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Wiltshire's housing PFI scheme approved after nine years of preparatory work

January 20, 2012 8:36 AM
By HCA / Trevor Carbin

A £77m contract which will see 350 affordable homes built in West Wiltshire has been given Government approval.

The Private Finance Initiative (PFI) project will bring together Persimmon Homes and its sister company Westbury Partnerships with Wiltshire Council to deliver a mix of new homes in the county. The bid sees land provided by the council and Persimmon Homes. Westbury Partnerships, working with Sarsen Housing Association, will build the first 240 homes, with construction starting this month.

These homes will be built in Trowbridge, Warminster, Westbury, Melksham and Hilperton, with the first properties ready to move into during the summer. Plans to build a further 100 homes will also progress following the backing.

The housing PFI allows local authorities to work with private sector partners to build, improve and manage housing. It is administered in England by the Homes and Communities Agency (HCA), which has been working with the council in support of its bid. This scheme is one of 13 that the Government signalled continued support for, subject to a value for money review, in November 2011.

Steve Roche, managing director, Westbury Partnerships Wessex, said: "This joint venture will deliver more homes into the communities where they are most needed. The contract is an excellent example of cooperative working between the public and private sector and we look forward to welcoming the first new residents in the summer."

HCA head of area Peter Jones added: "This is good news for people in Wiltshire who are looking to access high quality, affordable homes. Partners have worked hard to get this initiative into place and people will now begin to see the benefits of the investment when homes start to be delivered. I am really pleased that progress will be made on this project."

John Thomson, Wiltshire Council cabinet member for housing, said: "I am really pleased the government has approved our business case to ensure these 350 much-needed affordable homes can be built, despite the difficult financial times. It is especially important during the economic downturn that we are able to provide enough good quality accommodation for Wiltshire's residents, and also bring much-needed jobs and commercial activities to the area."

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houseThe latest round of 'value for money' checks and other requirements imposed by the treasury meant that Wiltshire was asked by the government to cut back on maintenance and insurance estimates and to build cheaper, poorer quality houses so that the amount of credit required was less.

The council's set up costs through to financial close are £2.4m. Developers SHL have invested at least double that amount.The council will make a revenue contribution of around £220,000 per annum (index-linked), for the contract period, with the majority of the costs being met through PFI credit and the tenants' rent.

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Here's some more history:

The PFI scheme was first put forward by West Wilts District Council in 2003. Although a number of private sector developers originally showed interest in bidding to do the building work most of them pulled out, and when Selwood withdrew the bidding process changed from being competitive to being single-bidder, which meant the council had to be particularly careful to make sure value for money would be obtained.

Silbury Housing Ltd (SHL), a consortium led by Sarsen Housing Association in partnership with Barclays Private Equity and Persimmon Homes, have been contracted to carry out the scheme.

In November 2009 the WC cabinet agreed to proceed with a reduced scheme of around 350 homes in total, on a phased basis, with approximately 242 homes being provided in Phase 1. It was also agreed to submit a final business case with the intention of signing the PFI contract by the end of March 2010.

The project was then further delayed, due to uncertainty about land ownership and difficulty in commercial negotiations with SHL.

Persimmon demanded a higher than expected price for their land to compensate for not being able to develop the sites commercially if they're used for PFI, so the cost per house as built came out at £156,000.

Then the scheme ran into more trouble with the identification of legal restraints on two parcels of land intended to be developed. These are at Paxcroft Mead Hilperton and Broad Street Trowbridge. In April a report went to the WC 'cabinet' recommending appropriation of the land to over-ride any potential problems. This takes away the rights of anyone with an interest in the land to block the scheme, but would allow compensation to be paid if such people came forward.

Cabinet approval to enter the agreement with SHL was granted on 17 June 2010. Meetings subsequently took place in London with the Department for Communities & Local Government plus the Homes and Community Agency (HCA), before the final approval in January 2012.

In the early years PFI was seen as a very ineffective way of building homes, but was the only way it could be done as the government would not permit other simpler methods of financing. Since then the government has become more reasonable, and councils and housing associations have been able to create more rented housing. Selwood, for example, have been actively building homes with HCA support since withdrawing from the West Wilts PFI.

The fact that it takes nearly a decade to complete the bureaucracy required to build just 350 houses tells its own story about the ineptitude of British national and local government.