Pension fund to invest in Manchester housing under new funding model

In the first phase of the scheme more than 240 new homes will be built on five sites across the city. The three parties have signed a memorandum of understanding under which the council will provide most of the land for the sites, the HCA will provide one of the sites and GMPF will deliver the funding.

The investment model is the first initiative of its kind in the country and provides a new way to finance house building. The partnership will choose a contractor and a property manager for the scheme together. The council will then take an equity share in the property to help make the new homes more affordable and to keep mortgage costs down.

With the council investing the land and a partner, such as the GMPF, investing the finance, the contractor's overheads are minimised and it has no sales risk, the council said. This removes the risk associated with normal development for the contractor. Rents and capital return from house sales will generate a revenue return for the partnership, it said.

The council said it hopes the new model will enable buyers to purchase homes for 20% less than the normal market level. This will provide a genuine route on to the property ladder for people struggling to afford to buy at the full rate, it said.

“Manchester’s growing population and forecasted economic growth will mean we will continue to need more homes in the near future," said deputy leader of Manchester City Council, Jim Battle.

"The economic climate has severely slowed home building in recent years and levels of development are not keeping up with the city’s demand. This new innovative model tackles these issues, pushing forward development opportunities while ensuring a supply of new attractive homes are available to residents at affordable prices," he said.

"I’m proud that we are able to use the pension fund to invest in the building of much needed homes in Greater Manchester whilst securing a good return to fund the pensions of the workforce," said GMPF chair Kieran Quinn.

“At the HCA our focus is to employ new and innovative ways of working to use public land assets to more quickly deliver homes and economic growth. This new concept marks a major milestone for house building in Manchester and has the potential to attract major investment to the city," said North West executive director of the HCA, Deborah McLaughlin.

The council said it hopes the scheme will set a precedent for much bigger projects with other major investors.