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L&G aims to dominate sector with new housing association
The UK’s largest institutional investor is seeking to build more than the rest of the social housing sector with the launch of its own housing association.
Legal & General (L&G)’s new association will aim to get development up to 3,000 homes a year within four years, which would make it easily the biggest builder in the sector, ahead of L&Q, which built 2,247 homes in 2016/17.
The association will be called L&G Affordable Homes and will have long-term financial backing from L&G “with an aim to become the leading private affordable housing provider in the UK”.
It will be established, L&G said, “through a leading development and management platform”.
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This, along with the claim that it will use “the housing management expertise of the leading existing affordable housing providers”, suggests that big players in the sector may be closely involved with the project.
The association will target all areas of affordable housing across the UK, including new build Section 106 and grant-funded homes for affordable rent, social rent and shared ownership.
Nigel Wilson, chief executive of Legal & General, said: “Despite the fact that the UK is a great place to invest, 30 years of underinvestment have led to poor productivity, low real wage growth and numerous market failures.
“Affordable housing is a classic example of underinvestment with minimal new equity capital being deployed to the sector. This is not a sustainable position – either for the sector or for the 1.3 million households currently on a waiting list. This important sector has now been added to Legal & General’s £15bn UK direct investment programme.”
Simon Century, head of affordable housing, added: "Many housing associations are becoming increasingly highly leveraged, as they have funded significant amounts of development through debt funding for many years.
“They have no ability to raise equity and maintain a sustainable financial structure – therefore forcing many to significantly limit their growth ambitions.
“Legal & General Capital is building a more natural and sustainable model – one in which institutional investors are the long-term holders of the assets working alongside the best-in-class affordable housing operators who will provide the highest quality housing management.”
L&G’s intervention makes it the most significant new entrant to the sector since Blackstone, the world’s largest property investor, entered the sector by funding for-profit Sage Housing Association to buy Section 106 affordable housing allocations from private developers.
