Supporting
housing
investment
A Case Study Guide
Case studies
Introduction
This document provides examples of entrepreneurial activity lead by councils to provide new
homes in response to the demands of their local housing market and housing pressures and
shares some of the learning from those councils. It also highlights the options available to
develop an investment offer that meets your local needs.
Collectively, we simply aren’t building enough homes to meet the demands of a growing and
ageing population. Demand for housing across all tenures is high and the housing waiting
list in councils has increased by 70 per cent in the last decade1. Private renters make up an
increasingly large part of the overall housing population, and 45 per cent of them think it will be
5 years or more before they can buy their own home2. After a period of uncertainty over house
prices, the Royal Institution of Chartered Surveyors (RICS) report that house prices rose in
every part of the country by the end of 20133.
The challenges vary of course; for example areas experiencing high demand for housing face
the challenges of affordability, leaving many households priced out of the market for home
ownership and directing a significant proportion of the household income on housing costs.
Conversely, areas where property is considerably lower in value can make it difficult to attract
investment to support wider regeneration. Both of these issues will hold back the local economy,
where housing and jobs are intrinsically linked.
Taking a long term view on the housing needs and aspirations of your area and the investment
needed to meet these needs can support wider plans to stimulate economic growth locally, and
help to manage pressures on public services and affordable housing.
As the councils in this document demonstrate there are opportunities for both stock and nonstock holding authorities to deliver, support, attract and underpin housing investment. For stock
owning councils, self-financing provides an opportunity to run the housing stock in a more
business like way to ensure value for money for tenants.
1 CLG live tables, Table 600 Rents, lettings and tenancies: numbers of households on local authorities’ housing waiting lists1, by
district: England 1997-2012
2 English Housing Survey 2011-12
https://www.gov.uk/government/publications/english-housing-survey-2011-to-2012-headline-report
3 RICS Housing Market Survey, 16 January 2014
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Supporting housing investment
For all councils there are opportunities to build on previous commercial and entrepreneurial
experience to start new house building projects which provide private rented, affordable and
market housing. A recent LGA survey4 showed that 90 per cent of councils intended to make
land available for housing over the next five years and a number of City Deals and other asset
development partnerships have opened up opportunities to pool and release assets across the
public sector. Land values vary considerably across the country and this will have bearing on
the development options for councils and the margins for potential investors. A complex housing
market needs the creativity and entrepreneurial skills of councils to bring land and money to the
table and get new homes built.
Councillor Mike Jones
Chairman, Environment and Housing Board
Local Government Association
4
http://www.local.gov.uk/c/document_library/get_file?uuid=7a1e4ffa-173a-438c-9252-bd46cf687725&groupId=10180
Supporting housing investment
3
Contents
Introduction by Councillor Mike Jones
2
1. Housing delivery options
5
2. Case studies
10
A. Private investment
10
B. Council investment
15
C. Housing as part of a wider growth and investment agenda
17
D. A quick look at other investment and delivery models in development
18
3. Issues to consider in selecting an investment and delivery model
22
Useful resources and further reading
25
Acknowledgements25
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Supporting housing investment
1. Housing delivery options
There is no one model of partnership and each council will have a different set of requirements
and opportunities. The table below sets out some of the different options.
Vehicle
Form
Direct
Council or ALMO
development building financed
through the
Housing Revenue
Account (HRA) or
borrowing.
Financial
investment by the
council outside of
the HRA.
Council
owned
housing
company
Power to set up
trading activity
established by
the well-being
power of the Local
Government Act
2000 and the
Localism Act.
Investment and
return
Investment through
the HRA or via
borrowing up to
centrally prescribed
cap.
Direct return to
council through
rental income
and capital
appreciation.
Council investment
Direct return to
council through
rental income
and capital
appreciation.
Issues to
consider
Undertake a
risk and options
appraisal: the
investment risk
may be offset by
the development
of a potentially
valuable asset.
Example
Stroud5
Borrowing through
the HRA is limited
by a centrally set
cap. What impact
will additional
borrowing have on
your long term HRA
business plan?
Investment is offset Ashford
by the development (page 15)
of a potentially
valuable asset.
5 “Let’s Get Building” (NFA, ARCH, CIH, LGA and CWAG 2012) for more examples of building through the HRA
Supporting housing investment
5
Vehicle
Form
Local
housing
company
A form of joint
venture between a
council and private
sector partner
originally piloted
by the Homes
and Communities
Agency (HCA).
Investment and
return
Typically the
Council invests
land; partner
provides funding
and house building
expertise.
Shared reward.
Jointly owned, both
partners share risks
and benefits.
Special
purpose
vehicle (see
note on p9)
Typically a
medium to long
term partnership
arrangement.
Land is committed Council provides
to a special
land, partner
purpose vehicle
provides funding
and homes are built
with private finance
Returns go to
investor for
duration of lease.
Asset may then
return to council
if a leaseback
arrangement is in
place.
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Supporting housing investment
Issues to
consider
Shared risk.
Example
Sheffield
(page 19)
This is a longer
term partnership
arrangement
and therefore
councils will wish to
consider the choice
of partner carefully.
Investor may
Barking and
require guarantee
Dagenham
from council or
(page 10)
arrangement to
underwrite potential
losses.
Vehicle
Local Asset
Backed
Vehicle
(LABV)
(see note
on p9)
Form
Investment and
return
Various models
Council provides
but typically
land, partner
involves the council provides skills and
transferring land
funding
to a separate
entity and financial
investment
Different models of
from a partner
return, depending
organisation
on the contract
alongside skills and arrangements
capacity to deliver.
Issues to
consider
Shared risk
Example
Shared risk
Oxford Barton
LLP
(page 12)
Gateshead
(page 14)
The vehicle is
a distinct legal
entity and shares
and governance
arrangements
are typically
shared across the
partnership.
Joint
venture
(see note
on p9)
Council and
private commercial
venture. Risk
and rewards are
split between the
partners
Can take different
forms, either a
limited partnership
or a company.
Council provides
land, partner
provides funding
Rewards are
split between
the partners,
depending on
the contract
arrangements
Wakefield
Partnership
(page 19)
Council will have
high visibility
and involvement
in programme
delivery.
Supporting housing investment
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Vehicle
Private
Finance
Initiative
(closed
to new
applicants)
Form
Investment and
return
Long term
Agreed returns
contracts between to private partner
councils and
during contract
private sector firms. period. Asset then
reverts to council.
Development
with
registered
provider
Council investment
of land, use of right
to buy receipts or
financial investment
to fund new
building.
Pension
Fund
investment
Pension fund
Long term
acts as investor
partnership
to housing
arrangement.
development.
Council can provide
land to increase
the viability of the
model.
Supporting housing investment
Example
Kirklees
(page 11)
Some risks
transferred to
private sector.
Management of the
housing becomes
the responsibility of
the private sector
contractor; the local
authority continues
to own the housing
and retains its
tenants.
8
Issues to
consider
Risk formalised
in contracting
process.
Direct loan or
bond provided by
council to housing
association. Land
assets may also
be used in a
partnership with the
housing association
providing the
finance.
What is the
appropriate
governance
and investment
vehicle for this
partnership locally?
For example joint
venture, special
purpose vehicle.
Hastings
Council loan
to Amicus
Horizon
(see Hastings
Council
website for
details)
Consideration of
the management of
the asset over the
partnership period
and the ownership
of the asset at the
end of the period
– for example
would this remain
in local authority
ownership.
Housing
Investment
Fund
supported by
Manchester
Pension
fund and
Manchester
City Council
(see the
council’s
website for
details)
Vehicle
Form
Planning
obligation
(Section 106
agreements)
Planning
obligations6,
commonly known
as section106
agreements, are
a mechanism
which make a
development
proposal
acceptable in
planning terms,
that would not
otherwise be
acceptable.
This can include
obligations for
affordable housing.
Investment and
return
The wider viability
of the development
in question will be a
key consideration.
Issues to
Example
consider
The Growth and
Infrastructure Act
introduces a new
application and
appeal procedure
for the review
of planning
obligations
on planning
permissions
which relate to
the provision of
affordable housing.
The changes
require a council
to assess the
viability arguments,
to renegotiate
previously agreed
affordable housing
levels in a S106,
and change the
affordable housing
requirement or face
an appeal.
A note on special purpose vehicles, local asset backed vehicles
and joint ventures
Each of these vehicles can be used as a framework for a council to enter into a partnership
with a private sector partner. They offer different approaches to tax, to on or off balance sheet
borrowing, protecting public interests and visibility of council involvement. This is a complex
area that requires legal and financial expertise.
Land assets
The availability and value of land for development will be a key factor in housing development.
Councils will be identifying sites for development including public land through their strategic
housing and planning function. Council owned land can be a valuable asset and considerations
will include the council’s overall asset management strategy as well the long term vision for
the area including jobs and growth. In developing land assets for housing there are a range
of issues to consider including capital receipts, achieving best value, de-risking sites and
increasing the viability of development.
The Homes and Communities Agency are working with partners on a programme to release
HCA land and unlock development on publicly owned sites.
6 Section 106 of the Town and Country Planning Act 1990 (as amended)
Supporting housing investment
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2. Case studies
A. Private investment
London Borough of Barking and Dagenham – building homes
for affordable rent
Barking and Dagenham have developed 477 new homes for affordable rent using private
investment. The investment was secured through a special purpose vehicle and the homes are
managed through the council by an independent company. Tenants have moved into the first
properties to be completed and marketing is well underway for the remaining homes.
The homes are built on two sites across the borough, both owned by the council. Other
options for developing the sites had been explored but proved difficult to deliver. The council’s
partnership with Laing O’Rourke (the Local Education Partnership) started with schools projects
and pre-dated the housing project. Drawing on their experience of building projects, the Local
Education Partnership set up a special purpose vehicle (SPV) to act as a developer of the two
housing schemes and secure private finance. Institutional investor Long Harbour funded the
scheme with the council providing the land. The council guarantees the rents and after 60 years
the homes will be owned outright by the council.
All the new homes are offered at affordable rents, with a mix of rent levels including 20 per cent
at social rent. The target group for the new homes includes local people in work who do not
qualify for social housing, but struggle to afford options in the private housing market.
The council markets, manages and maintains the homes through an independent company
called Barking and Dagenham Reside. Reaching out to a new group of renters has required
a commercial and cost-conscious approach from the council to marketing and managing the
properties.
Barking and Dagenham are working on options for a second phase of housing development.
The council ran a funding competition last year to test the cost of private investment and are
currently putting options to councillors on sources of finance and the mix of homes, which is
likely to include some houses for sale.
Learning for other partnerships
• The complex nature of the project meant that it needed the agreement of key experts inside
the council. Any project of this type will need agreement from the council’s finance, property
and legal teams.
• Setting up a partnership with an institutional investor takes time and money. It takes longer
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Supporting housing investment
and is more complicated than using more traditional forms of borrowing such as the Public
Works Loan Board.
• With the benefit of hindsight the council would have simplified the contract arrangements.
The number of organisations involved in the Barking and Dagenham project led to a complex
arrangement that created a large volume of contract documents.
Kirklees Council – Excellent Homes for Life
The Excellent Homes for Life project will build 466 new one and two bedroom flats for council
tenants in Kirklees. The new homes are tailored to local housing need and the project includes
35 flats designed for wheelchair use and 140 extra care flats, 10 of which cater for people with
dementia. Kirklees Council have specified high sustainability and design standards and the
homes are adaptable to meet tenants’ needs throughout their lifetime. The scheme has been
delivered through private finance initiative (PFI) and delivered in partnership with the Regenter
Excellent Homes for Life consortium. Building work started early in 2012.
Kirklees Council developed the “Excellent Homes for Life” project to replace a core of high cost,
poor quality homes with purpose built new affordable homes. The new building project was
an opportunity to address shortages in the current housing stock, and deliver wider economic
benefits to the area. The process began around 10 years ago and with limited options for the
council to build new affordable homes in volume, PFI provided an achievable route for delivery.
The PFI deal covers the construction of the homes and a 20 year service contract to manage
and maintain them. The project went through a competitive procurement process and Regenter
was appointed as the preferred bidder in 2010. The Regenter consortium includes Regenter
Limited and Wates Construction Limited.
Kirklees Excellent Homes for Life development
Supporting housing investment
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Excellent Homes for Life is separate from Kirklees Neighbourhood Housing, (the arm’s length
management organisation (ALMO) for council housing) and has its own maintenance and
management contracts. In practice, there is no obvious difference to tenants.
The flats are built in small developments on 27 sites across Kirklees. Managing the planning
process threw up some challenges, including some public opposition and the complexity of
managing 27 sites in one project.
The council has sought economic benefit to the local economy from construction work, and from
delivering the services by working with Regenter to use and develop local skills.
Construction work has been completed ahead of programme. Properties are let quickly after
completion thanks to good communication between the partners. Relations between local
communities and the construction company are good, and the contractor worked hard to
address any problems caused by the disruption of the building work. There is a stringent
certification process from the council to ensure that properties are handed over to the specified
standard.
Tenants are pleased with their new homes, with very high levels of satisfaction recorded in
a recent survey. The extra housing units have opened up new housing options for Kirklees
residents and some of the tenants have moved in to the extra care flats from residential care.
Learning points for future partnerships
The council set out a robust specification and this contributed to the success of the project. This
was required as part of the PFI process but applies to other housing partnerships. The council
has reduced risk as much as possible through tight specifications and contracts, but some risks
such as the impact of welfare reform or future legislative change cannot be easily quantified.
Understanding whether risks are acceptable to the private sector or should be kept in house is a
subtle, but important skill for councils.
Protocols between partners and expectations of service delivery have all helped the partners to
understand each other and set out what is expected.
The extra care element is treated separately to the housing management contract and is not
part of the PFI deal. It was a deliberate decision to split the two contracts and avoid a conflict of
interest.
Councillors played an important role in developing the strategy and vision for building the new
homes, and engaging local communities in the planning process.
Oxford City Council – bringing forward new housing at Barton
Oxford City Council owns a 36 hectare (90 acre) site at Barton, which was allocated as a
strategic site for the provision of housing in the city. The site needed significant investment in
infrastructure, making traditional development routes difficult. In order to bring forward housing
growth the council entered into a joint venture with an investment partner leading to the creation
of Barton Oxford LLP. Outline planning consent has been granted for 885 new homes and work
has begun on detailed building plans.
In a challenging economic climate and against a background of severe housing shortage, the
council wanted to ensure early delivery of new market and affordable homes. Demand for
affordable housing in Oxford far outstrips supply. The council had very little development land
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Supporting housing investment
available to develop social housing apart from the Barton site, and buying others was not an
option due to lack of other land in the city.
There were significant financial constraints associated with bringing forward the Barton site
with infrastructure costs estimated at £25 million to £30 million relating to issues such as
contamination, and access onto a major trunk road. In addition, there were significant viability
issues relating to the provision of a new primary school and additional S106 contributions. The
site needed substantial upfront funding before returns could be made from the sale of land and
property could be made. Selling the site to developers was unlikely to lead to a quick route to
building, with the likelihood of with protracted negotiation over section 106 requirement and
viability of affordable homes.
The council could have funded the project through borrowing, but would have been exposed to
the full development risk. After carrying out an options appraisal the council agreed on a joint
venture vehicle with a private sector partner to provide investment. The infrastructure provider
will secure investment against the value of the land
Oxford did not have significant prior experience of joint ventures and had to draw on external
advice on tax and the accounting treatment. There were also costs for professional services
including architects, surveyors and lawyers and further due diligence, met by HCA. The council
started the procurement process to find a partner in 2010. As the developers are providing
infrastructure funding alone, the procurement of the Joint Venture partner was not subject to
the EU public procurement rules, avoiding a time consuming OJEU exercise. The procurement
process was still a vital stage of the process as it brought out the economic, social and
environmental benefits in the council’s vision for Barton, including the opportunity for training,
apprenticeships and job creation.
Following the procurement process Grosvenor Developments Ltd was selected as the preferred
private sector co-investment partner. The council entered into a 50:50 limited liability joint
venture partnership (LLP) with Grosvenor in October 2011.
The scheme is expected to deliver 885 residential units of which at least 40 per cent will be for
social rent.
The early stages are well advanced with outline consent granted and a detailed design code
has been part of the planning process. The council has been careful to keep a strict separation
between its role as landowner and as Local Planning Authority.
The joint venture has enabled development on a difficult site, and will enable the building of new
affordable homes without additional public funding. It also allows the council to retain a degree
of control over how the site is delivered.
Running a joint venture takes time and effort from the council and initial investment to cover the
cost of external expertise and the procurement process. Oxford has learnt that operating the
joint venture takes more time than they originally expected.
Learning for other partnerships
Oxford had clear objectives for the project and threaded these through the process and the
procurement stage. For Oxford, the project was not just about getting housing built and the aim,
clearly set out by elected members, was to support local economic growth and increase the
range of housing options for local people.
Choosing the right partner has been crucial to the success of the project. Oxford had clear aims
Supporting housing investment
13
and set them out in the procurement process, and this has been helpful to both partners.
A joint venture requires resourcing by the council. Oxford have committed a lot of time to the
partnership and other councils considering this approach will need to think about the demands
on officer and member time. The skills and commercial experience needed to set up a
successful joint venture will also be critical to success.
Gateshead Council – Regeneration partnership
The Gateshead Regeneration Partnership between Gateshead Council and Evolution
Gateshead will deliver 2,400 homes over the next 15 years. The council is using its land
assets to secure private finance through this Local Asset Based Vehicle which also allows the
council to achieve wider economic, design and sustainability outcomes.
Gateshead has partnered with Evolution Gateshead (itself a partnership between Home
Housing and Galliford Try) to develop an innovative solution to delivering both private and
affordable housing. This scheme is also being supported by the Homes and Communities
Agency.
The approach developed by the council has been to secure a long-term public private
partnership with access to private financing and commercial expertise. Sites are being ‘bundled’
together in groups of three or so where the sites with a positive value will cross-subsidise those
with a negative value and thereby ensure development across the bundle.
This public private joint venture will also support wider housing and regeneration objectives of
the council and its communities including promoting economic development, increasing local
employment opportunities, raising sustainability standards in residential dwellings and improving
design standards.
The project will deliver:
• the regeneration of 19 key development sites
• around 600 affordable and 1,800 private homes
• local employment and economic opportunities: 25 per cent of employees working on the
project will be from Gateshead and 25 per cent of the value of supply chain opportunities will
go to Gateshead businesses
• homes will be built to Code for Sustainable Homes level 4
• all homes will be built to Homes and Communities Agency space standards.
Learning for other partnerships
• This type of project requires a corporate approach with input from a dedicated range of
professions across the council.
• An engagement plan is a useful tool to keep stakeholders informed of progress with the
project.
• A governance structure is needed that effectively represents the interests of all partners.
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B. Council investment
Ashford Borough Council – building on a track record of housing growth
Ashford Borough Council is setting up a council owned housing company to build new homes
for rent. Ashford has a thriving housing market but there is a gap in the provision of rented
accommodation, and this is an area that the council will target through the new housing
company. Experience of building council homes, PFI projects and a proactive approach
to housing development has given the council a base of commercial and entrepreneurial
experience to build on.
Ashford has a track record of housing growth, including the expansion of Chilmington Green
with 6,000 new homes. Councillors and communities have supported the growth of the area and
there is support for further building.
The council has built new affordable homes on council owned land through Housing Revenue
Account (HRA) borrowing and through the HCA funded local authority new build programme.
New council homes have been well received, and have improved small and difficult sites such
as garage areas.
There is a strong housing market in Ashford for owner occupiers but the market is not keeping
pace with demand for privately rented accommodation or providing alternatives for people
without sufficient income to buy their own homes. The council is seeking to target this gap in
the housing market through a new venture. Building through the HRA is no longer an option as
the council has reached the borrowing cap. A new trading company is the solution for providing
additional housing capacity. The new property company will be council owned and funded
initially by council borrowing.
The company will offer homes to rent and sale, with a mix of rent levels. Providing some
properties for sale and market rent will make the company sustainable and enable the company
to provide the properties at lower rent, creating a housing offer for local people that meets the
gap in the commercial market.
Setting up a council owned company has not been straightforward and the question of state aid
has been particularly complex. This model was preferred by Ashford due to the ability for the
council to maintain control and ensure that the company has appropriate governance. It will also
provide an income stream for the council through the borrowings.
Ashford’s track record in building new houses will underpin the new company. Their experience
of building through the HRA has built up their skills in design and consultation. Becoming a
self-financing housing authority gave them confidence in their accounting ability, as they gained
valuable experience from the process of negotiating the self-financing agreement with the
Treasury.
Learning for other councils
Taking a more entrepreneurial role in housing has enabled council staff to develop new skills
and services in house. The council now has its own architect, for example. The expansion of
the housing stock has had a positive effect on the housing service and opened up new areas of
opportunity.
The trading company allows the council to manage the investment and keep a close control
Supporting housing investment
15
over governance. It has taken time to set up and other councils thinking of a similar approach
will need to think about the time and skills needed to support this level of commercial activity.
Ashford Borough Council prepared a detailed business case as part of their preparation, and
had existing experience of trading companies to draw on.
South Cambridgeshire District Council – Arms Length Housing Company
South Cambridgeshire District Council has registered South Cambridgeshire Limited, a
specialist arms’ length housing company. Long term options for the housing company are under
review, with the potential for commercial activity.
Affordable housing is a significant economic issue in the local area. The shortage of rented
accommodation is a concern for employers, with a real risk that essential workers will be priced
out of the local jobs market by high housing costs.
The council is considering leasing arrangements through the Housing Company to address
the shortage of affordable rented property. Options under consideration include leasing empty
publicly owned empty homes, and redevelopment of council owned bedsits.
Leasing has the advantage of speed, as no building is required. It is also a low risk activity to
the council in terms of risk and investment. The council is exploring different types of tenancy
through Housing Company including longer tenancies. There is demand from professionals
for rented accommodation with security of tenure, for example during a placement with the
University.
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Supporting housing investment
C. Housing as part of a wider growth and
investment agenda
Preston, South Ribble and Lancashire City Deal - Land assets and
infrastructure
The Preston, South Ribble and Lancashire City Deal is one of the second wave of City Deals.
It focuses on the area’s economic assets and opportunities to drive forward local growth, and
over a ten year period the City Deal will generate 17,420 new homes and secure £2.3 billion in
leveraged commercial interest.
New homes will be needed to support the planned increase in jobs and economic activity. The
City Deal area already has many attractive sites allocated for housing development in its Core
Strategy. Investing in infrastructure is critical to delivering large scale housing development on
these dormant sites.
The area has the potential for housing growth and the location and geography of Preston makes
it a well suited for development as a regional hub. Several attractive sites have already been
earmarked for housing development through the core strategy. The challenges have been to
secure the infrastructure and speed up delivery on sites that have so far been dormant, and
where planning permission has not been given due to capacity problems.
The City Deal has enabled the partners to set up an Infrastructure Delivery Fund and
Investment Fund to get schemes moving and provide the catalyst for jobs and housing.
Infrastructure projects include four major new roads, a motorway junction and local community
infrastructure.
Infrastructure developments will be funded by bringing together existing funding streams, along
with investment from the Lancashire Pension Fund, land receipts, New Homes Bonus and the
community infrastructure levy (CIL) from developers.
HCA assets, a legacy of the new town development in the 1970’s, are being brought into the
City Deal. The Partners will keep the receipts for 10 years and a Stewardship Board will guide
the disposal process.
By bringing certainty over long term investment, housing development can start quickly. Preston
Council is working on a masterplan with developers and encouraging them to collaborate. The
aim is to produce a single planning application.
Learning for other partnerships
Joint working between the local authority partners began long before the City Deal. The councils
involved had a clear, simple vision for economic growth and this has been key to agreeing the
City Deal.
There will be complexity in the delivery of the City Deal projects, for example on the planning
masterplan, but underpinning the agreement is a simple vision for developing the area and
using existing assets.
Supporting housing investment
17
D. A quick look at other investment and delivery
models in development
Plymouth City Council
Plymouth City Council is establishing a £50 million fund to build 1,000 new houses a year. The
council will borrow the money and lend it to housing associations and housing cooperatives at
an interest rate of 3 per cent. The council also plans to release 100 acres for development for a
mixture of affordable homes, family homes, executive properties, student accommodation and
extra care housing.
http://www.plymouth.gov.uk/rds
Kent County Council and Kier
Kier’s property arm and Kent County Council have struck a deal to build 150 homes for private
rent across the county. The council will provide the land, Kier and an international pension fund
the finance for a mix of market sale, new, rental and affordable housing.
Cornwall Council
In February 2013 Cornwall Council established a new £62 million fund which will deliver more
than 4,000 new affordable homes over the next 4 years. A central proposition is for the Council
to develop new innovative ways of investing which create value which can be recycled into
future schemes. This includes commissioning new affordable housing from registered providers
and appointing a development partner through the HCA to develop council owned sites where
receipts are recycled.
Eastleigh Borough Council
Eastleigh Borough Council offered a “guaranteed purchase” model for developers who had
sites with existing planning permission but were unsure if they could sell the houses, leading
to stalled development. Eastleigh provided a letter of guarantee that the council would buy the
property if it failed to sell on the open market. Under this arrangement the developer had an
agreed period to sell, and the flats were in fact all sold to private buyers.
Eastleigh is exploring options for developing a set of sites that are too small to attract
commercial interest. Partnership with neighbouring authorities and local housing associations
would allow the council to link up sites and share resources and expertise. A Special Purpose
Vehicle is being established and options for housing delivery are being considered by
councillors. It is likely that any new housing would include affordable housing as well as homes
for market rent, to ensure viability.
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Supporting housing investment
Mansfield District Council
Mansfield District Council is looking at a number of options to promote house building and a
mixed approach to investment. Different options are proposed for different sites, allowing the
council to support a range of different housing products and help local people access affordable
homes and move up to home ownership. Proposals include new build “rent to buy” homes on
land owned by the council, financed by private investors.
Alongside the lease back scheme the Council is also looking at an arms length Housing
Company as vehicle for direct investment.
http://www.local.gov.uk/web/guest/housing/-/journal_content/56/10180/3891735/ARTICLE
Thurrock Council, Essex
Gloriana Thurrock will be a housing company wholly owned by the council and able to build new
homes on council-owned on a site-by-site basis. The financial model assumes that most of the
new homes will be let at 80 per cent of market rent, with the balance sold outright or through
shared equity or similar schemes.
The business case for Gloriana Thurrock can be found on the Council’s website:
http://democracy.thurrock.gov.uk/thurrock/MeetingsCalendar/tabid/70/ctl/ViewMeetingPublic/
mid/397/Meeting/2261/Committee/402/Default.aspx
Sheffield Housing Company
The Sheffield Housing Company was formally established in 2011. It is a partnership
organisation with 50 per cent of its shares owned by Sheffield City Council and 50 per cent
owned by a consortium of Keepmoat Ltd and Great Places Housing Group.
The council invests land in the Company and Keepmoat Great Places invests money to match
the value of the land asset. Profits and risks are shared equally between the partners.
Sheffield Housing Company plans to build 2,300 new homes over a 15 year period.
https://www.sheffield.gov.uk/in-your-area/regeneration/sheffield-housing-company.html
Wakefield Metropolitan District Council and Wakefield & District Housing
Joint Venture Partnership
Wakefield MDC and Wakefield & District Housing (a Registered Provider set up following
transfer of the housing stock in 2005) have agreed to establish a Housing Joint Venture Limited
Liability Partnership to develop private market homes with the purpose of increasing the supply
of new high quality market sale homes and affordable homes. This innovative new partnership
will operate on a commercial basis with a view to profit realisation, in order that the profit
generated from market sales can be re-invested in further improving the local housing supply or
investing in priority regeneration opportunities in the Wakefield district.
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The parties have agreed to invest equal sums into the Partnership that will enable it to acquire
sites from the council, with an initial programme of 200 new homes over the next 5-7 years. It is
currently anticipated that the Partnership will be launched in April 2014.
Brighton and Hove City Council
Brighton and Hove City Council has identified a range of options for delivering affordable
housing. The council is engaging with institutional investors in order to utilise potential private
sector funding opportunities to contribute to the delivery of new affordable homes. The HRA
capital programme includes funding to support building new council homes on vacant garage
sites and £1 million for the procurement of initial feasibility, design and stakeholder engagement,
on potential case studies for additional housing opportunities on HRA land. The Estate
Regeneration Team is carrying out detailed work on an initial pipeline of 40 sites which have the
potential to deliver up to 150 homes
Westminster City Council
Westminster City Council has developed an integrated model which incorporates direct
development with a council owned housing company, leverage of value through planning
obligations and funding through local authority borrowing. Together these initiatives have
helped to speed up the delivery of housing regeneration across the council’s area and add to
housing supply.
In 2010 the council formed a wholly owned charity, Westminster Community Homes (WCH)
to compliment the council’s activities in delivering new and better affordable housing in the
Borough. Westminster has a planning policy that allows a payment into the council’s Affordable
Housing Fund (AHF) if it is impossible or unviable to deliver affordable housing on site. The
council uses the AHF to grant aid charities and registered providers to provide affordable
housing with this fund. Some donations have been provided from the AHF to WCH. In addition
the council transferred land at nil value to the charity plus loaned money at market rates to help
WCH grow its portfolio. Over four years WCH’s portfolio will have grown to 400 homes with a
mix of new build homes and acquisitions.
WCH provides housing for those in priority need in Westminster. More recently WCH has
worked in partnership, acquiring homes in and around the council’s Housing Renewal Areas.
With the benefit of these homes, WCH provides decant opportunities for households affected
by the Housing Renewal Programme. The availability of these decant homes helps to speed
up the process of regeneration by providing local residents with decant opportunities. The
phase 1 Housing Renewal sites will deliver over 500 new and larger affordable homes alongside
a programme of 600 private homes in the City. As the new homes are much larger than the
old homes which are being demolished, the phase 1 programme will help up to half of the
overcrowded households in the City.
Building through the New Homes Bonus
The New Homes Bonus is an un-ring fenced grant from central government. Councils use the
New Homes Bonus for a variety of purposes and these examples show it in use as a funding
option for new housing development.
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Leicestershire County Council
Leicestershire County Council committed all New Homes Bonus received in 2011/12 to support
the building of rural affordable homes, available to rent or for shared ownership schemes in
villages. This is bringing forward stalled housing developments by plugging funding gaps.
South Norfolk Council
South Norfolk Council is using money from the New Homes Bonus to encourage Housing
Associations to build affordable housing in the district. The first development funded under the
scheme is for 8 new homes in Diss built on the site of derelict garages. The initial investment by
the council is expected to attract a further £1 million from other sources.
Islington Council, Keriston project
Islington Council
In 2011, Keriston Housing Association planned to develop a site on Junction Road in Archway,
but did not have enough funding to provide all the homes for social rent. Islington Council
stepped to meet the funding gap by adding £820,000 of its New Homes Bonus money to unlock
the scheme and guarantee that all 14 homes would be for social rent. It’s one of the first deals
of its kind between a local council and a housing association.
The development of one, two, three and four-bedroom properties, including one which has
been especially adapted for a wheelchair user, will help house more than 50 people, including
Islington families currently living in overcrowded conditions.
The properties will also have lower energy bills thanks to solar panels, green roof and argonfilled double glazing.
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3. Issues to consider in
selecting an investment
and delivery model
Vision and leadership
Key questions to ask:
• What type of housing is needed now and in the future? Sources of information could include
the Strategic Housing Market Assessment and Joint Strategic Needs Assessment.
• How does the scheme link with your wider objectives? For example town centre regeneration,
skills development and apprenticeship schemes, supporting an ageing population.
• What is the business case for increasing housing supply? Could increasing housing supply
reduce the pressure on council housing and homelessness services, for example?
• What is the right balance for your authority between refurbishment of existing stock, stock
replacement and new build?
• What are the ambitions and priorities of your residents?
Learning from councils:
Ensuring strong leadership and a clear and effective vision. The crucial role of councillors
in setting a clear vision for investment was highlighted by many of the councils we spoke to.
Housing as part of a wider agenda. The councils in our case studies linked housing to their
wider vision for growth, local employment and sustainable communities.
Getting the language right. A number of councils highlighted their role as mediator or ‘ring
master’ of partnerships including a number of public and private interests. Ensuring effective
communication channels and demystifying the public sector for private investors was identified
as an important role for the local authority.
Level of involvement: risk and return
Key questions to ask:
• What level of involvement does control does the council want to have in house building
projects? This could range from being a strategic partner or funder, to taking a direct role in
building and managing new homes.
• What is the council’s approach to risk? This will underpin the right delivery vehicle and
determine the degree of direct involvement in implementation and investment.
• House building can offer a financial return through sales and rental income. Could increasing
housing supply reduce the pressure on council services, for example in homelessness and
temporary accommodation?
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• What skills and expertise will be needed? A role in delivery and commercial activity will need
• sound financial management as well as the ability to deliver new houses.
Learning from councils:
Greater involvement will give the council more of an opportunity to share the rewards and
influence the way that projects are run and delivered. To support this, councillors and officers
may be required to invest significant amounts of time in housing projects.
The traditional housing management function is moving into a new entrepreneurial and
enabling role. Officers and councillors may need to learn new skills and adopt different ways
of working as part of this process. This can be motivating and open up new opportunities, but it
may also represent an increased workload and demand on limited capacity.
Partnership working does not necessarily equate to the transfer of risk. Retaining some
of the risk with the public sector may be necessary to make projects attractive to private sector
partners and to reduce costs.
Investment in housing can be part of a longer term strategy to create income for councils to
invest in further housing activity, and become more resilient to reductions in grants and central
government funding.
Considering best fit for on-going and planned projects as well as new and unexpected initiatives
is crucial when selecting a partner for a long term venture.
Kirklees - Excellent Homes for Life development
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What source of finance?
Key questions to ask
Some form of financial investment will be required, either by the council or a private partner.
Credit markets are fluid and borrowing rates have changed over time. Which option will be
cheapest in the long run? Will the borrowing be on or off the council’s balance sheet?
Learning from councils
Each option will require different amounts of preparation and research. Entering into a
partnership with an external partner will take time and involve complexity through legal,
procurement and finance issues.
How can the planning system support you to attract investment in housing?
Key questions to ask
• Have you got your local plan in place? Providing certainty to potential investors and the
community through a local plan and land allocations can attract investment locally.
• How can your pre application service support early engagement with potential partners?
Could this take place across areas to attract investment on a larger scale?
Learning from Councils
Using planning tools to package up land and reduce risk up front for potential investors was
highlighted by councils we spoke to as a key tool to attract investment.
An effective pre application service which develops and nurtures long term and mature
relationships with potential investors can help deliver long term investment locally.
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Useful resources and further reading
Online library of housing case studies on the LGA website:
http://www.local.gov.uk/web/guest/housing/-/journal_content/56/10180/3845114/ARTICLE
Meeting Local Housing Demand - A Guide for Elected Members
http://www.local.gov.uk/web/guest/housing/-/journal_content/56/10180/3373353/PUBLICATION
Supporting Housing and Growth: Case Study Guide
http://www.local.gov.uk/web/guest/housing/-/journal_content/56/10180/5544777/ARTICLE
“Let’s get building”
The case for local authority investment in rented homes to help drive economic growth
Published by the National Federation of ALMOs and ARCH, with CWAG, CiH and the LGA
http://www.arch-housing.org.uk/policy-and-practice/arch-publications/lets-get-building.aspx
Homes and Communities Agency
Funding for national housing programmes and information on investment models
http://www.homesandcommunities.co.uk/ourwork/investment-models
LGA Productivity and Commissioning resources including asset management and
economic growth
http://www.local.gov.uk/productivity;jsessionid=26A1BDC51C449B7CE7414AA4FEECDFFE
Acknowledgements
The LGA would like to thank the case study councils for their time and contribution to this report.
Further thanks go to the Homes and Communities Agency for suggesting case studies and
innovative examples of partnership working.
Contact: Hilary Tanner
Email: hilary.tanner@local.gov.uk
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