Barking pursues £100m investment
Barking and Dagenham Council is seeking up to £100 million from private investors to build 600 homes.
The funding model, put together by City law firm K&L Gates, could allow the east London borough to bring development capital into its housing revenue account without breaching its Treasury-imposed borrowing limit.
K&L Gates believes its model could be replicated by other councils, with at least six more understood to be looking to use it.
The long-term financing deal would take the number of homes being built by Barking and Dagenham over the next five years beyond the 1,000 mark. The council has been one of the most active local authorities when it comes to attracting alternative sources of funding for development. Last year, it completed a £76 million deal to build 447 affordable homes with institutional fund manager Long Harbour.
The council is running a ‘funding competition’ to find backers for the scheme and is looking for an investment of between £80 million and £100 million. Five potential funders have already submitted bids with one more expected to do so shortly.
The plan would involve the development of a mix of homes for market rent and for affordable rent set at between 65 and 80 per cent of market rates.
Ken Jones, director of housing strategy at the council, said it is considering setting up a subsidiary to carry out the development so that borrowing does not come into its HRA.
Barking and Dagenham took on £265 million debt under HRA reform. Its government-set debt cap gives it just £12 million of extra borrowing room. Mr Jones said the borrowing restriction has prompted the council to look for alternative investment models.
‘If there’s going to be no relaxation or abolition of the debt cap, we’ll go through the funders and not the PWLB [Public Works Loan Board - the Treasury-backed lender to councils],’ he said.
Several organisations, including the Chartered Institute of Housing and the Local Government Association, have stepped up calls in recent weeks for the government to raise the borrowing caps to allow councils to extend their development programmes. However, there was no progress towards changing the policy in George Osborne’s Budget last month.
