Legal & General, the pensions and insurance firm, have joined in partnership with Dutch pension fund managers PGGM to build and rent 3,000 new flats across the UK. The scheme will see the new properties built and let out with Legal & General acting as landlord to the new occupants. The scheme is set to start with properties built in Bristol, London and Salford before possibly spreading further around the UK.
The two companies have joined together in this new venture which will begin with 650 flats in Bristol, Walthamstow and Salford and it is their way of taking steps to help tackle the housing crisis. Experts have estimated that over 250,000 new homes need to be built every year to manage the crisis and less than half this number is actually being built. The Legal & General Plan has been described as a “build-to-rent” venture and is said to be worth £600m.
Traditionally the UK private rental market has been dominated by individual landlords who work on a buy-to-let basis rather than large businesses but this has been changing as more companies have adopted a ‘build-to-rent’ mentality and put up blocks of homes and apartments purely for tenancy and not for sale.
Speaking on behalf of Legal & General Capital, the main investment division of the company, managing director Paul Stanworth described the UK rental market as ‘dysfunctional’ and said, "For this to change, and renting to become more affordable, we need to invest in the ‘new’, and build new homes to rent, and just stop inflating the prices of old housing stock."
Throughout this project Legal & General will act as the property developer and then the landlord of the properties once they are built. The company plans to use rental income to pay pensions and has a target of yields of 3 to 5%.
Legal & General are not the first insurance company to invest in private rental housing, as the asset management arm of the Prudential insurance group, M&G and Hermes Investment Management have also launched similar funds within the last few years. M&G’s first move in the rental market was to build 152 private homes for rent in Acton in West London.
Legal & General’s plan is to focus on urban areas with good transports links around the UK and they also have a focus on the outskirts of London due to their popularity. This new partnership with PGGM has come almost a year after Legal & General made their first investment into the private rental housing sector, with a £25m site in Walthamstow bought in February 2015, with plans to build and rent over 300 new flats.
In contrast to the UK, the build-to-rent market in other countries is much more commonplace with Legal & General’s new partner PGGM regularly investing in this sector and, in fact, have been doing so for over 40 years with nearly £3bn invested into residential projects both back at home in the Netherlands but also in the USA.
Build-to-rent satisfies the needs of the public with demand for housing being so high and also provides something palpable in return on investment for the investor; in this instance Legal & General and PGGM.
more companies have adopted a ‘build-to-rent’ mentality and put up blocks of homes and apartments purely for tenancy and not for sale.
Ian joined Eddisons in October 2010 and leads the Building and Project Consultancy team across the UK, continuing to build and develop on a strong range of industry knowledge and experience in his field gained over 15 years.
Specialising in multiple disciplines including building acquisition surveys and due diligence reviews, Ian covers the full range of building surveying services which includes project monitoring and management, and pre-acquisition surveys.