Case Study: Lease models unlocking new homes
Social Rent Housing playbook series
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Image courtesy of Goscombe Group
Goscombe is a profit-with-purpose business deeply committed to building homes for good. They have their own MMC manufacturing facilities and a business model intent on balancing meaningful investment in social purpose and fair investor returns. As well as offering homes for sale to housing associations and local authorities they have developed a long-term leasing model for MMC homes. Disruptive models, such as theirs, which help free up the capital reserves of Registered Providers for deployment on other projects, have the potential to reshape the landscape of possibilities for affordable housing delivery. Goscombe talk about their model here:
We’ve developed a recycled steel-framed panellised solution capable of erecting a watertight building within 36 hours of arriving on site. As an illustration, this MMC system is set to provide 27 new 1- & 2-bed apartments specifically designed for social rent (circa £100 per week) for a Scottish housing association.
The Housing Association (HA) is offered the flexibility to either purchase these homes outright or lease them from Goscombe’s wholly-owned asset management business, or Pension Fund partners. These leases span a 50-year period and include Fully Repairing and Insuring (FRI) terms, with properties guaranteed to remain in social rent perpetually.
In the leasing scenario, Goscombe secures up to 52% of the scheme’s funding through a government grant, with the remaining balance provided by a Pension Fund partner. Additionally, 60% of rent collected will be retained by the RP for cyclical maintenance.
There are four steps in enabling our lease model for RPs:
Typically, an RP brings forward a site for development, working with Goscombe’s design team.
Our Pension Fund partners finance the development, thereby eliminating the need for Goscombe to borrow funds and removing the cost of servicing debt from the final cost of a home.
On completion, the RP enters into a lease agreement on a FRI lease basis with the Pension Fund, releasing the RP to deploy their capital reserves on other projects without compromising their ability to build new homes.
The rental income is shared between the RP and the Pension Fund. At the end of the lease, the RP has the choice of continuing with the lease, acquiring the homes at the exercise price, or withdrawing.
As a company Goscombe is determined to resist ‘bottom line’ culture, and place purpose at the forefront of all they do. 90% of Goscombe profits are reinvested into social housing and community regeneration.
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