The challenges for local authority and housing association joint ventures
There is increasing interest by local authorities in joining with housing associations and developers in joint ventures to develop new private rental sector housing and social housing throughout a geographic area of influence.
Since changes were made in the Localism Act 2011 it is now easier for local authorities to invest in joint ventures with housing associations, developers, house builders and even private investors. The challenge is to develop a tax efficient model which does not rely on a REIT structure to deliver new housing in a limited liability, off-balance sheet structure while maintaining the tax exempt status of housing associations and local authorities for each development scheme.
Unfortunately, the Localism Act 2011 section 4(2) provides that if a local authority undertakes a commercial activity in exercise of its general power it must only do so through a limited company. This requirement can restrict the types of vehicles that other tax exempt organisations (such as housing associations or foreign investors) may wish to utilise when structuring housing development joint ventures…
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