Wednesday, 22 October 2014

Council signs landmark deal with pension fund

A council has signed the first deal of its kind to build homes through an innovative agreement with a pension fund.

Manchester Council announced yesterday it had signed a memorandum of understanding with the Greater Manchester Pension Fund and the Homes and Communities Agency for a new way of funding house building.

Under the model, which will initially be used to build 240 homes, the council will put in land while the pension fund will provide finance for the development. The Homes and Communities Agency is also putting in one site. This will reduce for risk for the developer, which is yet to be appointed, allowing homes to be let or sold at below market rate.

The council hopes the homes will be sold for 20 per cent less than market rate. The council will take an equity stake in the homes, and the partnership will generate revenue to reinvest from rents and sales.

The council will appoint a property manager to manage the rented properties.

Jim Battle, deputy Leader of Manchester Council, said: ‘Manchester’s growing population and forecasted economic growth will mean we will continue to need more homes in the near future.

‘The economic climate has severely slowed home building in recent years and levels of development are not keeping up with the city’s demand.

‘This new innovative model tackles these issues, pushing forward development opportunities while ensuring a supply of new attractive homes are available to residents at affordable prices.’

Deborah McLaughlin, north west executive director at the HCA, said: ‘In the current economic climate, innovative funding models will play a fundamental role in supporting the delivery of much needed affordable homes for local people.’

Readers' comments (6)

  • Great to see an attempt at a new finance model but I would have thought that one area which had a surfeit of empty homes is Manchester.

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  • Can the trustees really allow assets to be disposed at 20% less than market value ???
    The recipients of the pension fund will be delighted at this innovative approach.

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  • FANTASTIC - how about Social Housing built by private and high rents paid by government through HB.

    OR - the government could build houses and rent them to our needy population.

    All this is skirting around what is really needed - COUNCIL HOUSES built by the state SIMPLES !!

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  • Alpha One

    Please employ a HA to manage the site, not Peveral or the like.

    This is a really good idea, and to answer your question adam smith, yes the fund can allow it, as long as it gets a good return on it's investment it is fine.

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  • Spot on Douglas!

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  • Interesting that the Pension Fund is taking the risk during the construction phase on this -or have I miss-understood?

    Is the Pension fund providing the development finance or is it agreeing to buy the completed development?

    Don is right - why are 'we' complicating something which essentailly is very simple?

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