A PIONEERING cross-subsidy land deal worth over £25 million between Hackney Council and Lovell is thought to be among the first of its kind.

Hackney has contracted Lovell to build 87 Homes & Communities Agency (HCA) Local Authority New Build-funded new homes for social renting over two sites, after match-funding through prudential borrowing an HCA grant of over £6million.

But by the Council enabling an additional 42 private sale homes on one of the sites, which overlooks Finsbury Park with a Red Book value of around £2million, Lovell will invest in the regeneration, undertaking the construction of 20 further Council-owned homes at another site, worth around £3million.

This is thought to be among the first instances of a local authority cross-subsidising the development of sites in its property portfolio on this scale, as the mixed-tenure model is usually associated with major regeneration projects such as at Woodberry Down, or with housing associations. The two sites form part of the wider Six Estates regeneration programme, though while sites have high value, acquiring leaseholds to enable work to proceed has a significant cost – so the LA New Build programme offered an opportunity to kill two birds with one stone.

Due to a 15-month deadline for development to meet grant requirements, Hackney put to the market a procurement package seeking bids from developers either to:

•build the 87 social rented homes across the two sites

or:

•build the 87 homes plus private housing, and in return build a further 20 homes for Council ownership on the other site

Market interest was considerable, and the Council also mitigated development risks by:

•designing schemes ahead of procurement, minimising planning risk

•providing land at no cost, removing significant finance risk

•‘buying back’ the social rented units upfront through HCA grant and prudential borrowing

Cllr Karen Alcock, Deputy Mayor of Hackney, said: “Hackney Council pledged to residents that despite the economic climate we would find new and innovative methods to deliver high quality and affordable homes for local people, and this is one of the ways in which this commitment is being realised. Hackney is among the top-performing London boroughs for affordable housing provision, and is on course to exceed a three-year total target of 1,961 affordable homes by 2011."

Lovell regional director Steve Coombs said: “We have an excellent working partnership with Hackney Council developed through our extensive work helping refurbish and improve the authority’s housing stock. We look forward to bringing our wide-ranging national expertise in the creation of sustainable affordable homes to these two schemes – our first new-build projects for Hackney – which will create energy-efficient, attractive homes for residents.”

The Six Estates regeneration programme has received £16million in funding through the Local Authority New Build Scheme introduced by the HCA in May 2009.

Cllr Alcock is available for interview on this matter – for more information, please contact James Willsher on 020 8356 4694 or email james.willsher@hackney.gov.uk