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Council housebuilding plans boosted by new investment vehicle

A new housing investment body set up by the Local Government Association will seek to borrow £800m to help councils build thousands of new homes.

LG Develop was launched with an initial 14 councils involved, with combined plans to build 6,362 homes.

The programme could be extended to other local authorities if they have land available for housing and a convincing business plan allowing them to borrow against future rents.

An LGA document shows the 14 unnamed councils are seeking to borrow a total of £798.5m.

The largest programme bidding for money aims to build 1,756 homes, while the smallest is targeting 50.

LG Develop is not affected by the restrictions on councils’ ability to borrow within their housing revenue accounts, as the homes would not be for rent at the relatively low levels normally charged by councils, but rather for private rent and sale or affordable rents, set at 80 per cent of market levels.

Councils with programmes of varying sizes will be grouped into consortia for which LG Develop financial adviser Centrus will seek funds from bonds, pension funds and other lenders.

Brian Reynolds, who is leading on LG Develop as programme director for the Cabinet Office’s One Public Estate programme, said: “Using consortia means they all have to have plans at roughly the same stage, but it not only spreads risk but also allows easier borrowing, as if you are going to pension funds you would need to borrow some £50m as a minimum.

“If you can borrow £80m or more you could expect the costs to be cheaper.”

Mr Reynolds, who has been seconded to the Cabinet Office from the LGA, said councils would normally need to own the site concerned, so there was no land cost involved.

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