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Revamping Mayor’s Land Fund could boost housing investment pot to over £1 bn and support delivery of 20,000 new homes, say London First and PwC
18 March 2021
New report highlights the potential of Greater London Authority (GLA) Land Fund to ramp-up housing delivery in the capital.
A report published today by campaigning business group London First and leading professional services firm PwC calls for a new, three-step approach to boosting the GLA’s Land Fund to help secure additional investment and accelerate housing development in the capital.
Created in 2017, the original Land Fund has transactions in contract that could support in excess of 10,000 new homes and has a pipeline of further schemes. This could be extended to an additional 20,000 homes over 10 years if the Fund were to be opened up to attract co-investment either from the public or private sector, such as an institutional investor.*
With the pandemic having setback construction activity, London First is calling for a new version of the existing Land Fund, which was set up to invest in buying and preparing land for housing, as well as using investments to speed up development, to unlock a fresh wave of homebuilding.
Jonathan Seager, Executive Director for Place at London First, said: “The pandemic has pushed the capital further behind its house-building targets, making it critical that new ways of bringing forward development are quickly harnessed.
“The Mayor’s original Land Fund has shown proof of concept, but now is the time to innovate and leverage in more funding.
“With London needing at least 66,000 new homes a year, house building in the capital requires more investment and the GLA is well positioned to secure this through a revamped Land Fund.”
James Bailey, Director, PwC Deals, added: “The London Land Fund offers a great opportunity for the GLA to leverage its assets and unique capabilities to attract private sector co-investment into housing and stimulate a sustainable post-pandemic recovery.
“More importantly, the need to “level-up” communities across London will require a creative approach to partnerships, and the GLA — through the London Land Fund and beyond — will have a central role to play here.”
London First and PwC brought together a group of leading developers and advisers, chaired by Liz Peace CBE, a member of the Mayor of London’s Homes for Londoners Board and chair of trustees at the Centre for London, to put forward ways to increase the Land Fund’s impact and effectiveness by harnessing the potential of co-investment. It comes after the Mayor authorised the undertaking of market-testing and securing advice on a commercial strand of the Fund last March.
In the report, Land Fund #2: How the GLA could attract co-investment to help build more homes, London First and PwC are calling for three steps to be taken by the GLA to help set up a new Fund:
Clarify how the Fund is structured and the type of financial interventions it will use to improve its potential for attracting co-investment;
Identify opportunities to secure and leverage co-investment, as well as identifying potential providers; and
Explain the co-investment opportunity on offer, presenting a clear investment strategy and demonstrating it has the capacity and track record to deliver the deal.
Highlighting the potential impact of Land Fund #2, the report shows that using the GLA’s £250m contribution to the current Land Fund as a starting point for illustrative purposes, if the GLA allocated a third of the funding available to equity investments on a 1:1 leverage model for an average investment time horizon of ten years; and two thirds of the funding available to loan investments on a 1:3 leverage model for an average investment time horizon of five years, the potential co-investment over a ten-year period could be in excess of £1bn which could provide 20,000 new homes.**
Liz Peace, CBE said:“The Land Fund was a good idea to boost the number of homes developed for Londoners, but its impact was always going to be limited by availability of funds. So, it’s great to see a group of private sector housing interests working together with the GLA to identify concrete ways of boosting the fund through private sector participation. I hope very much that the next Mayor will work with us to take them forward.”
Robert Walker, Partner, Housing Leader for PwC, concluded: “The London Land Fund offers a great opportunity to support the recovery of London as a major global city and create the much-needed supply of suitable housing for Londoners.”
[*] The figures relating to the current Land Fund have been provided by the GLA and are contained in an Annex to the report.
[**] This assumes an investment of around c.£50,000 per home, which is broadly consistent with the GLA’s current Land Fund investments and pipeline.
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