13 Dec 2010
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Willmott Dixon and Skanska target housebuilding

Contractor Willmott Dixon is set to take on development risk in a scheme to build up to 1,500 homes for rent in a joint venture with Birmingham council, Building reported.

Willmott Dixon is understood to be leading a consortium with housing association West Mercia and property consultancy Savills, to build the homes housing in a joint venture with the council. The homes would be in the private rented sector.

The plan potentially forms a new model for social housebuilding, in that it does not rely on public sector grant from the Homes and Communities Agency.

The council and developers aim to put enough land into a joint venture company to develop 750 homes over the next five years. The deal, based on the government’s private rented sector initiative, will guarantee a minimum of 200 homes being built.

The other parties, including an as yet unnamed funder, will then build, manage and market the homes. All parties will share the profits dependent upon the amount invested in the vehicle.

Birmingham council says it is now in discussion with other local authorities in the West Midlands to bring forward other sites, which could yield a total of 1,500 homes.

Birmingham councillor John Lines, executive member for housing, said: “We see the initiative offering the opportunity to kickstart development on a number of council owned sites, benefit the economy by creating construction jobs and develop 1,000 to 1,500 private rented sector homes over the next five years.”

The deal is set to be signed in the next few weeks. If signed, it will be Willmott Dixon’s first major move into development since group chief executive Rick Willmott announced in June that he wanted to make the firm a hybrid contractor-housebuilder.

Meanwhile, contractor Skanska has also shown its faith in the UK housing market, announcing that it is to open a UK housing division as part of a four-year growth plan, according to a report on the website Construction Enquirer.

Skanska’s move is part of its four-year growth plan to achieve margins of 3.5-4 per cent on construction projects worldwide, Building also reported. Skanska will also launch a residential operation in Poland.

The new development arm in the UK will focus on high-quality residences in London and the south east. The first projects are due to start on site in 2011.

The firm said: “Skanska has long had a large and successful construction operation in the UK. The financial crisis and the dramatic decline in the housing market have now created excellent opportunities for entry as a residential developer.”