By David Cowans, Chief Executive of Places for
An increasing number of councils are thinking creatively about
how they can use the value locked up in the assets they own to
deliver a much needed revenue return at the same time as delivering
new homes for their communities.
But rather than just focusing on the short-term benefits of
selling assets, we are starting to see local authorities shifting
towards a more strategic approach that maximises capital assets by
turning them into sources of funding for long-term revenue.
That's one of the reasons why we are seeing a rapid growth of
Local Asset Backed Vehicles (LABVs) which help pool finance, land,
planning powers and expertise, ensuring an acceptable balance of
risk and return for all partners and the ability to plan and
deliver projects more strategically.
We see huge potential to evolve and develop new partnership
models like these. They could have a major impact on economic
growth and generate new revenue streams. This is why we recently
partnered with SOLACE (Society of Local Authority Chief Executives)
to host a thought-leadership event that discussed how local
authorities can use their assets to generate long-term revenue
streams, including the challenges, opportunities and best practice.
Attended by 28 local authority chief executives and directors, the
event explored potential funding, delivery and management
That event discussed the benefits of partnering with
organisations like ours which have large asset bases and operate
not for dividend business models geared towards social good. This
can help local councils to fulfil housing aspirations which are not
being met by purely commercial developers.
Aberdeen City Council is a case in point. Left with an acute
affordable housing shortage after the oil and gas boom, it has now
committed to build 2,030 homes by 2017. To meet its objectives, it
set up a 50/50 limited liability partnership with Places for
People. The partnership will develop council-owned sites with the
local authority receiving a 50% share of the development profit, in
addition to payment for the land value.
The agreement will see an initial 2,000 homes built in Aberdeen of
which 1,000 homes are affordable.
When partnering with us Aberdeen City Council leader, Councillor
Jenny Laing, said: "The widening gap between supply and demand for
affordable housing, not just in Aberdeen but many local
authorities, has been a major social challenge in the UK for more
than a decade.
"This is due to the heavy reliance on the private sector
incorporating 25% affordable housing within their developments,
which is not always delivered on site.
"However, this public-private partnership approach will now
allow the council to provide thousands of new, purpose-built homes
for Aberdeen residents and end this barrier to the continued
economic growth in the region."
Wider collaborations involving pension funds can also be
effective. For instance, the Manchester
Housing Investment fund - a joint partnership between
Manchester City Council, Greater Manchester Pension Fund (GMPF) and
the Homes and Communities Agency - was set up to boost
housebuilding on five separate sites across the city.
Places for People entered into a 20-year operating lease with
the new partnership to manage and maintain the new homes. This
arrangement offers a number of benefits as it not only reduces
operational risk, but offers a guaranteed annual income and future
Back in Scotland Falkirk Council Pension
Fund has awarded fund manager Hearthstone Investments
£30 million to invest in social and affordable housing in
For local authorities there are still many challenges ahead, but
by working together, aligning our objectives and creating a unified
vision, we can make the most of future opportunities and deliver
the housing that is so desperately needed across the UK. By
developing strategic partnerships and forming joint ventures and
other structures with complementary organisations, there is the
potential to balance risk and share resources, skills and
expertise. The benefits of these collaborations should not be
underestimated, so let's find a way to make this work.
This blog was first published on
Solace on 05 July 2016.
06 July 2016