New housing investment model signed in Manchester

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Legal, Local Government

A deal that will see a council and pension fund come together to deliver new homes for rent and sale – thought to be the first initiative of its kind in the country – has been signed this week.

Manchester City Council, in partnership with the Greater Manchester Pension Fund (GMPF) and the Homes and Communities Agency (HCA), has signed a memorandum of understanding that will bring together a completely new way of funding home building in the city.

Under the deal the council is providing land and the pension fund the finance to build the homes. Both will then jointly procure a contractor to build the homes and a company to manage the rented properties.

The scheme was highlighted in both the Government’s Housing Strategy, published nearly a year ago, and also in Adrian Montague’s review of the barriers to institutional investment in housing.

Initially the scheme will be applied to five sites – one of which is owned by the Homes and Communities Agency (HCA) – across the city, and will see 240 new homes built for sale or rent, with the local authority taking an equity share in the homes for sale making them more affordable.

Of the 240 homes, 173 will be for rent with the tenure split i.e. market/affordable not yet decided.

It is hoped that buyers could get a home for 20 per cent less than the normal market level.

The chosen contractor will design and build the homes but without the risk associated with a normal development, as their overheads are minimised and they have no sales risk.

The revenue return is generated through market rentals and the capital return through house sales.

Cllr Jim Battle, deputy leader of Manchester City Council, said: “The economic climate has severely slowed home building in recent years and levels of development are not keeping up with the city’s demand. This new innovative model tackles these issues, pushing forward development opportunities while ensuring a supply of new attractive homes are available to residents at affordable prices.”

Cllr Kieran Quinn, chair of Greater Manchester Pension Fund, said:  I’m proud that we are able to use the pension fund to invest in the building of much needed homes in Greater Manchester whilst securing a good return to fund the pensions of the workforce.”

Deborah McLaughlin, north west executive director at the HCA, said: “This is great news for Manchester. In the current economic climate, innovative funding models will play a fundamental role in supporting the delivery of much needed affordable homes for local people.

“At the HCA our focus is to employ new and innovative ways of working to use public land assets to more quickly deliver homes and economic growth. This new concept marks a major milestone for house building in Manchester and has the potential to attract major investment to the city.”