A ‘unique’ housing fund set up by a global asset management institution and one of the UK’s largest housing associations has secured its first development.
The first development under the new fund will be the £40m Hughes House scheme in Liverpool.
The partnership says the development, located on London Road, is primely placed for those working at some of the largest key worker organisations in the city.
Once complete, the 258-unit scheme will comprise 144 one-bedroom apartments, 99 two-bedroom apartments, and 15 studio apartments.
The financial model, devised by Home Group, underpins the fund, which flexes to suit the needs of the build location, as well as the varying needs of renters.
Flexible Rent is a scalable ‘build to rent’ product, which provides a mix of private and discounted rented homes for people on a variety of incomes.
The partnership says the fund will satisfty the needs of renters, as well as other stakeholders such as local authorities and central government.
The new funding mechanism will also provide Home Group with a way to secure long-term additional investment in-order-to deliver housing across the UK.
Flexible Rent is endorsed by Homes England.
The fund aims to assist the government with its commitment to deliver 300,000 homes per year, while also enabling local authorities to secure higher levels of affordable housing for rent and relieving the ongoing pressure to secure government grant.
‘Government grant not needed’
Commenting on the development, Kitson Keen, head of Build to Rent at Home Group, said: “We are continually looking at new ways of working in-order-to disrupt the housing market.
“Partnering with some of the best in the business is what we have always done, and will continue to do so, in order to deliver the right homes in the right places for those who need them.
“As a country, we aren’t going to be able to build the homes we need without innovative approaches.
“A larger, professionally managed Private Rented Sector (PRS) will have a positive impact in driving up standards.
“Making private renting better is crucial to ensuring everyone has a safe and affordable home in which to live.”
He added: “By expanding Home Group’s housing delivery model into the PRS, through the relationship with the BMO UK Housing Fund and with the utilisation of the Flexible Rent leasing mechanism, we’re able to offer the sector the potential to provide more of the homes we need at an affordable level with funding coming from the private sector.
“It does not need government grant – yet can operate at scale.
“The Hughes House development is the first in what we expect to be many more similar developments to emerge across the UK.”
Peter Lowe, fund manager at BMO Real Estate Partners said: “This acquisition provides us with an opportunity to support the delivery of much-needed housing in Liverpool – a market which has been characterised by an undersupply of affordable private-rented accommodation – while generating sustainable, inflation-linked long-term income returns for investors.
“The location of the scheme will enable us to meet the weight of demand in the area from key workers working within the local authority, hospital, and both universities in low- and middle-income roles.
“We have an identified pipeline of further short- to medium-term opportunities, which we are aiming to immediately deploy capital on as we seek to continue support the delivery of affordable housing solutions across the UK.”
Stewart Bennett, global head of Alternatives at BMO Global Asset Management, said: “It is important that, while this fund has clear social objectives, it aligns to our philosophy of creating sustainable real estate by also prioritising environmental considerations and promoting sustainable living, ultimately creating thriving communities for the long term and supporting income generation for our clients.”
One of BMO UK Housing Fund’s largest investors is Big Society Capital.
Wren Laing, investment director at Big Society Capital, said: “The current failings of the private rented sector are widely documented: unaffordable, poor quality, insecurity of tenure, to name only a few.
“An essential part of solving the housing crisis is tackling the problems experienced by tenants and improving the quality and range of choice of housing options available to people living in the PRS.
“The Flexible Rent model has the potential to contribute to this through the delivery of new professionally managed affordable rental homes, expanding the current build to rent offering to a wider market.
“Social investment seeks to connect capital with social sector organisations achieving impact.
“This strategy brings together a unique partnership between BMO Real Estate Partners and Home Group, a housing association with a strong social mission and demonstrated track record of delivering affordable homes and tests an innovative and impactful housing rental model.”
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