Legal & General has added an affordable housing division to its £15bn (€17.2bn) UK direct investment programme.

The UK insurer has launched Legal & General Affordable Homes which is being established through a development and management platform.

The new business plans to accelerate and grow the provision of affordable housing across the UK, targeting all areas of the affordable housing market, including new build and grant-funded affordable rent, social rent and shared ownership units.

Affordable Homes will aim to be fully operational and delivering 3,000 homes per year within the next four years.

Nigel Wilson, CEO of L&G, 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.”

Simon Century, the head of Affordable Housing, said: “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, Century added.

Affordable Homes is a subsidiary of L&G’s principal investment arm Legal & General Capital.