The Rise of the Housing Portfolio PPP

We have long believed in the positive role that Public Private Partnerships (PPPs) can have in unlocking the potential of the public sector estate, particularly in relation to stalled public housing programmes where we see borough-wide portfolio opportunities arising from the ashes of many a local authority-led housing development vehicle.

The recent launch of an opportunity for the London Borough of Lambeth on its New Homes 6 portfolio (450 mixed-tenure homes across six sites) brings this into sharper focus.

Coupled with recent portfolio partnerships in Hillingdon and Ealing, alongside short-to-medium term opportunities rumoured to be brewing in Hackney, Southwark and Lewisham, there is a growing swell of activity in this space as London’s local authorities increasingly look to partner on their housing programmes.

For the public sector, in an environment of heavily strained finances and general risk aversion, such models are proving an increasingly attractive option where direct development models were previously often deemed to be the panacea. PPPs allow the public sector to share risk and reward while leveraging private sector capital alongside capacity, resources, and expertise. Critically, obligations around timescales and delivery can be set at the outset, giving the public sector comfort on delivery metrics (e.g. affordable housing levels).

At a time of high costs of construction and debt, alongside uncertain sales trajectories, the private sector too is extremely interested in PPPs as they afford more flexibility to control capital risk whilst leveraging the powers of the public sector and giving access to medium-term development pipelines. Dealing with a borough-wide portfolio also affords more opportunity to look at innovative ways of improving social, economic and environmental investment outcomes.

A number of delivery models are available and ought to be considered, ranging across contractual and joint venture structures. Within this, investment partnerships have very much been in vogue, particularly in the Home Counties, but are often poorly understood and can give rise to material procurement risk if not set up properly.

All have a place, but (as with any delivery strategy), options need to be fully considered and evaluated in the context of robustly tested landowner objectives as well as consideration as to whom such vehicles will be attractive to and what that means for delivery outcomes.

The trick, of course, is to set these opportunities up properly, and this takes time, good advice and a steady political hand on the tiller. Thereafter, public and private sector partners need to resource the PPP properly and seek to embed flexibility, honesty, trust and respect between partners.