Merlion aims for 1000 houses a year

Britain’s biggest provider of shared equity housing plans to grow fivefold and provide up to 1000 homes a year by 2008. Merlion Group, which last year turned over £21m and provided 300 homes, aims to capitalise on the government’s drive to get 1 million more people into home ownership by 2010, and turn over £100m in three years’ time.

Alistair Baker, chief executive of the privately owned company, said: “We won’t be the next Wimpey or Barratt but we do have the potential over the next few years to grow very quickly.”

He added that the principal driver of the planned growth was the continued squeeze on housing affordability – particularly in high-demand areas such as south-western England and along the south coast.

Shared equity housing is typically sold at a 25% discount to the market value with the purchaser owning the home outright, but the developer able to raise funding against the 25% it retains to invest in more housing.

Baker said he hoped a key area of activity would be the mooted “Solent Gateway” in Hampshire where the government plans to build up to 140,000 homes over the next decade.

The Winchester-based company consists of two businesses. The first is Merlion Homes, founded in 1991, which provides affordable housing. Initially the business mainly acquired stock from other developers but now it builds much of its own. Unlike housing associations, the business operates without Housing Corporation funding. Merlion Group’s other business is Infinity Homes, a private housebuilder set up in 2002.

All the Housing Corporation cash is doing is subsidising and driving up land values

In 2004, the businesses turned over £15m and £6m respectively. This is predicted to grow to £40m and £30m in two years’ time and then to exceed £100m the following year.

Baker said that this growth “could be even faster” if the government acted on a proposal to halt the £220m annual funding the Housing Corporation ploughs into shared equity housing.

“This money is being completely wasted. We have shown for the past 10 years that shared equity homes can be sold at 75% of their market value without public subsidy. All the corporation’s cash is doing is subsidising and driving up land values. If the government wanted, it could very easily allow private sector builders or even housing associations to do tens of thousands of shared equity units at absolutely no cost to the public purse.”

Baker added that all that was necessary for this to happen was for land to be earmarked by local authorities for shared equity housing.