We've partnered with London First to explore the delivery models available to local authorities to form partnerships with the private sector, to deliver much needed new housing in London. Sandeep Singh Bhakar explains why we are proud to be leading the conversation on the use of housing partnerships.

The government’s new standard method of calculating housing need puts London’s annual housebuilding requirement at more than 93,000 homes per annum. Yet, there are a complicated set of factors that make meeting that housing target in London challenging.

In our new report, co-authored with London First, we look at housing partnerships with the private sector as possible solutions to providing the homes London needs.

Read our full report: Housing partnerships - delivering the homes that London needs  [ 5036 kb ]

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Housing partnerships are back on the agenda

Sir Oliver Letwin stated in his 2018 review that the ‘absorption rate’ - the number of homes that can be sold into the market in a particular period - was being limited by the homogeneity of the homes that were being developed.

In his report, Sir Letwin recommended that, to increase housing supply, greater diversity in the type of housing being built was needed, including build-to-rent, shared ownership and more social and affordable options.

In recent years, housing has, once again, risen up the political agenda. The government is committed to seeing 300,000 homes built a year by the mid-2020s and recently announced a new £11.5-billion affordable housing programme to run 2021 to 2026.

This is an increase of £2.5 billion on the last programme (£9 billion from 2016 to 2021), but London’s allocation of funding in the new programme has reduced from £4.8 billion to £4 billion, seeing its share of the total pot decreasing from roughly 50% to 35%.

The capital’s new funding falls far short of the £4.9 billion a year that the Greater London Authority estimated was required to deliver the affordable homes that Londoners need in the 2022-2032 Affordable Housing Funding Requirement for London report.

Four different types of housing partnerships

Set against this background, forming partnerships with the private sector could be the key to unlocking the housing aspirations of the boroughs. By partnering with the private sector, local authorities can leverage critical investment, skills, resource and experience.

However, partnerships require flexibility and compromise, commitment and goodwill, and a shared understanding about priorities and outcomes. There is no one-size-fits-all approach, but there is an ever-growing awareness of the types of structures that work well, and the key issues that must be addressed to deliver a successful partnership.

Let's look at the four different types of partnerships that are covered in detail in the report:

1 Joint venture housing partnerships

A traditional joint venture, as described in our report, is one in which a local authority seeks a partner to incorporate a new joint venture company to deliver a new development, with both parties equally sharing the risks and rewards that are generated.

In such a partnership the aims and objectives align. This offers an opportunity for local authorities to secure a long-term return on land, while retaining control of the overall development.

2 Development-led housing partnerships

A development-led agreement will see a local authority enter into an agreement with a partner, typically a developer, to purchase land in return for a cash receipt.

The agreement will stipulate that the partner must develop the site within an agreed timeframe and, at practical completion, the local authority may take a share of any overage or super profits over and above that of the developer.

3 Investor-led housing partnerships

Under this scenario, a long-term investor will forward-fund a development and take a share of the development risk, with the local authority taking on the long-term operating risk for the completed development.

In this instance, while there is a sharing of risk, there is flexibility to vary this risk share during both development and operation.

There are different investor-led transaction structures established, but to-date, the most prominent structure has been an income strip.

4 Strategic housing partnerships

The final model we consider is one in which local authorities may take a long-term perspective and secure a strategic development partner through a single procurement. In this instance, both partners may put forward development and investment opportunities.

The partner, which may be any type of developer or investor, will consider the viability of the opportunity before agreeing with the local authority to undertake the development.

Housing partnerships aren't one-size-fits-all

While these and other partnership models are available, selecting a particular model may not automatically guarantee the desired outcome. Your preferred delivery model must be moulded around the requirement of the partners and the parameters of the individual scheme.

Partnerships are not one-size-fits-all. Their frameworks may not suit all local authorities and choosing the right framework will be pivotal to their success. However, housing partnerships represent the opportunity to maximise resources, secure long-term delivery and effect a positive change for those who take the decision to enter them.

Rebuilding London

Housing partnerships are a complementary tool for local authorities to that offered by the direct-delivery model and, crucially, one that lends itself to scale and ambition. Partnerships have the potential to unlock significant developments, bringing wider economic and social benefits to an area, in addition to much-needed new homes.

As London and the rest of the country starts to focus on rebuilding the economy, housing partnerships could be the solution.

For support and guidance with housing partnerships, get in touch.

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