Borough Launches First Ever Privately Funded Social Housing

By SamF Last edited 70 months ago
Borough Launches First Ever Privately Funded Social Housing

Barking and Dagenham has become the first London borough to secure private financing for the development of social housing.

The freehold of the land will remain the property of the borough while private property developers Long Harbour and contractors Laing O’Rourke have put up the capital for the creation of nearly 500 units. All of these dwellings will be available at ‘affordable’ rents, which in this case will be set between 50-80% of market value.  The rents from the housing will then be collected by the private investors for the duration of the lease — as yet unknown — after which point the buildings will revert to the local authority ownership. It is, essentially tantamount to a local authority borrowing money from a private company to provide public services at an assumed rate of interest, which will be spread out over the length of the lease.

This can be seen as a truly laudable effort by Barking and Dagenham council to provide social housing in the face of a staggering lack of central government funding. Concerns must be raised, however, as to how this project differs from the Private Finance Initiative (PFI), which led to the building of many excessively low-budget hospitals within the National Health Service (NHS). The National Audit Office (NAO) has questioned whether such schemes provide good value for public money in the long term as opposed to non-profit publically funded projects.

Providing social housing is vital but unless it is delivered at a high quality it becomes counter-productive. Measures must be taken to ensure that the private contractors deliver housing of a sufficient standard, and that corners are not cut to boost what is in essence a permanently capped profit margin.

Image by Max Nathan in the Londonist Flickr pool.

Last Updated 29 February 2012

IanVisits

It's technically known as Build-Operate-Transfer (BOT) and is very different in scope and intent to PFI deals. It's used in a lot of countries for everything from housing to national mobile phone networks.

HoosierSands

" It is, essentially tantamount to a local authority borrowing money from a
private company to provide public services at an assumed rate of
interest, which will be spread out over the length of the lease."

I don't think so. The council is lending the land gratis for 60 years. It will also be guaranteeing the rent via Housing Benefit I assume.

As for the "first privately funded social housing"-have we forgotten George Peabody?

Sam Frankl

Of course I haven't forgotten George Peabody but the council didn't own the freehold in those cases so it's not the same thing. The rate of interest i mention is the profit margin that the income of rent will produce for the developers, i didn't mean actual interest, sorry if that was unclear. 

ecudiélle

Cannot be called social housing if it's affordable rent, one of the least affordable forms of tenure in the so called "affordable" housing market.

ecudiélle

I know they are saying 50-80 but not giving the ratio between the two. And rents are soaring in the area so by the time the scheme is complete 50% market rent will be, what? 300pw on a 1bed?
http://www.telegraph.co.uk/fin...