Strategic partnerships between local authorities and developers

The government has ambitious plans to build 1.5 million new homes by the end of its five-year term, matching that ambition with reforms of planning system, new funding agreements, and support outlined in its recent Spending Review.

It is increasingly clear, however, that ambition and those measures announced so far will not resolve the challenges market and social housing developers face. A major study by law firm Winckworth Sherwood points to a route that is increasingly front of mind: strategic partnerships.

In the spring of this year, we commissioned a piece of research based on in-depth interviews with developers, social housing providers, local authorities, and funders. In that report Strategic Partnerships – a driving force for housing provision, we wanted to better understand how various players in the housing community were responding to the challenging market.

That found that, increasingly, many organisations are turning to partnerships to deliver housing. Where once they were largely opportunistic, today they are strategic, structured, and driving housing delivery at scale.

Our study suggests that two-thirds (67%) of the 86 organisations we interviewed have recently entered into strategic partnerships and consider them successful, although 29% told us the results of that partnership were mixed.

The study also found that 76% say they plan to enter strategic partnerships in the next two years, and 87% expect their competitors to do the same.

There are very good reasons to do so: 54% enter strategic partnerships to share risk, 46% to access funding, 29% to access land, and 22% to access expertise.

Interestingly, we also found that 32% enter strategic partnerships with local authorities to secure their backing and support.

Local authority partnerships

The true value of strategic partnerships lies in the ability to combine complementary strengths, unlock innovation, and deliver outcomes that neither party could achieve alone. It is a well-travelled path for local authorities that recognise that large and often complex sites need the expertise that private sector and social housing providers bring.

Strategic partnerships with and for local authorities do however bring unique challenges, from governance to a rapidly changing political landscape.

Any partnership between a commercial or social developer and a local authority starts with solid and open due diligence, where the ground rules are set and agreed. All parties need to be crystal clear on what they want to achieve, what each party brings to the relationship, and the roles of each strategic partner.

Local authorities will in most instances bring land to the partnership yet often lack the knowledge and capability to bring forward, deliver and, following that, manage new homes at scale. The institutional expertise that local authorities once had in each of those roles has long since been lost.

Facing increasing public (and political) scrutiny, local authorities need then to consider whether they are prepared to be a ‘silent partner’, providing land and allowing a developer to drive the scheme forward, or play a more active role – and should then ask what that might (or indeed should) look like.

That more active role typically involves a local authority expecting to own some of the homes and/or taking on the continued responsibility for the management and maintenance of the development post completion, often over considerable periods of time. Whilst that might not seem a priority at planning or development stage, it needs early consideration and the sustained resource inside a local authority to manage once again a large housing portfolio.

Local authorities need to also consider how ‘hands on’ it expects to be during the design, development and delivery phases. If an active partner, they need to be alert to the implications of what scheme will be handed over, especially where the developer’s role is a short term ‘build and out’. 

Developers too need to be alive to the risks they might face.

Where a local authority is providing the land, it will expect (and be expected) to wear two separate ‘hats’. A local authority’s governance and delegated powers for the planning process are often well established and must always be kept separate from a local authority’s role and decision maker as landowner/developer. Therefore, partnering with a local authority does not automatically mean that securing planning permissions or utilising their significant appropriation powers will be a smooth ride. Securing permissions are likely to take time, with a local authority going to great lengths demonstrating its probity.

Developers too must understand the decision-making processes inside local authorities, the roles of elected councillors and officials and the governance process. Who, for example, has the responsibility to sign off key decisions (and separated between its ‘planning’ and ‘land owner’ roles). Staff turnover, particularly where a local authority leans towards external consultants, can mean delay is almost inevitable.

And then there is the political cycle. Social housing and private sector developers are well-used to working on lengthy timeframes, but the five-year election cycle can see large swings in local politics and changing priorities.

Yet, both developers and local authorities recognise the value each party brings together with the shared value of wishing to deliver new homes. That is why partnership with local authorities are a prize worth pursuing.

Charlotte Cook is a Partner and Edward Swain a Senior Associate in the Social Housing Real Estate team at Winckworth Sherwood. Visit www.wslaw.co.uk