Insurance firm Legal & General has moved further into the realm of house building with the launch of an affordable housing provider.
Legal & General Affordable Homes plans to build 3,000 affordable homes a year within the next four years once fully operational.
It will be a subsidiary of Legal & General Capital and aims to become the leading private affordable housing provider in the UK, the firm said.
Legal & General Capital invests capital into sectors where it has identified a shortage of investment and innovation.
The insurer, which already owns Cala Homes and a modular housing factory, and is investing heavily in the build to rent sector, said the new business would look to accelerate and grow the provision of affordable housing across the UK.
The business will target all areas of the affordable housing market, including new-build Section 106 and grant-funded affordable rent, social rent and shared ownership units.
Legal & General pointed to government figures that show a shortfall of 100,000 homes per year in the UK, with over 1.3 million households on UK waiting lists for affordable housing and new additions averaging only 30,000 properties a year over the last 10 years.
Nigel Wilson, CEO of Legal & General, said: “Despite the fact that the UK is a great place to invest, thirty 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 1.3m 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.”
