Planning requirements for affordable housing
Robertson Homes’ is developing and marketing 3-, 4- and 5-bedroom detached homes at Fair Acres in Dunbar. The development includes a Section 75 Planning Agreement with East Lothian Council (ELC) to provide affordable homes.
Robertson Capital Projects (RCP), working in partnership with Ross Developments and Renewables (RDR) worked with ELC to create an innovative delivery and funding mechanism, that would allow the homes to be delivered using the Council's long term affordable rental income to underpin a private sector funding solution.
Private funding allows development
50 of the homes are being provided for rent at mid-market rates, funded using private sector investment, while 10 would be for social rent, funded using the council’s capital budget.
In order to procure the project, RCP and RDR formed a Special Purpose Vehicle (SPV) to firstly acquire the land then enter into a £6.5m design with build contract with Robertson Partnership Homes to construct the homes. RCP is providing construction phase finance, with the SPV undertaking a range of project management services to ensure successful delivery of the new homes.
The SPV also introduced an exit investor – The Co-operative Pension Fund (Co-op) – which agreed to acquire and hold the 50 mid-market affordable homes under a 40-year lease as a long-term investment following practical completion.
ELC will charge the Co-op for letting, marketing, management and maintenance costs over the 40-year lease, with all 50 properties reverting to Council ownership at the end of the lease period.
Innovative funding methodology is a win-win situation
This methodology means that:
- the private sector takes responsibility for acquiring land, procurement, programming and funding;
- the Co-op holds the properties as a long-term investment;
- the council receives revenue from the Co-op for the right to market, let, manage and maintain the houses;
- the local authority lets to qualifying residents at agreed affordable rents;
- local residents get new, high-quality homes, at affordable rates in a location with good schools, public transport links, amenities and facilities;
- there is a reduced reliance on grant funding to build new affordable homes;
- the Council can accelerate its programme for much needed projects where no alternative funding solution exists;
- and the council acquires the homes at the end of the lease for a nominal fee resulting in ownership of a significant asset with no corresponding lease commitment.
Affordable homes without public subsidy
This innovative model will generate 50 additional affordable homes for residents of East Lothian in addition to the homes identified in the Strategic Housing Investment Plan (SHIP) for East Lothian without any subsidy or funding from the public sector.
