If you had owned an estate 100 years ago, you would also have been a landlord, renting accommodation to your farm workers. These days, there are fewer farm workers, but there is still a real need for affordable housing. So how can estate owners take advantage of this market without losing long-term value?
Build affordable houses to rent
Your development can range from half a dozen houses to several hundred. The development must meet Section 106 requirements, which in rural areas is often used to set aside part of a development to provide affordable housing for local people.
Rather than selling these affordable houses to a housing association, you keep them. You retain control of the development, including site management and management of the rental properties. Your rental income will cover loan costs, management and maintenance, and will eventually provide a profit.
How this works in practice
A good example is where an estate has a contract on one piece of land to build houses for private sale. It then builds extra houses on a second piece of land to meet its Section 106 commitments. The landowner registers as a For Profit Registered Provider (FPRP) and maintains ownership of these extra houses, renting them at reduced rates to local people. The rental income covers all costs and, after covering the development loan, provides cover for future borrowing and investment down the line.
A note of caution
Social housing is not a straightforward investment. There are plenty of regulatory requirements and certain behavioural expectations. It will also take time before you see any surplus rental income. But in the meantime, at least you get the satisfaction of knowing you're helping to keep your rural community alive.
If you would like to learn more about FPRPs and the benefits for landowners, contact Savills farms and estates services team.