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15 minutes with... Ben Denton, managing director of Legal & General Affordable Homes
Ben Denton left Sovereign Housing to take up the role of managing director at Legal & General’s fast-growing housing association business, L&G Affordable Homes. He catches up with Peter Apps to discuss how the organisation is set to grow
Legal & General (L&G) has said it wants to become the leading private provider of affordable housing. What does that entail?
That ambition still stands. There are five strands: we’ve always said we want to be developing about 3,000 affordable homes of all tenures right across the country a year; we want to be the pre-eminent institutional investor in the affordable housing space; we want to collaborate with the sector to make sure we’re growing the whole sector as well as delivering our business plans; we want to deliver great customer service; and the final point is about sustainability – how can we accelerate quicker towards net zero.
Where are you at the moment with the 3,000 homes plan and what is the growth trajectory?
2020 was our second year of operations and we handed over 670 homes.
Right now we have just under 5,000 homes in our pipeline, which we define as schemes where we’ve agreed heads of terms and we’ve taken them through our scrutiny process. There’s probably another 1,500 we expect to come in over the next couple of months.
In terms of the proportions, about 15% is direct delivery and 85% is either Section 106 or open market homes, which we convert to affordable with grant, and we expect over time to move to just over a third as direct delivery.
Tenure-wise, roughly speaking, it’s 50/50 between rented and shared ownership and then 25% of the rented is social rent and the rest is affordable.
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Does L&G intend to manage any of the homes itself?
No, all the homes are managed by our partners. The biggest is Stonewater but we’ve got homes in management with Flagship, Jigsaw, Optivo, [management company] Pinnacle and we’ve got further partners coming on board as homes are handed over in different areas – for example Karbon in the North East.
So the structure is that L&G is the landlord and our management provider provides the management and the repairs and maintenance services.
Apart from Pinnacle it’s all through registered providers and all of the organisations are great management providers and deliver really high levels of customer satisfaction.
What are you doing at the moment with regard to net zero?
We worked with Arup in 2020 to put together our sustainability strategy, which said everything we build ourselves will be net zero in operation by 2030 and the homes that we buy will be capable of net zero by 2030.
We see it as a journey from [Energy Performance Certificate] B, to A, to net zero. In our delivery programme just over 75% of the homes are going to be EPC A, so we’re making good progress in that area. We see modular as a critical component in helping us make that step more quickly.
How does this ambition link up with the modular factory that L&G owns?
Around half of our direct delivery is modular. All our businesses operate on an arm’s-length basis – we enter into commercial contracts when appropriate to do so.
Quite a lot of our direct delivery programme is with the modular business because it’s a great product and we don’t have to do an awful lot of work to get it to net zero.
You made the switch from Sovereign. How different has it felt going from a traditional housing association to a private provider?
If you look at L&G’s ethos and values, you can see exactly those standards in the not-for-profit sector. So from that perspective, the values of the organisations are not that different.
What is different is the pace of change and the agility. I guess we’re just a quicker-growing registered provider. For example, we bid for between 50 and 60 schemes a week right across the country, whereas at Sovereign it might have been a quarter of that.
We’re also a regulated business within a regulated business, so the level of control and risk management and detailed knowledge of everything on a minute-by-minute basis is much more intense.
Is this model the future for the social housing sector?
It will be interesting to see. Certainly, there’s an appetite for greater institutional investment in the sector, but you have to work with the regulator so it’s more difficult than starting a build-to-rent business, for example.
What’s interesting is the number of well-established providers that are now looking at partnering with institutions.
I think the alignment between trusted providers and trusted institutions is something there will be more of going forward. We can bring long-term, patient capital while they invest in meeting net zero and the building safety agenda.
If we’re all holidaying at home this summer, what is your go-to UK holiday destination?
For me, it has to be the South Coast. There are some amazing places down there where you can fly the kite and walk the dog, and the kids can run about as well. It’s a lovely, lovely part of the country.
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