Legal & General has launched the L&G affordable housing fund, alongside a £125 mln (€149 mln) commitment from Local Government Pension Scheme (LGPS), Access, a collaboration of central, eastern and southern shires, composed of 11 LGPS administering authorities with assets totalling £40 bn.
As 1.2m households sit on local authority waiting lists in England, the fund will invest in well-designed, purpose-built affordable rent and shared ownership housing in areas of acute need and demand across England.
António Simões, group CEO, Legal & General, said: 'Today’s launch is an important step forward in putting pensions capital to work by investing in tangible assets that can help benefit the real economy and enhance local communities. With acute demand for affordable housing across the UK, the public and private sector need to work together to drive change.
'This fund builds on L&G's ambition to scale our private markets platform and catalyse our own balance sheet investments by offering our clients new investment opportunities that aim to deliver compelling financial returns whilst tackling real-world challenges.'
Data for England suggests that the level of new affordable homes being built (under 55k over the last decade) falls short of the National Housing Federation’s recommendations of c.145k a year until 2031.
The fund will aim to positively impact hundreds of people's lives, focussing on equity and affordability as its core social priority. The homes will align with Legal & General’s commitment in aiming to achieve net zero carbon by 2050 or sooner. The pipeline consists of new-build, energy efficient affordable housing stock, >95% of which has an EPC rating B or higher.
The strategy has a strong pipeline of new homes via Legal & General Affordable Homes (LGAH). At launch, the fund will hold over 750 homes, the majority of which will benefit from affordable rent, with the remainder being shared ownership and social rented homes.
The fund will operate a direct leasing model for greater control, high quality customer service and to reduce counter-party risk. The fund will be managed by Legal & General’s asset management arm.
With £1 bn invested in affordable housing to date, LGAH was established in 2018 as Legal & General’s own developer and operator of affordable housing, with the aim of attracting new, much-needed institutional investment into the asset class and increasing affordable housing delivery across the country.
Ali Farrell, fund manager, asset management division, L&G Asset Management, said: 'We’re thrilled that Access have committed £125 mln which will directly increase the supply of affordable homes.
'With traditional housing associations facing financial pressures, institutional investors, like ACCESS, are proving themselves as reliable partners in directing long-term pensions capital into areas that support society by unlocking more homes.'
Cllr Mark Kemp-Gee, chairman of the Access joint committee said: 'This allocation marks yet another key step in our initiative to diversify in private markets. We have been impressed with L&G’s history of delivery in the affordable housing space over a long period and believe this investment partnership will provide robust, stable, long-term financial returns for our members.'
