Q&A on the delegated contractor model

What is a delegated developer model? Can you briefly explain the concept?
The delegated developer model is also sometimes called the proxy model, because the role of developer is delegated from a social housing organisation to a private operator. The private housing developer is then responsible for the actual construction and then hands over the project to the social housing organisation.

Why is it necessary to use a delegated contractor model?

Denmark has a long and proud tradition of developing high quality non-profit housing. In recent years, the complexity of building has increased and it can be difficult for social housing organisations to manage the task within their own organisation, while there has been an increased focus on creating diversity in our urban areas and settlements.

It therefore makes perfect sense for social housing companies to work with private developers who are already exploring the market for building sites.

What is Section 116 of the General Housing Act?

Until 1 January 2020, it was not formally possible for a private actor to be the developer of a social housing project, because the social housing organisation must, as a general rule, be the developer itself. Section 116 now makes it possible to derogate from this general rule.

Does this mean that no public-private projects were delivered in a delegated developer model before 2020?

Yes, some buildings were built with a delegated developer model, but without a legal basis. The purpose of Section 116 is to ensure a better legal basis in the law on general housing, and thus more of the general construction that is in demand.

When can a social housing association use a delegated developer model?

There are two conditions that must be met in order to make use of a delegated contractor model. Firstly, the cooperation with the private operator must be necessary for the realisation of the housing project and secondly, it must not entail unnecessary risks.

It is up to the local authorities in the area to assess whether these conditions are met, and in assessing the need for cooperation, the project's contribution to mixed housing.

In relation to risks, it is important that the contract ensures that the General Housing Act is respected, even if the task is entrusted to a private operator.

How to ensure good collaboration in a delegated developer model?

It goes without saying that private developers and social housing organisations come from different starting points, which is why it's really important to take the time to agree on expectations before starting the project.

The Building Damage Fund, in cooperation with BL - Danmarks Almene Boliger - has developed paradigms for a general contractual basis when social housing organisations and private actors cooperate to build mixed housing. The basis includes a conditional cooperation agreement, a conditional purchase agreement and a conditional total contract agreement. If you are new to this field, I would strongly recommend that you read and make use of The Building Damage Fund's guidance and paradigms here or to ally yourself with a professional advisor.

In my experience, if you do your homework properly, projects solved in a delegated contractor model run at least as well as other projects, and the different perspectives add good value to the overall project.

Is the role of the architect different in a delegated developer model than in other projects?

Both yes and no. As architects, we always start from the concrete project, and each project is its own. That said, there are some common elements of public-private housing projects that we focus on in particular. Precisely because projects in a delegated developer model have great potential to contribute to the mixed city and socially sustainable housing, we as architects have an essential role in putting that potential into practice through architecture that accommodates diverse and changing needs, and creates the framework for healthy communities. 

Research shows that the immediate environment has a major impact on people's well-being. The social sustainability it creates also helps to underpin the economic and environmental sustainability of specific projects. Indeed, successful socially sustainable architecture results in less tenant/owner turnover, less need for renovation and, ultimately, a longer building life.

Can you share a concrete example of a project built with a delegated contractor model?

At KHR we are working on a housing project in Kregme, where public and private housing is built in a 50-50 split. In our winning proposal, the plan for the area calls for both smaller communities around shared courtyards and a larger community for the whole complex. The general and private housing is mixed also within the small communities to create the best possible social cohesion in the development. This also applies to the integration of apartments for socially vulnerable people, where the municipality has 100 percent assignment rights. It is our clear experience that the cooperation between the two developers, Bo-Vita and Svanen Development, enriches the project and creates synergies across the board. It is certainly an advantage that the two developers have worked together on several cases, and we as architects have really been able to focus on the building's overall solutions.

Learn more about KHR's approach to residential architecture.

What does Section 116 of the General Housing Act say?

Commitments under section 115(1)(1), (2)(1), (4)(1), (5)(1) and (6)(1) may also be granted for the construction of social housing in cooperation between the recipient of the commitment and a private party constructing the housing in question, provided that

1) the co-operation is necessary to establish the housing and
2) the commitment recipient does not run unnecessary risks.

Paragraph 2. The municipal council may, in special cases, grant an undertaking under section 115(1)(1), (2)(1), (4)(1), (5)(1) and (6)(1), even if the recipient of the undertaking does not have a deed to the property during the construction of the dwellings. The conditions referred to in paragraph 1(1) and (2) must also be fulfilled.

Paragraph 3. The municipal council shall make commitments under paragraphs 1 and 2 conditional on the private party carrying out the agreed works in accordance with the obligations under public procurement law incumbent on the recipient of the commitment."