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Private money is essential if the government's policy on housing and regeneration is to be realised. To maximise the amount of regeneration secured for each pound of public subsidy, public bodies must enter into innovative arrangements with their private partners. This is particularly important in the nine housing market renewal pathfinders. The private sector must assume real risk, not just in the short term when public sector investment will constitute a major proportion of the overall scheme cost. It is also essential to make sure that, where private sector investment follows public sector money, it is not withdrawn too early, otherwise what risk has the private sector assumed in securing its rate of return?

To kick-start a change in private sector investors' expectations for future growth, public sector pump-priming is vital. Although this may create short-term benefits, evidence of sustainable value is only demonstrated when demand for properties in the area exists after this funding has been fully exhausted.

It is also crucial that each market renewal pathfinder's business plan be structured to lever in maximum private investment. Each of the pathfinders has different features attractive to the private sector; these positive features need to be identified and accentuated.

Demand for housing can only be created by integrated public sector policies to deliver infrastructure. Government policy has increasingly recognised the joined-up nature of regeneration, and departments and agencies need to ensure that this approach is turned into deliverable action plans.

There is a wide spectrum of partnership arrangements available to public bodies and their private sector partners, from simple contracts to complex and well-capitalised company structures. The structure will need to be shaped to ensure a fair reward for each party, which must balance their inputs into the venture and relative risk exposure.

Marrying commercial organisations to those with social objectives is not straightforward. So public sector organisations must enter into such arrangements with unambiguous and prioritised objectives to deliver renewal.

The partnership structure will need to ensure a fair reward for each party, which must balance their inputs and risk exposure

Often, a public sector body has neither the financial resources nor the appetite to take on the financial risks involved in implementing major regeneration projects. A public sector body is not generally in the business of speculative property development and should not expose itself to inappropriate risks. It therefore expects the development partner to take risk, such as planning, construction, letting or sale and financial risks.

This risk transfer needs to be of a reasonable scale and timescale, given the size and complexity of the project. "Featherbedding" of private sector partners will not result in value for money.

The private sector partner's role is to provide finance, expertise and innovation in order to make the local community's vision a reality. They would be expected to understand demand for any new development and to ensure that the appropriate scheme is developed to meet that expected demand.

In complicated, challenging projects, which most of the pathfinders are, sophisticated structures may be required. The public sector body may decide to take an equity share in a new entity created jointly with a development partner. In this instance, the public sector body still has to ensure the best consideration for its assets and there will be contractual relationships between the new entity and public sector body, in relation to the sale of public land or assets.