Home advantage: How local authorities can tackle new affordable housing

Local authorities remain committed to driving the delivery of more social and affordable housing. The only question is how they can achieve this at a time when resources are stretched, demand for social is rising, and pressing matters such as LGR, are taking precedence?

Despite these pressures, with Andy Burnham as Prime Minister and Angela Rayner back as Housing Secretary, conversations about social and affordable housing (and the role of local authorities in respect of the same) have taken on a fresh lease of life. Local authorities want to do more to meet housing targets, but what can be done to get more development activity underway? 

What could ‘doing more’ look like?

One way for a local authority to get further ‘behind’ social/affordable housing delivery is to lend money to a housing association, whether at commercial rates or at below market rates (subject to subsidy control rules). This won’t be viable for many, but it does remain an option for some. We have seen the benefits of this first hand in some of the recent transactions we have advised on. 

By lending money to a housing association, local authorities can boost development activity significantly.  

Is leveraging land the key?

If a local authority doesn’t have access to capital for social/affordable housing development, they can consider leveraging land assets more creatively, with some already doing this.  

Retaining some ownership of land can bring long-term gains rather than one off capital receipts from an asset sale. For example, local authorities can contribute land into development vehicles, agree deferred land payments, undertake land swaps, or otherwise look to retain a stake in developments giving them a financial interest. 

Alternatively, local authorities can choose to enter into a joint venture (JV) with a housing association. A joint venture arrangement can enable a local authority (or indeed a combined authority) to benefit from a local housing association’s development and management expertise and infrastructure. Risks and returns are also typically shared, enabling social/affordable housing delivery, without necessarily requiring up-front public sector expenditure. 

Local authorities can also opt to leverage land assets by the creation of local development companies which can drive development activity. There are more success stories emerging here, with development arms completing multi-tenure housing regeneration projects, often focused on former local authority-owned sites.

Tapping into ‘Manchesterism’

Tapping into ‘Manchesterism’ could inspire more local authorities to explore not just JVs but also the potential for public-private partnerships to accelerate social and affordable housing delivery at scale. Public-private partnerships have been successful in Manchester, and similar models could be rolled out in other towns and cities.

The main focus of a public-private partnership is generating financial certainty for investors and thus facilitating targeted investment. What this achieves is confidence within a community and ‘placemaking’, ensuring stable, sustainable communities.

Local authorities and combined authorities should be seen as strategic landowners and ‘place makers’ for the long term. They can continue to play a role in driving housing development activity and delivering more social and affordable homes for generations to come. 

Key takeaways: 

• Local authorities can unlock new opportunities for housing development by making use of alternative funding mechanisms and leveraging land assets,
• Local authorities can become ‘placemakers’ for the long term by using their land assets strategically.
• Alternative options such as JVs, leveraging land assets, and lending money to housing associations are all options to explore for local authorities.

For more information

For further information or advice, please get in touch.