Empty Homes JV Solution
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Empty Homes JV Solution
- Private owner invests empty, disused home into joint venture at cost given current use and condition.
- Developer invests cost of refurbishment and redevelopment into the JV.
- Developer works with social firms that train and employ long-term unemployed, ex-convicts, people that have experienced homelessness, re-skilling them with skills in the building and construction trade.
- Home is sold at market.
- Cashflow waterfall:
- 1.[Repay any joint borrowings including cost of finance/ interest]
- 2.Payback initial JV investment (cost of house and development costs)
- 3.Split net proceeds on agreed basis (could be 50/50 or based on proportion of site cost to development cost)
Motivations
- Owner: Habitable house is easier to sell than a disused house, development costs are borne by someone else.
- Social firm: Employment opportunity and possibly chance to share in upside upon sale of the house.
- Developer: Possible upside/ share of profit intended to fund future projects.
Risks
- Owner probably prefers selling the site as-is and avoid risk of re-sale and market forces on selling price.
- Selling price might not cover site and development cost.
- Can be mitigated through research into local area and talking to local estate agents about potential re-sale value.
- Target homes are individual disused homes on otherwise good streets (i.e. obvious outliers) in attractive neighbourhoods.
- Using a social firm for the construction work might extend redevelopment period and increase costs of construction (especially if there is loan finance and interest).
- How does developer fund the costs of the first project?
Outcomes
- Disused home is put back into use.
- Training and employment opportunities for beneficiaries of social firms.
Alternatives
- Can this be done with homes owned by local councils?
- If this were done with a council-owned home, could the home be sold at a pre-agreed price (with a built-in profit) to a registered social landlord and kept as affordable housing, on condition that the profit be used towards future projects?
- Can this be done with home owned by registered social landlords/ housing association?
Links
- P2P Property Management Network
- This is one of several property-related projects being explored by Bonnie Wong.