Public Housing, Land and Area Development
In Australia and Ireland, the central governments have encouraged the use of concession models in their pilot PPP public housing projects. But the country with the deepest experience in this sector remains the Netherlands, which has been applying PPPs to social housing and regeneration projects for nearly two decades. Joint venture, the most commonly used PPP arrangement for these projects, suits the local governments' need to retain control over planning and development while utilizing the private partners' available resources and expertise. PPP contracts typically last for 5 to 10 years, after which the land owner (the government or the private partner) takes ownership of the project. This model proved quite successful for more than 100 locally initiated projects in the Netherlands.58 The cooperation needed to make joint ventures work have proven to be especially successful tools in breaking deadlocks with private developers that arise because land in crowded Holland is scarce.
The Dutch central government has also introduced key PPP projects in urban regeneration. These projects, are centrally administered, with continued involvement by local governments.59
| Housing and Development PPPs: |
| Challenges and Solutions |
| Challenges |
| Uncertainty. Housing projects involving refurbishing or upgrading often face uncertainty about the condition of existing housing stock. Where the public sector is unable to provide accurate or detailed estimations about the extent of upgrade work required, private partners usually charge risk premiums that inflate the project cost. |
| Demand forecasting. The difficulty in precisely forecasting the number of housing units needed for new builds, refurbishments and maintenance poses a serious challenge for the public sector. This also affects private partners, as their revenue streams might be limited or reduced depending on the number of residents who exercise their option. |
| Goal alignment. The large number of stakeholders involved (citizens, shop-owners, private developers, municipality, and so on) in regeneration and area development projects makes it relatively difficult to come up with a project that sufficiently meets the interests of everybody involved. |
| Solutions |
| The challenges in this sector are often addressed by using alliancing models, such as a joint venture in which the public and private sector jointly design, develop, and finance a project. A jointly financed approach can facilitate risk and cost sharing, especially in the multidimensional sector of area development. In some projects, both sectors also work together on the construction, maintenance, and operation of a facility. This form of partnership is not limited to a single party; in fact, many alliancing projects are constructed with multiple partners. Sometimes, within the alliancing structure, traditional procurement or other PPP delivery models such as DBFM are also used at different phases of the partnership contract. |
| Another frequent technique is allowing alternative revenue sources into the project. For housing projects, this means granting private partners the right to build and sell private houses, or other commercial facilities, in the same area as the public housing. |