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£400m warchest to rescue affordable housing deals

A major equity investor has created a £400m war chest to buy up affordable home deals as interest from housing associations wanes.

Cheyne Social Property Impact Fund told Construction News it was already in the running for six “section 106 assets” in London and the North-west, with a total value of around £45m.

Its surprise entry into the market for planning deals comes after measures introduced by the chancellor in July – including a 1 per cent cut to social rents – hit social landlords’ finances.

Impact fund manager Shamez Alibhai said he had been approached by councils, associations and private housebuilders to step in and invest following the summer Budget.

“The 8 July Budget has put pressure on housing associations’ budgets,” he said. “As a consequence, their appetite for section 106 assets has diminished.

“Developers have the need for a section 106 to dispose of those units and they historically have sold those units to a housing association.

“We are working with associations to buy section 106 assets and make those homes available for the associations and councils.

“We buy them as an asset and lease them back to the council or housing association.”

Cheyne is looking to invest up to £400m over the next three years in section 106 planning deals, out of a total of £900m it plans to invest in housing projects across the UK.

It has already committed £70m to other housing projects and has a further £250m of investment in the pipeline.

Mr Alibhai said housing schemes for which it had been asked to bid would be held up or see their affordable housing element cut without its investment.

“There is quite a dramatic need for affordable housing provisions and a risk of schemes not being viable at all or having much less social or affordable housing,” he said.

Cheyne hopes to have purchased its first section 106 asset before Christmas.

Ian Graham, head of law firm Trowers & Hamlins, said he was not surprised at the entry of new investors in the market for section 106 assets.

“We have had people come and see us, saying they would like to invest in section 106 housing,” he said.

“We have said that legally there is no requirement that it has to be held by a registered provider.

“Councils can achieve what they want to achieve in terms of control through the terms of the section 106 agreement.”

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