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Birmingham sets up innovative homes venture

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Birmingham City Council is set to launch an innovative public-private joint venture to attract investment to kickstart home building and boost the private rental sector in the city.

The venture, which was approved in principle by the council last week, would see Birmingham raise finance to invest in new homes with the debt secured against the future income streams from the homes to be built.

The council would hold a minority stake in the venture and would, alongside its private sector partners, effectively act as a private landlord and rent the homes or sell them on a shared ownership basis.

The council has identified pension funds as the likely investment partners. It would transfer land for development into the joint venture partnership, with the finance raised through other private sector investment as well as debt, which would be secured against the future income of the development and passed on to pension funds looking for long-term investments.

A source at the council said the proposal has been in development for about 18 months and the council had identified an “appetite” from pensions funds to invest in market rented housing and homes put up for sale on a shared ownership basis.

He said the aim of the venture was not only to kick-start house building in the city but to fill a gap in the market between social housing and the private market. The first tranche of investment aims to create about 1,000 new homes in the city.

Jonathan Seager, senior analyst at thinktank Centre for Cities, said historically the UK had failed to foster the right conditions for institutional investors, such as pension funds, to invest in the housing market and this in part had contributed to the UK’s “chronic undersupply” of housing.

“There is a natural home for pension funds - and foreign investment - in housing but we haven’t created the framework to allow that to happen,” he said.

“Instead the money has gone into the commerical sector. These kind of ventures will hopefully establish the market and more players will come in - and ultimately more homes will be built.”

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