sustainably take ownership of heritage assets, as well as funding for critical phased works, including feasibility studies and other early-stage development; acquisition funding; and capital works.

The AHF has historically been among a small number of funders who provide this early-stage support, which our long-term evaluation shows to be critically important for long-term sustainable ownership; ten years after receiving our early-stage funding, 87% of heritage assets we funded were in community ownership or were in a long lease. Projects that benefitted from this support include Acton Arts, a project to create a community-run arts centre and cinema in the old library in Acton, which had AHF grants from 2013-2021. At present, there is a significant gap in the availability of early-stage funding. This will mean both that some projects that could be sustainable do not proceed and that projects which are proceeding may not necessarily enjoy such high rates of sustainability. Early-stage funding is an inexpensive form of funding that delivers outsized returns on investment and should be prioritised in any government spending on heritage.

Additionally, the Community Ownership Fund (COF) demonstrated the need for acquisition funding for heritage assets: across the fund, at least 76, or 19%, of the total 409 projects in receipt of a COF grant were to heritage assets (we know this because those 76 projects had previously had early-stage funding from the AHF; the COF programme itself did not record ‘heritage assets’ as a class, but we estimate that up to 25% of COF-funded projects may involve heritage assets). These include projects such as the ‘Haven Community Hub’ in Southend-on-Sea, an Art Deco department store that is transitioning into a key services centre for older people, which had both early-stage AHF grants and an AHF loan before receiving a COF grant to facilitate freehold purchase. With the closure of COF and the continuing challenging economic climate, particularly in economically deprived parts of the country, there are likely to be more heritage assets becoming available for purchase but fewer opportunities to secure them due a lack of acquisition funding. In Scotland, the Scottish Land Fund supports the acquisition of land and buildings, and has supported communities with the purchase of historic assets https://www.tnlcommunityfund.org.uk/funding/programmes/scottish-land-fund. Similar funds should be available in other parts of the UK, and the AHF is exploring the creation of a revolving Acquisition Fund to provide loans to charities and social enterprises aiming to purchase a heritage asset.

• Poor energy efficiency of historic building stock: For a variety of reasons, community organisations tend to operate or own older buildings, including historic buildings. Research by Social Investment Business demonstrates that these buildings tend to have poorer energy performances, as measured by EPC ratings.[1] The 2024 Adapting Historic Homes for Energy Efficiency review highlighted the barriers (planning regulations, local authority resources, skills, financing) to improvements in the energy efficiency of historic homes, which apply to heritage assets owned and operated by charities and social enterprises as well.[2] Poor energy efficiency of community-owned heritage assets leads to increased energy costs, which in turn further challenges the economic resilience of these organisations.

The AHF is a partner on the Energy Resilience Fund (both Key Fund-led pilot and Social Investment Business-led extension), and through this we aim to help finance installation of energy efficiency and renewable energy creation systems. These funds are blended loan/grant funds, and the need to repay part of the investment may not be suitable for all organisations. We see the need for a dedicated heritage asset energy fund, which would expedite this important work for community buildings that are also heritage assets, as would government considering removal of VAT on basic maintenance for heritage assets – as issues such as damp and preventing draughts are significant amplifiers of historic building heat inefficiency but correcting for them is not covered by the current VAT zero-rate policy on installation of insulation, heat pumps and solar panels. There is also a clear need for honest and objective advice that can guide organisations to the most appropriate and cost-effective solutions.

Government should look at how significant sums of unspent Section 106 funds managed by local authorities could support the upgrading of community buildings, including historic buildings. Unspent developer contributions amount to significant quantum of funds and proposals have been made for how these could be better utilised, e.g. through Local Carbon Offset Funds.[3] Local authorities should be supported to develop programmes, alongside funders, that deliver these funds to in-need community organisations, including historic assets investing in energy efficiency measures. 

2)      How effective are the current funding and finance models for built heritage?

The current funding models for built heritage are different in each of the UK’s four nations, supported by UK-wide funders including National Lottery Heritage Fund, the AHF and others, such as The Pilgrim Trust. With strengths and weaknesses across these models, there are some principles and models that better assist the sector’s sustainability. 

In Scotland, the system of muti-year revenue + capital funding packages for critical partners through Historic Environment Scotland promotes fluid, complementary collaboration in which different sector organisations concentrate on their specialism within the broader ecosystem. Such agreements therefore help create a more resilient sector, but these have been limited in other countries in recent years (often due to agencies’ own funding being on an annual basis). Long-term public funding for the heritage sector in all nations should be structured to enable multi-year revenue + capital funding packages to strategic sector partners that specialise in providing the different needs of the sector. This should include an assessment of how multi-year funding for national, regional and locally focused organisations (including Heritage Development Trusts and building preservation trusts) – similar to the Arts Council England’s development agency model – could be adapted for the heritage sector.

This change would also provide greater structure to the funding landscape that heritage asset projects must navigate as they develop. Heritage regeneration projects are complex, requiring on average nearly a decade from inception to delivery and a mixed economy of funder/advisors to support them at each stage in their project development – a good example is Leigh Spinners Mill in Wigan, which had its first of several AHF grants before going on to receive critical funding from Historic England, the National Lottery Heritage Fund, Great Manchester Community and Voluntary Organisations, and Wigan Council. Sector organisations work hard to remain in conversation about our collective support – with funders meeting across regional and national levels to discuss both strategic- and project-level challenges and opportunities – but are not incentivised to invest in structured communication because of the time-limited nature of short-term funding. Longer-term funding structures would incentivise better connectivity across the sector.

We know from the work of the Local Trust that very deprived communities need longer-term support and patient capital to build their capacity to take on a heritage asset and create and sustain the social infrastructure that often operates from these assets. It will be critical for the new Community Wealth Fund managed by the National Lottery Community Fund, which rightly has identified the role that heritage can play in very deprived communities, to support communities over the long term with support and patient capital.

The sector has also seen the decline in match funding sources over the past fifteen years. There was previously a broad range of funding from EU, national and local sources. This is a now much diminished picture and there is, at present, no apparent replacement for the UK Shared Prosperity Fund which succeeded EU funds. This means that match funding is much harder to source and places additional pressure on the funds that are available. In Scotland and Northern Ireland, where more match funding sources have been available, e.g. the Scottish Land Fund and Shared Island Initiative, heritage regeneration projects have benefitted.  

A final challenge is around valuing heritage assets, which can be a significant barrier when third-sector organisations are looking to purchase assets from private or public entities. For good reasons, public funding such as COF grants cannot be used to purchase an asset for a price above market valuation. However, this can lead to heritage assets being lost to community use because a private purchaser can pay more than the market valuation. The existing policies relating to Assets of Community Value in England are not yet strong enough to manage this risk, and government may wish to consider how to address this problem, including allowing government funding to consider ‘equitable value’ as well as market value and allowing funding to be used, up to a certain point, to go over a market valuation.

3)      What role does built heritage play in the regeneration of local areas and in contributing to economic growth and community identity?

Our recent reports on Transforming Places through Heritage and our Heritage Development Trust programmes demonstrate the potential for heritage-led regeneration to strengthen community identity and catalyse economic growth – Transforming Places through Heritage estimates a 3.38 CBR after ten years. These programmes argue that community-led regeneration of heritage assets can deliver the greatest impacts, and sustainable end uses – because community-led projects are most likely to recognise the buildings of greatest local meaning and to propose new purposes relevant to today’s users. Projects in this vein include former pubs taken on by communities (such as Petersfield King’s Arms, which is delivering a vibrant youth programme from a historic pub building after early-stage grants from the AHF); vacant warehouses that testify to social history are transformed into art spaces providing critical cultural infrastructure; beloved but disused civic spaces are revitalised into broad community facilities providing workspace, meeting rooms, and events capacity.

Our Heritage Development Trust programme, initially piloted under DCMS funding and then extended thanks to partnership with the National Lottery Heritage Fund, focuses on increasing the resilience of local third sector organisations, which specialise in leading complex heritage-regeneration projects. The programme has supported experienced trusts transforming derelict streetscapes into vibrant high streets with bustling cafés, retail and experience-led spaces, with offices and affordable homes above. In Great Yarmouth, a 70% vacancy rate on the high street was converted into over 80% occupancy in the period immediately before the combined effects of both Covid closures and Brexit population shifts once again challenged this seaside town. This transformation saw buildings such as 17th-century timber-framed 160 King Street, Great Yarmouth, empty for 20 years, beautifully conserved into affordable accommodation on upper floors and a thriving locally-owned Portuguese café on the ground floor. In Sunderland, the conservation and reuse of listed buildings threatened with demolition has had a catalytic impact, inspiring the conservation and reuse of adjacent buildings as well, which now form focal points for a vibrant live-work development scheme on what was a downtrodden brown field site.

Historic buildings also provide an important opportunity to help address the UK’s housing shortage. Historic England’s recent Heritage Works for Housing report found that heritage assets could provide up to 670,000 new homes, with lower carbon investment than new-build – thus tackling two key government priorities.[4] That report is aimed at larger developers but there are also smaller-scale opportunities for creating new housing units across the UK, often in town centres and on high streets in the classic ‘living above the shop’ model or in repurposed redundant buildings; these projects have the added advantage of bringing footfall back to town centres and driving town centre renewal. While larger-scale developers and housing associations can be uninterested in these smaller schemes, particularly in areas with lower land values, third-sector developers are already providing new homes in this model; among them are the burgeoning Community Land Trusts across the country and the AHF’s Heritage Development Trusts. An example is the Alliance project in Bacup, in the Rossendale Valley, where with funding from the AHF, Historic England and National Lottery Heritage Fund, a Heritage Development Trust has adapted a former bank (a site of anti-social behaviour) into co-working facilities and four affordable flats for local young people. Scaled up, this approach to reusing heritage buildings for new housing units has potential to make a significant contribution to the UK’s housing and regeneration needs, in a net-zero and community-orientated way. Government could support the uptake of these projects by considering reduction in VAT on new housing units delivered from heritage assets and by investing in programmes such as the Heritage Housing Fund the AHF is presently developing.

4)      What are the financial, regulatory and practical barriers to preserving built heritage?

See 1 above for a variety of financial barriers preventing the full realisation of built heritage’s potential to support economic growth, strengthen community identity, and help achieve our environmental goals. Additionally:

• Skills shortages: the conservation, adaptation and sustainable reuse of heritage assets requires diverse skills across the lifetime of a project. So-called ‘heritage building skills’ are the best recognised, but other skills are no less important to project development and long-term resilience and environmental sustainability, including business and financial planning, project management, and conservation retrofit. These skills are in high demand, with most areas of the UK facing critical shortages that mean projects must wait in queues, stretching their delivery and ultimately increasing costs. Although some areas of skills needs could be assisted by AI (e.g. financial modelling), many will still need to significant human input and oversight and provide opportunities for the creation of ‘good jobs’. Government should consider investing in long-term, broad training programmes and consider new models for apprentices in the conservation, adaptation and reuse of heritage assets as a secure career pathway.

• Knowledge gap: A high proportion of community groups taking on heritage assets and adapting them for new uses are new to these complex processes; many are volunteer-led. These groups need support and guidance to deliver their projects, maintain their buildings, and run resilient enterprises. This ongoing multi-year support of projects as they develop should be considered part of future funding schemes.
• Pipelines ready for investment opportunities: Recent years saw several capital opportunities led by government for heritage assets, e.g. the Levelling Up Fund, Community Ownership Fund. Given tight timelines, however, only projects already advanced in their development benefitted (as evidenced by the large number of AHF-supported projects in receipt of COF grants). The programmes also tended to benefit communities with greater capacity and existing resources than more deprived communities. A steady programme of early-stage funding will enable strong pipelines to capture the greatest impact from future capital programmes, including within the most deprived communities. Funding programme should also be patient and flexible, reflecting the needs of historic building and community-led projects.

• VAT: the treatment of VAT on repairs and maintenance and new build construction is an inconsistency that has long exercised the sector. It should be flagged again that VAT being applied to the repair and maintenance of historic buildings is inconsistent with climate change and net zero goals and holds back the regeneration of historic buildings across the country. VAT being applied to new build construction would at least address this inconsistency and lead to greater consideration of reuse and adaptation rather than the dereliction  of historic assets.

5)      What policies would ensure the UK workforce has the right skills to maintain our heritage assets?

Please see 4 above. Government should consider what it can do to enable training schemes through Further Education colleges in fields including business and financial planning, project management, conservation retrofit, and more traditional ‘heritage building skills’.

Additionally, third sector organisations can also act as training providers for young people in their localities: since 2014, Great Yarmouth Preservation Trust has provided over 30,000 training hours, including apprenticeships, targeting young people Not in Education, Employment or Training. These programmes can not only help provide secure career opportunities for young people within their local communities but also boost the availability of skilled workers needed throughout the UK to tackle dereliction and bring heritage assets back into economically productive use. At present, many smaller heritage organisations that would like to engage in such schemes are unable to do so because they require longer-term, multi-year commitments beyond what individual organisations need or are able to manage. Government may wish to consider how it could establish regional apprenticeship collectives where smaller organisations such as Building Preservation Trusts could become members and take on apprentices for shorter periods of time, with the apprentice undertaking their training across multiple organisations. Such a scheme may help in particular to train highly specialist ‘heritage building skills’ workers.

Kelcey Wilson-Lee, Director of Programmes & Deputy CEO

Matthew Mckeague, CEO

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