by Derek Rust. Group Director of Growth & Development, Barnet Homes

A GENERATION of council house building was lost during the three decades between the early 1980s and 2012. While the work of housing associations and private developers was encouraged, local authorities like Barnet were left without the means to build and with all the responsibility – and the costs – of finding solutions for the homeless.

The best local authority land opportunities were effectively outsourced during those years. On top of that, all the corporate knowledge and capacity for house building that councils had amassed in the post-war years was lost.

Finally, in 2012, central government relaxed its grip on the Housing Revenue Accounts through which income and expenditure from council housing was accounted for. Councils who still had their own stock could once more use local rents to fund local priorities and this could include the building of new homes.

In Barnet this was seen as an opportunity for the borough’s wholly owned ALMO, Barnet Homes, to show that it could develop new housing of the same quality and at the same cost as local housing associations while keeping land and rental income within council control, and the benefit would be felt across all the borough’s housing management work. We started small with three council houses on a small infill site as our ‘proof of concept’. Then we scaled up, using small, difficult-to-infill sites that other providers would not touch.

In 2017, to speed things up, Opendoor Homes (ODH) was set up as Charitable Community Benefit Society (CCBS) and a registered housing association, wholly owned by Barnet Council but with much wider access to grants and borrowing beyond an HRA under increasing pressure from many other directions. ODH now oversees a stock of around 700 homes and supplements new-build with an acquisitions programme to meet as much housing need as possible.

The Hermitage Lane Model

Cost versus income is the equation all house builders need to balance and increasingly tough for those of us wanting to build new social housing. We’re left with relatively small, complex sites and affordable rents can’t support loans that will meet the build-cost inflation now afflicting all new development, especially in London.

So to build any social housing at all, local authorities increasingly have to innovate; for instance, using sales to cross-subsidise costs. But this does expose councils to greater financial risk: upfront capital costs, unforeseen development delays, and whether homes will sell in an uncertain market.

Our solution was to carefully leverage a site we had in Hermitage Lane to extract its full value. We developed a policy-compliant (60% market price and 40% affordable) 51-home mixed tenure scheme. Then we went looking for a development partner who would:

• provide the working capital, taking full build-cost risk;
• take full sales risk for the market-cost homes;
• pay the council an amount that reflected the higher value of the land because it came with planning consent already approved.

Opendoor Homes would:

• take on the 15 discounted affordable rent homes, supported by GLA grant with 100% nomination to Barnet council;
• take on the sales risk of the scheme’s six shared-ownership homes, also supported by GLA grant;
• retain the freehold of the site after the development partner had sold their last home.
• We rejected the often time-consuming and complex Joint Venture approach and instead had an enhanced development agreement to cover the clear responsibilities of each party.

Both sides win. The developer had access to new-build land without up-front purchase costs or land banking and an inbuilt contracting profit. They also had a guaranteed development profit – but Opendoor Homes and Barnet Council had the right to any surplus beyond that. In the long term, the freehold of site remains in the wider council family and will be leveraged again in the future to deliver more supply once it has sufficient equity.

The development, now known as The Artisan, was completed late in 2022. Despite all the economic upheavals of the last 12 months, all the affordable rent homes are let and the shared ownership homes are either sold or reserved. The developers have just a handful of homes left to sell – remarkable in the current environment.

At the time of writing, our next scheme modelled on Hermitage Lane is on its way to committee for planning consent on two more sites.

In the last eight years, we have built 464 new homes and currently have just over 400 on site including over 200 homes on one site in Hendon. A planning application for a mixed tenure regeneration scheme in the West of Barnet, a joint venture that could deliver more than 500 homes, is underway. Plans for well over 400 more homes are in the early stages and we hope to bring them forward over the next two years, economy permitting.