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Inside Housing's Top Non-grant Funded Developments 2015: Characteristics Of Privately-financed Housi
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The cessation of Government funding for affordable housing has proved challenging, but partnerships and cross-subsidisation are helping fill the gaps.
If there is a term for non grant-funded affordable home development, it would be partnerships. This is because it takes a team, a set of partners, to provide subsidised housing without subsidies from the Government.
The executive editor of Inside Housing, Nick Duxbury, explains that this category of the magazine’s annual review of exemplary building is all about being resourceful without funding that was slashed by the previous coalition regime (grant funding was cut by 60%). The solution for social landlords and housing associations was to raise funds in other ways, quite often by selling some homes for market sale and reinvesting profits into affordable homes.
To some degree, this is similar to building in the fully private sector. For example, strategic land developers take some risk on buying UK land that may or may not achieve planning authority approval for development. With those approvals, a very profitable development might result. And those developments need to provide for some social good in the form of infrastructure funding.
Social developers demonstrate their own strategic development skills through the named honorees of Inside Housing’s 2015 list:
Windsor Avenue - The partners in this project in Peterborough were a private developer (Westleigh Homes), which built 22 of the homes on the site, and L&H Homes, a housing association that developed 85 of the homes. Intermediate rent is charged on 33 homes, 13 are in shared ownership agreements, 12 deferred equity and 27 are at market rent. Cost of the development was £10 million, supplemented by a £250 million bond and additional £230,000 in a capital fund grant from Peterborough City Council.
Chyvelah Close - Situated in Chyvelah Close in the village of Threemilestone, Cornwall, the scheme of 21 homes were built at a cost of £770,500. The scheme was made affordable by 14 of the homes sold at open market rates, four at affordable rent and three in shared ownership. Special attention was made in construction by use of surface materials that protect the roots of a mature hedgerow, which creates a privacy screen from neighboring properties.
Fullbourn Phase 2b - At a cost of £11 million, the 79 homes of this development were funded by Accent Group, a 19,000-home housing association that generates receipts through market sale and shared ownership properties. Fully 46 of these homes were sold at market prices and another 13 in shared ownership, with 19 occupied in social rent and one in a Right to Buy reprovision.
Lygon Court and Post Office - The Merlin Housing Society built this 3-home development in Cromhall, rural South Gloucestershire, for £630,000. It preserves a post office and village shop, considered a community amenity. This compelled South Gloucestershire Council to provide £100,000 of funding and essentially donate the land to the society. The three homes bring the village’s social housing properties up to 21, still a small percentage of the village where the number of households is 279.
Newbury Racecourse - On a much larger scale, there will be 1,500 new homes built here in ten years, of which 421 are already built, 87 of which are social rent and 40 shared ownership. The site is at a major sporting venue (Newbury Racecourse) and the cost for this first phase of homes is £324 million.
Railton Place - Earning top honours in the category, the 48 homes in this scheme were evenly split between homes for social rent and those in shared ownership. This is quite an achievement in one of the most expensive postcodes (Weybridge, Surrey) in the UK. It was designed by Paragon Housing in partnership with Brooklands Museum Trust and English Heritage. The property includes a unique feature: the restored Competitors Tunnel, where race car drivers would enter the historic Brooklands racetrack, adjacent to the property.
Land fund partners can work with housing associations or completely within the market rate sector. Each of these developments indicates how the hybrid of various financial structures - affordable rental, shared ownership, market rents and market ownership - are possible.
Investors need to consider all options and use of an independent financial advisor can help facilitate that. The real property investment sector is particularly interesting both because of the opportunities for asset growth, and also because of the unlimited creativity and variety that housing, sites and financing allow.
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