PGIM Real Estate’s recently launched UK affordable housing fund, backed by local government pension scheme (LGPS), has made its debut investment.

The UK Affordable Housing Fund, which raised £190m (€221m) from two LGPS pools – Northern LGPS and Brunel Pension Partnership – earlier this year, has acquired eight single-family residential sites from build-to-rent provider Wise Living.

The portfolio is spread across seven cities and towns in the Midlands and North of England, and includes five stabilised assets and three development sites covering 314,000sqft.

PGIM said the sites would eventually provide a total of 433 two and three-bed homes, all with good access to road, rail and bus transport, and proximity to employers, schools, supermarkets and other amenities.

PGIM’s fund is designed to invest in and develop single-family homes with rents that are affordable for working people and families across the UK.

The company has been managing social and affordable-housing investments on behalf of the Co-Op corporate pension scheme prior to the launch of the fund.

PGIM said that residential rental growth, outside central London, had remained robust across the UK over the past year, despite a sharp drop in household income growth resulting from COVID-19.

The company anticipates that residential rents will track a rebound in household income growth in the coming years, positioning residential property to generate “solid long-term income-driven returns for investors”.

Head of UK transactions Charles Crowe said PGIM had “a strong track record in affordable housing, making our first investment in the UK back in 2016”.

He added: “Our recently launched strategy aims to alleviate the major supply/demand imbalance within UK affordable housing, benefiting working people and families, as well as income-focused investors.

“Despite recent economic uncertainty as a result of Covid-19, suburban areas and smaller towns with a greater emphasis on housing over apartments are reporting much stronger rental growth than city centre markets.”

Crowe was named among 15 members of a new affordable housing committee launched today by the British Property Federation to provide leadership to the real estate industry in the fast-growing area.

PGIM said it would work closely with Wise Living, which will manage the properties, to source further opportunities.

Andy Deller, CEO of Wise Living, said: “This is a significant transaction and marks the beginning of our new collaboration with PGIM Real Estate.

“We will be working together to secure further sites for it to invest in over the coming months and years. It’s an exciting project that will be a key part of our ongoing strategy to deliver rental homes to under-supplied suburban areas in the UK.

“The partnership is underpinned by the fact that we share the same values and view of the private-rental sector and will enable both businesses to push forward with plans to help meet the growing demand from UK families for quality rental homes.”