What other specialist delivery vehicles can provide
affordable housing?

Introduction

There are many organisations that can deliver affordable homes. Some are single entities such as Registered Social Landlords. However this section explores some of the alternative vehicles that can be established to deliver affordable housing and wider regeneration schemes. It considers:

Special Purpose Vehicles
Local Housing Companies
Community Land trusts
Private Finance Initiatives

Registered Social Landlords (RSLs), Arms Length Management Organisations (ALMOs) and developers are single entity delivery vehicles. There are also other delivery vehicles to consider that are partnerships, which often involve local authorities, RSLs, developers and ALMOs.

Some private companies and community-led groups are developing innovative schemes that offer intermediate affordable housing, often without grant, though they may require other forms of subsidy, such as land, that can be offered from the local authority.

Best practice Cawthorne Site “ Barnsley Council-releasing publicly owned land

Alternative forms of provision can represent good value, and the Government believes that local authorities should not reject them without carefully considering their merits.

What are the alternatives?

Alternative vehicles are generally partnership arrangements commonly termed Special Purpose Vehicles (SPVs) or Joint Venture Companies (JVCs). In deciding on the most appropriate route a local authority will want to consider the potential of each delivery option in terms of:

Its effectiveness in achieving the desired outcomes.
The resources which may be available through the identified route.
The timescales involved.
Administrative/procedural feasibility.
Political and partner acceptability.

The potential delivery vehicles are:

Special Purpose Vehicles

A number of successful Special Purpose Vehicles have been used around the country to deliver property/asset projects such as Urban Regeneration Companies; they have also been extensively used in Private Finance Initiative deals. In many of these partnerships the local authority commits land to the SPV and establishes a contract with it to protect the council from potential losses or delivery failure. The council does not influence or control the SPV (but agrees and supports its purpose).

The SPV oversees development through contracts with developers and RSLs, it undertakes a strategic role, such as land assembly and recycling of funding. In this way it is not a delivery agent, and does not take development risk, this is taken by the developer/RSL. Usually there is no upfront land payment or equity contribution from the developer or RSL but they guarantee future payments to the SPV.

Local Housing Companies

Local Housing Companies are one of the joint venture models outlined in the Housing Green Paper in July 2007. (ch 3) Web link >>

The Local Housing Company model is a joint venture between the public and private sectors, with local authorities ‘investing’ land in the development process and private developers and other investors providing funding to an equivalent level. The venture is either jointly owned, with a 50:50 split, or 51% by the private sector and 49% by the public. Both organisations will share the risks and benefits (such as uplift in land values) of the development process.

The suggested benefits are that Local Housing Companies will:

Increase the supply of a range of homes, including affordable homes.
Allow local authorities to invest land in housing development to capture a share of increasing land values.
Position local authorities at a stronger point in the centre of the development process.
Provide opportunities for a range of investment and development players to become partners of local authorities.
Create quality schemes with wider consumer choice and tenure options.

Social Housing Grant would not be available to the Local Housing Company and it would take the full risk of selling any homes.

Download the Local Housing Companies approach Web link >>

Community Land Trusts

A Community Land Trust (CLT) is a mechanism for the long term ownership of land by the local community. Land is taken out of the market and separated from its productive use so that the impact of land appreciation is removed, therefore enabling long-term affordable and sustainable local development. The value of public investment, philanthropic gifts, charitable endowments, legacies or development gain is thus captured in perpetuity, underpinning the sustainable development of a defined locality or community. Through CLTs, local residents and businesses, participate in, and take responsibility for planning and delivering redevelopment schemes. One of their main activities is providing affordable housing for local people, although the number of homes provided is as yet small.

Stonesfield Community Trust in Oxfordshire is a charity established 25 years ago that now owns 14 dwellings let at affordable rents to people on a working income. It also owns the village Post Office and the village pre-school. Stonesfield Community Trust are working with Gloucestershire Land for People, an umbrella body for community land trusts in Gloucestershire and Bibury Parish Council to launch a Community Bond to allow Arlington Mill to be brought and owned by the community. The mill building would be converted into workspace studios with living accommodation attached, for craftspeople “living over the shop”, which would bring increased employment and economic activity to the village. The proposed development would also provide a living display of the mill’s history and machinery. Finally, if possible, they are looking to restore the old mill wheel and use it to generate electricity. The Community Bond would be needed to pay the cost of acquiring the building.

For more information try the CLT website:Web link >>

Private Finance Initiative (PFI).

The Housing Private Finance Initiative is intended to be an alternative to direct procurement, stock transfer or Social Housing Grant for providing investment in social housing. It can be used on stock both inside and outside of the Housing Revenue Account (HRA). The provision of additional affordable housing is through the non-HRA PFI scheme. It is intended for large schemes and primarily for major improvement or regeneration projects.

A good PFI scheme should achieve a transfer from the public sector of risks that can be better dealt with by the private sector, whilst maintaining good value for money. Projects which benefit most from this method of procurement tend to have a capital intensive element and a service provision element, both of which are paid for by the local authority across a long term contract (typically 25-30 years). These payments are performance related and PFI credits are available from central government to support the capital element of projects.

The development of a PFI scheme is complex and time consuming, but has been successfully achieved. For more information, try Department for Communities and Local Government’s website: Web link >>

See West Wiltshire District Council Best Practice

What are the major ways of providing affordable housing?
What other ways are there of funding affordable housing?
What is double subsidy?
Who provides affordable housing?
Can local authorities still provide affordable housing directly?
What other specialist delivery vehicles can provide affordable housing?