Joint venture partnerships between developers and government could be a means to help create low-cost housing in the Cayman Islands.
The concept, used in the UK to regenerate run-down urban areas, involves creating new neighbourhoods with a mix of subsidised properties and middle-class homes. Profits from houses sold on the open market – typically around 60% of the development – help fund affordable homes within the same community.
Sam Story, head of corporate finance at KPMG, believes it could be the perfect model for Cayman. Story, who was formerly head of finance for UK building firm Wates Residential, helped structure partnerships with local authorities in London.
He said the model relied on a developer who was willing to accept slightly lower profits in order to help solve a social problem.
“The biggest challenge is to get developers to buy in,” he said. “There has to be a moral element to it, because the profit margin is usually lower than it is for developments targeting the higher end of the market.”
He said the beauty of the model is that the developer and government agree on the margin up front and split it evenly, with both providing equal funding to the scheme.
The developer usually takes a fee for managing the design and planning – and overseeing construction and financing – while government receives much-needed affordable housing for its residents, often at a subsidised rate.
The concept in the UK typically involves government putting in the land and the...
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