The Just and Fair Dwellings Initiative (JaFDI)
ProblemThere are in excess of 77,240 families currently living in temporary accommodation in England. This is costing the taxpayer at least £11.446 billion per annum (£148,190 per annum per family accommodated). Local councils have the responsibility for sourcing and paying for temporary accommodation requirements within their catchment area. Central Government reimburses the local councils at the Local Housing Allowance (LHA) rate out of national welfare budgets, but when there is a discrepancy between the LHA and market rents, the council must pay the short fall. In April 2018, the Homelessness Reduction Act 2017 (HRA) came into force, requiring councils to prioritise those at risk of homelessness when allocating housing. This not only significantly increased the number of people entitled to housing, but also meant that those already on housing waiting lists have to wait longer as priority is given to new applicants.
Bond Asian Ventures (BAV) is committed to addressing local councils’ housing shortage using the JaFDI model.
BAV will establish a special purpose vehicle (SPV) in the UK to deliver JaFDI in an agreed council catchment area, and issue an investment memorandum for £300 million to BAV’s Glacex investor panel. Of this £300 million, £250 million is for the purchase of JaFDI properties, and the balance is for stamp duty, fees, property maintenance and management (including HR), flats for market rental, and contingency.
We anticipate that 50% of the subscriptions will be for equity, and 50% will be for debt, though we can be flexible in either direction. When the project is fully subscribed, and after a 12 week preparatory period, the SPV will purchase an agreed number of suitable properties ‘on market’ within the council’s catchment area. They will be purchased on a buy to let model and rented directly to the council on a 20 year contract. The SPV will ensure that the properties are maintained to an agreed standard, have up to date electric and gas certificates, and an EPC rating no less than E.
The council will guarantee the rent for the full contract period at LHA rates, will provide a representative to advise the property buying team, and will manage the tenants. The council may also be required to pay an agreed, one off incentive payment for each property provided.
BAV's Glacex investor panel is comprised solely of sophisticated professional investors. These are typically family offices (including those of BAV’s principals), pension funds, and sovereign wealth funds.
UK pension funds have already expressed interest in investing debt and equity in JaFDI SPVs. They are attracted by the long term of the project (20 years), its social impact (it meets CSR obligations), its stability (the low risk profile is obtained as a result of the rental guarantee to be provided by the council), and the fact that it is in property (historically a reliable asset class).
JaFDI investors will receive annual interest payments / dividends during the course of the project, derived from the LHA payments received from the council. They will also be receive a one off payment at the end of the 20 year contract, utilising the proceeds of property sales. This uplift is available to debt and equity investors.