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.