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Legal & General doubles Affordable Housing Fund with £120m from pension scheme
Legal & General (L&G) has more than doubled the size of its Affordable Housing Fund in two weeks with a £120m investment from a large pension scheme.
The second big contribution to the group’s Affordable Housing Fund comes from the Greater Manchester Pension Fund (GMPF), the UK’s largest local government pension scheme. It follows July’s £125m investment from Access Pool, a group of 11 local authority pension schemes with assets totalling £40bn.
As of 5 August, the fund now stands at total contributions of £280m, according to L&G. As well as the £120m from GMPF, internal clients have provided an additional £35m.
L&G and GMPF have a long partnership. Most recently, they invested together in life sciences developer Bruntwood SciTech.
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The fund will initially finance projects totalling 750 new affordable homes in areas from West Sussex to Cornwall, where they will be let at 30% to 50% of market rent or sold under shared ownership.
The fund’s pipeline consists of new build housing, 95% of which has an Energy Performance Certificate of Band B or higher.
L&G will operate a direct leasing model for “greater control” and better customer service and to reduce counter-party risk, and will be managed by L&G’s asset management arm.
The firm expects to raise “significantly” more money by the end of the year, to fund more housing. It added that GMPF’s investment means there will be a number of projects in the North.
Gerald Cooney, chair of GMPF, said: “I know the depth of the housing crisis in which we find ourselves as a nation.
“We see it as we place record numbers of homeless children in temporary accommodation, as we grapple with waiting lists for social housing getting longer and longer, and younger residents are priced out of homeownership.”
The fund has a “strong pipeline” of new homes via Legal & General Affordable Homes (LGAH), its in-house operator and developer established in 2018. LGAH has 5,500 completed homes and 3,000 in development. Last year, the for-profit provider built 1,304 homes and posted a pre-tax profit of £1.3m.
Laura Mason, chief executive of private markets in L&G’s asset management division, said that the news “demonstrates the important role pensions capital can play in investing in tangible assets that we believe can benefit the real economy while seeking to deliver positive societal outcomes”.
L&G is highly active in the sector. Housing associations represent a core part of its private credit portfolio, with around £1.75bn invested so far. In July, it provided £75m to Oxfordshire-based Cottsway Housing Association.
Ben Denton, chief executive of LGAH, said: “When we launched our affordable homes business back in 2018, we had the aim of attracting new, much-needed institutional investment into the asset class and increasing affordable housing delivery across the country.
“Now, with the launch of the fund and the support of partners like GMPF, we can make a real impact on people’s lives across the country, delivering homes that people can afford and place-based solutions to support inclusive growth, alongside delivering great customer service.”
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