How to boost regeneration through crowdfunded community investment

By Rosalyn Old, Researcher, Government Innovation and Jonathan Bone, Senior Researcher, New Technology and Start-ups, Nesta

Local groups in the UK with ideas for projects are turning to investment crowdfunding, selling shares or taking out loans in order to raise finance from their communities. Projects raising money in this way range from saving a local pub, shop or sports club to creating a new community arts space, skate park or even a rural broadband network.

While crowdfunded investment enables projects to go ahead, the real benefit comes in the way that these projects bring people together, build skills and develop communities’ confidence that they have the power to change their surroundings, furthering regeneration and local resilience.

Although there certainly are examples of communities investing in local assets without the use of the Internet, the rise of online crowdfunding platforms has led to a rapid increase in the number of projects raising investment from their communities.

These platforms can vastly simplify this process by providing a dedicated online space where fundraisers can explain what their project is about, the timescales involved, how much money is needed and what funders get in return. They also support setting up and running the offer (such as by managing payments) and can help projects to reach a wider audience.

The impact that these projects can have extends beyond buildings or land. One example is the Bevy pub campaign, which brought the only pub on a Brighton housing estate back to life after the local community took ownership of the project in the form of shares worth £10 apiece.

The pub is now more than a local drinking spot; it acts as a community centre, providing food and activities for the most vulnerable in the area. However, while the potential for cities is evident, use of these tools is concentrated in a few hotspots such as Bristol, Oxford, Manchester, whereas in other cities including London use of these models is much more rare.

Raising money in this way does not come without its challenges. Community organisations often face difficulties in gaining access to assets due to a lack of funding or expertise in the asset transfer process, or due to hesitancy from local authorities who may feel disempowered if they previously owned and ran the asset.

Other important challenges include transitioning from fundraising into running a business with a large number of shareholders to keep happy, and ensuring the diversity of those investing in and governing these assets are representative of the communities in which they belong.

Local and city authorities, as well as foundations, have a key role to play in overcoming these challenges. This support can take various forms.

Leeds City Council invested in the Headingley Development Trust prompted by a successful community shares raise showing that local people supported the project. In Plymouth the City Council offers loan and grant packages of £15,000 to £80,000 to help groups bring redundant buildings back into use in the city, easing the asset transfer process. In the UK capital, Crowdfund London (run by the Greater London Authority) has boosted activity by providing matched grant funding for groups embarking on crowdfunded regeneration projects.

Crowdfunded community investment adds to the growing number of tools that can help empower communities and develop active citizenship of urban populations. Supporting projects raising money in this way should be made a larger part of cities regeneration and development strategies.

You can read more about this work in Nesta’s new report, Taking ownership: Community empowerment through crowdfunded investment. This research was conducted with funding from the Greater London Authority through the London Economic Action Partnership (LEAP).