The Housing Challenge
The problem of affordable housing affects hundreds of thousands of people, as inadequate housing stock and lack of investment has become prevalent across the UK. Unfortunately, this problem is expected to worsen as urban population continues to grow.
All councils are experiencing increasing numbers of households on the housing waiting list and some of the highest numbers of households in emergency temporary accommodation. The cost of maintaining households in emergency accommodation is a major financial pressure to all councils with homelessness up year on year. Limited supply of good quality permanent and affordable private rented accommodation is contributing to the housing crisis in the UK.
Delivering a long-term solution
Our initiative is to offer councils the opportunity to secure affordable housing through entering an overriding lease structure to enable the delivery of a significant amount of new affordable housing whilst generating a revenue income by discounting the funding model from LHA rates.
The proposal provides long-term certainty and security for households on housing waiting lists and assists the reduction in reliance on costly, insecure, nightly-let accommodation plus, as studies have shown, will have a positive impact on the life outcomes of families. In addition, the homes will generate surplus revenues, providing a long-term income stream, coming from the balance of properties being let at market rent levels, and mitigate the council’s exposure to local rents and nightly rates rising faster than inflation.
The proposal is for the council to forward fund the development by entering a funding arrangement with an Institutional Investor under which, in return for the council covenanting to pay for a 50-year term lease once the property is developed and completed, the Institutional Investor will take development and (most) funding risk.
The proposed structure does not require any capital outlay from the Authority, with all funding (including all costs, fees and SDLT exposure) being provided by the Institutional Investor.
The Housing Benefits
Better Quality Homes - ready access to better quality, energy-efficient homes managed by a considerate landlord on secure AST at affordable rent levels. Improved supply of decent housing is proven to strengthen local communities through improvements in mental and physical outcomes and result in enhanced educational attainment by children.
Financial Resilience - whilst it is an objective of financial structuring to make any property acquisition cash flow neutral from a project level revenue perspective, the real financial benefit is derived from a reduction in the council's existing temporary accommodation cost and the provision of protection against the council's exposure to local rents and nightly rates rising faster than inflation.