Local authority housing delivery
In March 2014 David Isaacson and Jonathan Turner commented on Housing Revenue Account reform, exploring whether using a Housing Development Vehicle was an answer to meeting long term housing needs (click here for the March alert). We followed this up with a well-attended and thought provoking seminar in London on Housing Development Vehicles.
Whilst our experience in recent months is that an ever increasing number of local authorities are setting up Housing Development Vehicles, from our engagement with the wider housing market-place we know there are other delivery routes that ought to be considered as part of any options appraisal – either on their own or in conjunction with a Housing Delivery Vehicle.
One such route is to source funding for a housing delivery programme from Pension Fund Investment. This article is a short summary from one such institutional investor on how they could support a delivery programme.
Long Harbour is an alternative asset manager founded in 2009 and based in London. We work on regeneration schemes with the public sector, providing financing for the delivery of units on their land. These aim to be self-financing using the rents generated over the lease term. Fusing extensive project management, real estate development and structured finance expertise, our team delivers local authority-led projects, working in partnership with the public sector and construction contractors resulting in ring-fenced solutions requiring no capital outlay from councils.
Long Harbour offers local authorities tailored finance and project delivery management skills to facilitate the ‘affordable’ rent bracket within social housing developments that either directly fulfill a proportion of the acute and current need, or allow improved management of the movement of housing revenue account tenants into alternative accommodation that can support intermediate rent level, freeing pure social units.
Long Harbour seeks to fund 100% of the project costs in return for guaranteed lease payments from the local authority. The authority owns and operates the units throughout the lease period, so any surplus after the payment of the lease and operating costs is for the benefit of the council. Our return is purely taken through the lease payments and is fixed at financial close – we would have no access to project upside.
We see the lease payments as being secured in three ways:
As a result of the above security we are able to offer highly competitive funding rates, however a condition of our funding is that projects are structured to be truly self-financing such that the authority’s covenant should never be called upon. With this in mind we establish the maximum capital commitment based on a blended rental income of circa 75% of open market rent.
More on Long Harbour is available on their website at www.longharbour.co.uk
We have up to date experience advising on the practical steps involved in setting up a housing development vehicle and advising on structuring and delivering housing projects. We would be happy to meet up with you and share our experiences with you. If you would like to set up a meeting to discuss in more detail, please contact us.