A blueprint for a new public-private partnership model designed to stimulate a fresh generation of council homes built by private developers will be published today in a bid to tackle the acute shortage of truly affordable homes.
The 30-page Public Rental Homes – Fresh Perspectives report has been drawn up by industry figures Peter Bill and Jackie Sadek for the independent Housing and Finance Institute and think tank Localis and aims to “flip” the traditional approach to negotiations on affordable provision.
Currently, councils negotiate with developers to determine the percentage of affordable homes a scheme can provide based on the total private home sales. “Affordable” rents can vary from 50% of local market rents up to 90%, with subsidised sales included in the percentages.
The report’s public rental homes model flips the viability question to ask how many half-market rent homes can be built from the set number of homes allowed on the site.
Developers would assume 100% of the risk and a 20% margin on both the PRH homes as well as their own private homes. Councils would act as a prime promoter, perhaps supplier of the land, giver of permissions and recipient of the new freehold homes. If negotiations on the number of PRH units drives the land value into the red, then that red figure would form the basis for negotiations on land input figures, government loans or grants.
According to the report, this shift could provide a solution to the challenge that just 6,000 of the 52,000 new homes listed as “affordable” in 2020/21 by local councils are truly affordable for 1.2m households on waiting lists.
There are 6.2m households in the lowest household income quintile that cannot afford to pay above what is defined as “social rent” – circa 50% of the free market rent in the locality.
Under the PRH model, local authorities would have the opportunity to develop plans to slash council waiting lists and galvanise local housebuilding by partnering with private developers. It calls for a shift from “top-down targets” to “bottom-up” plans, with local authorities responsible for identifying sites that might meet PRH criteria and initiating discussions with the private sector.
Bill, a surveyor-turned-journalist who edited EG for 11 years until 2009, said: “Families on council waiting lists are squeezed to the bottom of the pile by financial pressures on councils and developers trying to agree the percentage of affordable homes.
“A new perspective is needed to ensure the needs of these families become the top priority on sites where PRH is viable.
“The PRH approach addresses that need and provides fresh impetus to councils looking to house those on their waiting list and to developers looking for better, simpler, ways to build. Site-by-site viability is the key. Developers take 100% of the risk and therefore deserve a 20% profit margin.”
Co-author Sadek, who has decades of experience in urban regeneration and is a regular EG columnist, said: “We need to get on and deliver. Stop arguing about the whys and the wherefores. Delivery only happens on the ground, not from Whitehall.
“Let’s try to crack this massive crisis, not top-down, but bottom-up. Every council should be supported in drawing up a 10-year plan to deliver public rental homes.”
The approach is likely to resonate with those councils struggling to meet their five-year housing supply target via the conventional routes and has met with support from the Association of Chief Estates Surveyors, which has been consulted on the model.
The privately funded HFI was set up by the Cameron-Clegg coalition in response to the 2015 Elphicke-House report on the role local authorities can play in supporting housing supply. The report’s main finding was that “housing approaches should more closely reflect the wants and needs of the local population”.
Sir Steve Bullock, chair of the HFI board, said the report had been commissioned to offer a way forward in addressing the shortage of affordable homes that could attract cross-party support.
“Doing this at pace will need a different mindset at all levels of government and the HFI will press for that and work with councils, government and developers in the coming weeks to make this happen,” he said.
Localis is an independent think tank dedicated to issues related to politics, public service reform and localism.
The full report can be downloaded here.
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