Legal & General has made its first direct investment in the UK’s private-rented sector (PRS) housing market.

The insurance company said it plans to become a major owner of rented accommodation, aiming to invest up to £1bn (€1.35bn) in the sector.

Legal & General Capital bought a £25m regeneration site in east London, two years after first announcing its intention to invest in PRS.

The Walthamstow scheme will include 300 flats, which L&G said will provide an “attractive long-term institutional investment return”.

Bill Hughes, head of real assets at Legal & General Investment Management, said this week that PRS is a “key part of solving the housing supply crisis”.

He said: “The sector will enhance economic productivity through providing greater flexibility, as well as providing good value, high quality accommodation.”

Speaking at the British Property Federation’s (BPF) residential conference last month, Hughes said the reason PRS “hadn’t happened in UK is that there are gaps in the right sort of real estate, and few organisations with the appetite to take development risk”.

Legal & General has already been active in the other areas of the UK residential sector, and it recently announced it was planning to raise capital for a £15bn UK regeneration fund that would invest in housing and infrastructure.

Hughes told IP Real Estate that the fund – for which Legal & General has committed £1.5bn of its own capital – will focus on “shovel-ready” housing projects, while Legal & General will continue to invest more widely in residential market.

“There is a weight of capital that wants to own institutional quality” PRS housing, but the stock does not exist. Legal & General has the capabilities to build it, he said.

Read more of the interview with Bill Hughes in the next edition of IP Real Estate magazine