Strategic partnerships can help ease the housing shortage

17/11/2017

Richard Stirk

Richard Stirk

Partner

Housing associations, along with the rest of the housing sector – are looking to next week’s Chancellor’s Budget for bold new initiatives to address the UK’s chronic housing shortage.

Philip Hammond is being urged by his Communities Secretary to ‘borrow big’ for new infrastructure and Government-built homes; by leading housing associations to ‘relax’ planning laws; and by the LGA to allow councils to retain 100 per cent of ‘Right to Buy’ sales receipts and have more ‘freedom’ to borrow to invest and to set rents, as well as the flexibility to determine how they implement RTB locally.

Other developments include the added support of the Prime Minister who has pledged to take ‘personal charge’ of the Government’s housing strategy, and the ONS decision to return housing associations to the private sector - that could free them to work with their local authority partners and others to build the homes the country needs.

But with squeezed Treasury resources and a hung Parliament, the Chancellor probably isn’t minded to increase the UK’s debt, nor rile homeowners opposed to new housing developments on the green belt.

In recent months, the Chancellor has agreed to an extra £10 billion for Help to Buy, another £2 billion for social housing, the removal of social housing from the LHA cap, and limiting rent rises for tenants in the social housing and supported sector to inflation (‘CPI’) plus one percent for five years from 2020.

Some housing associations are reporting that the HCA are currently offering unprecedented (at least in the last decade or so) rates of grant for development (at least in the run up to Christmas this year) to try to further inject life into the sector.

All these are positive steps for the sector and we may see other measures such as slashing stamp duty for first time buyers - or more training for construction workers and bricklayers - to ease a skills shortage in the building industry.

Much of the talk, therefore, at a recent development conference by the National Housing Federation (‘NHF’) was about the use of strategic partnerships to aid housing delivery.

NHF Chief Executive David Orr spoke about the need, in light of the government's apparent commitment to "fix the broken housing market" for housing associations to now step up and deliver the “staggering” amount of homes that are needed each year to not just cover the housing gap, but to shrink the gap between the number of new households wanting homes each year and the actual number of new homes built.

The consensus seemed to be that while housing associations remain integral to the solution, they can’t be expected to act alone using traditional approaches (such as their own developments on local authority land, Section 106 Agreements or land they have in the ‘bank’ or acquired on stock transfer).

Several partnerships attending the conference expanded on their successful projects. They included commercial joint ventures aimed at creating large-scale ‘place-making’ regeneration developments that are residential-led; looser partnering and collaboration arrangements; and local authority and housing association joint ventures.

The proposed outcomes of each of these types of partnerships are slightly different – including maximising profit, community regeneration and unlocking otherwise unviable sites. But there were some clear similarities between them: 

  • trust between the parties is essential to ensure continued success
  • shared goals are not essential, but all require clear outcomes for all parties
  • each party will bring their own strengths to the arrangement
  • there will always be a degree of risk.

There are challenges for associations in finding both the best commercial arrangements and the right partner(s), while also ensuring they have suitably robust processes in place to give their boards a sufficient level of comfort with the risks involved.

In creating new housing projects, options include linking with private developers, local authorities or trying to get access to other public land via (say) the HCA or NHS. Directors taking these schemes to board also need to bear in mind that commitment on paper to the principle of ramping up production or entering a joint venture or other strategic partnership is one thing, but signing on the dotted line and putting money on the table is another.

Bevan Brittan has advised housing associations, developers and local authorities on joint ventures, partnering and other arrangements for many years on issues including contracts, finding suitable partners and managing risk. Some recent examples where we have advised are:

  • Brighton & Hove City Council upon their c.£170m corporate joint venture with Hyde Housing Group to deliver 1,000 new homes, being one of the first such partnerships of its kind and scale in the country, and expected to be a model followed by others;  
  • Places for People and Urban Splash on their corporate joint venture with Birmingham City Council; and
  • Canal & River Trust for the regeneration of the Icknield Port Loop development to deliver over 1,150 homes, other community facilities and infrastructure.

We advise clients who are experienced in joint ventures as well as new entrants.

What you can be sure of is that you will get clear, practical, commercial advice giving you the confidence to present a balanced risk aware opportunity to your board. If you would like to discuss joint ventures, partnering or other property or development work contact Richard Stirk.

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