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Legal & General launches affordable housing fund with £125m from investors
Legal & General (L&G) has launched a new affordable housing fund with a £125m investment from local government pension schemes.
The L&G Affordable Housing Fund will hold more than 750 homes at launch, the investment manager said. Most of these homes will be let at affordable rent, with the remainder being for social rent or shared ownership.
Its initial £125m investment comes from Access Pool, a group of 11 local authority pension schemes with assets totalling £40bn.
The fund’s pipeline consists of new build housing, 95% of which has an Energy Performance Certificate of Band B or higher.
The fund will invest in “purpose-built” affordable rent and shared ownership homes in areas of “acute need and demand” across England.
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The fund 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.
António Simões, group chief executive of L&G, said: “Today’s launch is an important step forward in putting pensions capital to work by investing in tangible assets that can help benefit the real economy and enhance local communities.
“With acute demand for affordable housing across the UK, the public and private sectors need to work together to drive change.
“This fund builds on L&G’s ambition to scale our private markets platform and catalyse our own balance sheet investments by offering our clients new investment opportunities that aim to deliver compelling financial returns whilst tackling real-world challenges.”
Mark Kemp-Gee, chair of Access Pool’s joint committee, said: “This allocation marks yet another key step in our initiative to diversify in private markets.
“We have been impressed with L&G’s history of delivery in the affordable housing space over a long period and believe this investment partnership will provide robust, stable, long-term financial returns for our members alongside meaningful social benefits.”
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. Earlier this month, it provided £75m to Oxfordshire-based Cottsway Housing Association.
It also established its own operator and developer, Legal & General Affordable Housing, in 2018, which now has 5,000 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.
Simon Century, managing director of housing in L&G’s asset management division, said: “We are uniquely placed to tackle the current housing crisis and deliver more affordable homes given our expertise across fund management all the way through to the development and operations of assets.
“Having created assets for our own annuity division, we’re delighted that Access have chosen us as their partner, supporting our belief that institutional investment can help play a role in directly benefitting people.”
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