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Social Housing Speed Read – Collaboration between local authorities and housing associations: the way forward?

In this week's Speed Read, we discuss the growing trend of local authorities and housing associations working collaboratively to build social housing.

Increase in joint ventures

Housing associations and local authorities co-operating with each other is not a new development, but rather a movement which has grown in popularity and scale over the last few years.

Both housing associations and local authorities share the same aim: to develop and build good quality, cost-efficient homes – and more of them. Government statistics show that in 2017/18, housing associations completed 27,410 new homes, whilst local authorities only built 1,730. This represents a tiny proportion of the 163,250 houses completed in the last financial year.

This is no doubt in part due to the restrictions placed on local authorities borrowing against their Housing Revenue Account, which were introduced in April 2012. Local authorities are often still able to provide some initial funding, in addition to owning the land the proposed development will be built upon. However, the additional financing, resources and expertise provided by housing associations can aid the progression of social housing developments.

Further still, commercial housebuilders seem keen to get involved with this method of collaboration. In June 2018 it was announced that Homes England, housing association Cross Keys Homes and housebuilder Kier Living had entered into a joint venture to create 5,400 new houses by 2028, and approximately 1,620 of these are to be affordable homes.

Splitting the risk and reward

When parties enter into a public-private joint venture, they enter into a new vehicle with a commitment to sharing the risk and reward, although there is room for negotiation regarding the size of the stake of each party.

One recent example of this is a joint venture in Greater Manchester, which is being entered into by ten housing associations alongside the Greater Manchester Combined Authority (GMCA). Each association will provide £3m of funding and own 80% of the venture, whilst the GMCA will invest £2m. It is hoped that the wealth of expertise will result in high quality developments which are delivered in a timely manner.

Similarly, North Essex Garden Communities (NEGC), comprised of four Essex councils, recently confirmed they were seeking another partner to deliver 43,000 across the next 50 years. The managing director, Richard Bayley, confirmed that they were not limiting the remit of their search to large housebuilders, but would also consider housing associations whom shared their ambition to deliver three garden communities.

Moving forward

As the industry are well aware, the Budget 2018 will likely include a formal commitment to scrapping the borrowing cap placed on councils in order to fund new homes. Writing for Inside Housing, Bjorn Howard, the chief executive of Aster Group, suggested that Philip Hammond should ‘implement a framework that will enable councils to benefit from these partnerships in tandem with the end of the borrowing cap’. This echoes the propositions put forward by Building Bridges, a paper published in 2017 by the Chartered Institute of Housing, which called for Local Housing Affordability Frameworks to allow ‘associations to engage more effectively with authorities on the affordability of lettings and on allocations’.

It is clear that joint ventures between local authorities, housing associations and even housebuilders have the potential to produce very positive results. We await to find out if there will be any governmental incentive or guidance to enter into such agreements, or if it will be for individual authorities and associations to realise that, in some cases, this may be a mutually beneficial arrangement for both parties, which delivers the best result for the community.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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