Bouygues UK has secured a ground-breaking contract to build the first homes planned by a new public-private partnership in the London Borough of Barking and Dagenham.

The council is a pilot for a wave of local housing companies, in which local authorities contribute land to special purpose vehicles formed with developers and/or registered social landlords.

Once built, half the homes will be sold on the open market so that the private sector recoups its investment, while 50% will remain under the council’s freehold as ‘affordable’ homes for rent or shared equity sale.

Next month, Barking and Dagenham is due to announce the incorporation of the local housing company and name its developer partners and designer.

But Ken Jones, the council’s head of housing strategy and property services, has confirmed that Bouygues has won the construction contract for the first site.

A council high-rise on the site has already been demolished. Subject to the council securing a revised planning concent, work will start in early 2009.

Jones says that Bouygues, which is targetting social housing under new chair Madani Sow, was selected partly on the strength of its track record in the borough. In 2005, it built the widely praised Jo Richardson Community School under the private finance initiative. ‘They built an extremely good school for us, and we were very impressed with their whole ethos,’ he said.

Barking and Dagenham is one of 14 local authorities around the country that have been given help from English Partnerships to launch local housing companies.

‘It has generated enormous interest in the local government world. There’s been a procession of local authorities coming through my door,’ Jones reports. Over the next 12-15 years, the new company could build up to 8,000 homes.

Steve Carr, director of policy and economics at English Partnerships, hopes that local housing companies will usher in a new era of housing development. ‘We want to attract skills and finance from the non-housing sector, including construction-based companies used to working on PFI projects. It’s not about what can be extracted in development value up-front, but looking at long-term investment pacakages.’

For councils, local housing companies should deliver more affordable homes than the section 106 system. ‘We put in the land value, planning powers, understanding of the community and masterplanning expertise, while the develoment partner brings development and design expertise,’ says Jones.