Welcome to our blog on the different deivery methods for social housing. Here, we’ll break down the key steps and strategies in housing development, focusing on practical aspects from planning to completion.
Turnkey Acquisition
This can be accomplished in several ways. First, the housing association or local authority can agree to purchase the completed units at a prearranged price. Second, any development comprising more than 10 units is subject to Part V obligations, which necessitates the developer to allocate a portion of the new development to social housing. The third approach involves the acquisition of additional units beyond the developer’s Part V obligations in new build schemes and unfinished estates, with a focus on creating and sustaining communities.
The approved Housing Association can enter into a contract to acquire the units before their completion. Negotiations concerning the final design and specifications can take place during the development phase between the contractor/developer and the Approved Housing Association. In certain instances, the contract may not proceed unless specific amendments to the proposals are made, as determined by the Approved Housing Association.
Traditional speculative developers bear four distinct risks:
- The risk of obtaining planning permission and other regulatory approvals.
- Financing the land purchase over several years while securing planning permission.
- Constructing houses and infrastructure at a viable cost.
- Dependence on potential buyers’ ability to afford the houses.
Part V Acquisitions
Part V of the Planning and Development Act 2000 (Part V) establishes obligations for developers concerning social and affordable housing.
The Urban Regeneration and Housing Act 2015 (the 2015 Act) introduced several amendments to Part V, with the objective of increasing the availability of social housing and enhancing transparency in the Part V process. Given the current surge in construction in the property market, it is more critical than ever for developers to be well-informed about these obligations and how to ensure compliance with Part V.
Application of Part V
Part V obligations come into play when an application is submitted for planning permission for a development comprising nine or more housing units or when the development spans more than 0.1 hectares of land. Before the 2015 Act, Part V did not apply to developments of four or fewer housing units. However, this threshold was raised to nine units as of September 1, 2015.
For planning permissions granted before September 1, 2015, with no Part V Agreement established with the local authority, developers must adhere to the requirements outlined in the 2015 Act. If a Part V Agreement was previously reached before September 1, 2015, it may be renegotiated with the consent of both the developer and the local authority (provided no commencement notice has been submitted).
Obligation to Reserve Land for Social Housing
The local authority possesses the discretion to determine the percentage of a development that must be earmarked for social housing, but this is now subject to a cap of 20% of the development.
Making a Part V Agreement with the Planning Authority
It is now mandatory to enter into a Part V Agreement prior to submitting a commencement notice. This change is welcomed as it empowers developers to comprehend their obligations at an early stage, thereby allowing them to incorporate these considerations into the design and planning phases of their developments.
How to Comply with Part V
The 2015 Act narrows down the array of alternative options available for achieving Part V compliance. These options now include:
- Building and transferring housing units within the application site.
- Transferring units to different land within the functional area of the local authority.
- Granting leases of houses within the application site or the functional area.
- A combination of the above.
The 2015 Act also introduces the possibility for developers to fulfill their Part V obligations through rental accommodation availability agreements, although this section of the 2015 Act has not yet come into effect.
Financial payments, offering serviced sites within the development, or transferring undeveloped land outside the application area are no longer permissible means of discharging Part V obligations.
Consideration of Alternative Options by the Local Authority
When contemplating acceptance of one of the alternative options, the local authority must ensure it obtains an equivalent planning gain. Compensation for the lands acquired by the local authority is calculated based on the “existing use value” of the lands, with the 2015 Act specifying that the relevant date for determining this value is the date of planning permission grant. Previously, the relevant date was the date of land transfer to the local authority.
Planning for a Part V Agreement
A Part V Agreement can have substantial implications for a development. Given the significant discretion local authorities maintain in fulfilling these obligations, it is imperative for developers to comprehend their responsibilities early in the process.
Initiating discussions with the local authority, even before seeking planning permission, can help ensure that development plans align with the social housing needs of the area. Failing to plan for the Part V Agreement in advance may necessitate modifications to proposals, potentially causing project delays.
Design & Build
Approved Housing Associations may opt to collaborate with an experienced developer in the development and design of a social housing association. Once the developer presents a plan, the Approved Housing Association proceeds to assess the proposal’s cost and design, engaging in negotiations to determine an all-inclusive project cost.
The agreed-upon cost is then employed to fund various aspects, including land acquisition, professional fees, and construction expenses. The Approved Housing Association acquires the land through a land sale contract while concurrently entering into a building agreement for unit construction.
The funding for construction is facilitated through certified interim payments, disbursed in accordance with predetermined project milestones outlined in the contract. Managing procurement and contracts for Design and Build arrangements can be intricate. The Approved Housing Association must ensure that all projects adhere to National and European public procurement guidelines, and that the scheme aligns with the Capital Works Management Framework.
MRE offers a service that encompasses the completion of all requisite documentation at each stage, ensuring a smooth process for payment disbursement. We can handle this process on your behalf, submitting the information to the Approved Quantity Surveyor, who will then negotiate the final value. This phase can be challenging, you can rely on MRE to secure the best possible price for your completed works. We possess extensive experience working with councils and approved housing bodies. Additionally, we can assist in the final handover of documentation upon project completion, and snagging phase, saving you a substantial amount of time.
Second Hand Acquisition
Acquiring second-hand homes from all avenues such as sales agents, receivers, investors and developers that can be renovated or restored to provide social housing. Derelict and rundown developments can be purchased by a developer for a regeneration project. Local authorities and housing associations can agree to this type of delivery method through either the turnkey or staged payment contract.
At MRE we have the experience to help maximise your return on this type of development while guiding you through the process.
Repair & Lease Scheme
Top of Form
The Repair and Leasing Scheme is designed to rejuvenate vacant properties in need of repair for use in social housing. It is targeted at property owners who lack the means to fund the necessary repairs required to make their properties rentable.
In an expanded pilot phase of the scheme, certain categories of property owners no longer need to demonstrate an inability to afford or fund the repairs. This exemption applies to:
- Vacant commercial units
- Vacant units linked to a commercial unit, such as flats above shops
- Vacant institutional buildings
- Unfinished developments that have remained vacant for a considerable period
For eligible vacant properties suitable for social housing, the local authority or approved housing body (AHB) covers the cost of required repairs. Subsequently, the property is leased or made available to the local authority or AHB for social housing use. The property owner receives an agreed rental payment, with the cost of repairs gradually offset against this payment over a defined period.
At MRE, our team possesses the expertise and experience required to offer comprehensive assistance with all of the aforementioned schemes.
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