Legal & General has launched Legal & General Affordable Homes, a new wholly owned affordable housing provider.
“Despite the fact that the United Kingdom is a great place to invest, 30 years of underinvestment have led to poor productivity, low real wage growth and numerous market failures,” said Nigel Wilson, CEO of Legal & General. “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 £15 billion [$21 billion] U.K. direct investment program.”
Legal & General Affordable Homes will focus on supporting the United Kingdom’s demographic and affordable living needs.
The United Kingdom continues to have a chronic shortfall of over 100,000 homes per year, according to the firm. The position is particularly stark in the affordable housing sector with over 1.3 million households on U.K. waiting lists, with new additions averaging only 30,000 properties a year over the past 10 years. Legal & General Affordable Homes will aim to be fully operational and delivering 3,000 homes per year within the next four years.
“Many housing associations are becoming increasingly highly leveraged, as they have funded significant amounts of development through debt funding for many years,” said Simon Century, head of affordable housing. “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.”
