Home sets up private developer to bankroll social housebuilding

England's second-largest housing association is to radically restructure in order to save £1m a year and build more homes.

Home Group, which owns 50,000 homes, plans to set up a development firm that will build homes for private sale. Profits from the sales will be spent on more social housing.

It will also register as a charity and integrate its three subsidiaries into one organisation to save on tax liabilities and improve efficiency.

The private developer's first project will be 285 homes on the 803-home Rayners Lane development in Harrow, north London. These sales will help fund 518 affordable homes.

Home hopes the new division, which will be called Home Group Developments, will reduce its dependence on government grants.

Group chief executive Malcolm Levi said: "We're not planning to be the next Barratt but this will enable us to deliver the kind of mixed-tenure communities John Prescott wants, while streamlining processes."

The move is the result of a two-year in-house analysis of Home's performance since it adopted a group structure in 1998.

This review also recommended that Home register as a charity and integrate subsidiaries Stonham, Warden and Home Housing.

The subsidiaries of Home, which has an annual turnover of more than £200m, have approved the restructuring and it is likely to be completed next month, provided it gets the go-ahead from the Financial Services Authority.

Steve Moorhouse, Home Group's legal director, said efficiencies were being looked for and refused to rule out redundancies.

He added that there was no plan to lose the Stonham and Warden brands, but said the restructuring made this a possibility in future.

Warden manages 13,000 homes in the South and Stonham runs 5500 supported homes across England.

The move to charity status will allow Home to avoid corporation tax on its principal business. After the restructuring, 90% of the group's assets will be held by the charity.

Integrating the subsidiaries will save on the cost of preparing accounts, which is where the £1m saving will be made.

It is also thought that putting all the association's assets in one place will make borrowing money easier.