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Tackling the affordable housing funding gap in an age of austerity – joint ventures as a strategic option

30/08/2012 15:11

While the affordable housing sector is facing a significant funding gap due to cuts in government grants and reduced bank lending periods, housing providers have also cited government austerity measures as additional obstacles to new developments.

Such measures include the government’s affordable rent programme and benefit caps, which housing providers have deemed the biggest challenges to new projects. The time that was needed for providers to work out the implications of these measures has caused a significant delay in much-needed housing developments.

Further challenges to the affordable housing sector

The following have also been identified as obstacles to the affordable housing sector’s growth:

  • The lack of available development opportunities
  • A change in consultation procedures which have been blamed for increasing planning delays by up to six months
  • Existing debt facilities / repayments
  • Risk-taking, which is not something that providers are keen to do in this current climate

Joint ventures as a solution to these challenges

There is one solution to these obstacles, however, in the form of joint ventures. These can provide a viable, strategic option for affordable housing providers to kick-start their developments again.

There are many benefits that come with housing providers entering into joint ventures with private developers. These include the fact that:

  • Joint ventures provide access to private sector skills that are needed for certain housing developments
  • Private developers also often possess attractive land-banks at a time when access to affordable funds may be constrained

At the same time, affordable housing providers can usually access cheaper funds and will be looking for a way in which they can reduce tenant waiting lists.

Paving the way for future housing developments

We can therefore see that by teaming up, both private developers and affordable housing providers are able to fulfil their objectives whilst sharing the risks involved with new housing projects.

Although it can take a significant amount of time for housing providers to build trust with private developers, there is proof that well-established partnerships can lead to successful joint venture projects – and this in turn can pave the way for future joint ventures that provide viable solutions for both providers and investors alike.

 

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