North Country and council to build homes for sale to tenants

A private housebuilder is to sign a £4m deal to build 80 low-cost homes to sell to council tenants at a reduced profit.

The agreement, between North Country Homes and an unnamed local authority that is believed to be in a low-demand area of Yorkshire, came as Wednesday's Barker Report demanded more private sector involvement in the provision of affordable housing.

Under the deal, to be signed in a month's time, the council will sell land to North Country at below market value because the developer will be building low-priced homes that will not give it the best possible return.

About 60 council homes on the site have been demolished and the tenants rehoused by the council. The site will be redeveloped with housing for low-cost sale. The homes will be offered to tenants of the demolished houses and other local people for about £50,000 each.

The council and North Country Homes will pay for a 15% deposit to buyers, with the council paying for two-thirds of this. The council will spend part of the money raised by the land sale on its share of the deposits.

Jolyon Harrison, chief executive of North Country, said it was setting up the deposit scheme so that tenants with poor credit ratings would not miss out.

It’s not the sort of margin you’d have in a free market, but with so many customers we can guarantee cashflow

Jolyon Harrison, North Country Homes

He said building societies were less likely to ask about county court judgments – which impair an individual's credit rating – if the buyer could supply a 15% deposit. Tenants can apply for an extra grant from the council to buy homes but they must repay part of the loan if they sell within five years.

Harrison said the company could still build a profit margin into the selling price. "It's not the sort of margin you would have in a free market, but we will have regular stream of customers so we can guarantee cash flow."

North Country is one of several private developers building low-cost homes without Housing Corporation grant. Asset Trust signed the first in a series of deals that will see it invest £1bn to build 10,000 homes over the next four years (HT 20 February, page 14).

Developer Merlion Homes, which also builds low-cost homes without grant, is selling 75% and 85% stakes in homes in Reading, Brighton and Richmond in west London.