Legal & General has secured an extra £150m for its UK affordable housing drive, pushing its total pot to £280m.
The lion’s share of this new funding comes from the Greater Manchester Pension Fund (GMPF), which has pledged £120m towards the company’s drive to add to its existing portfolio of more than 8,000 affordable homes.
GMPF is the largest local government pension scheme fund in the UK, managing more than 375,000 pensions and paying out more than £750m each year.
While pension cash has typically been shut out of such assets due to the higher costs associated with managing the money, ministers and regulators have been looking to ease the way that retirement money can be invested over the past two years.
And with 1.3m households currently stuck on local authority waiting lists in England, Gerald Cooney, chair of GMPF, said the funding boost couldn’t come at a better time.
He added: “As a leader of a council, as well as a chair of a pension fund I know the depth of the housing crisis in which we find ourselves as a nation.
“We see it as we place record numbers of homeless children in temporary accommodation; as we grapple with waiting lists for social housing getting longer and longer; and younger residents are priced out of home ownership.
“That’s why we are proud to be the cornerstone of this investment with longstanding investment partner Legal & General and support the government’s plan to provide much needed affordable homes for hardworking families whilst aiming to deliver strong low risk returns to pay the pensions of our hardworking members.”
Laura Mason, CEO private markets and asset management division, said: “Today’s announcement demonstrates the important role pensions capital can play in investing in tangible assets that we believe can benefit the real economy while seeking to deliver positive societal outcomes.
“With acute demand for affordable housing across the UK and with [the] government signalling the delivery of more affordable homes as a top priority, the public and private sector need to work together to drive change, and institutional investment has a pivotal part to play.
“Our evolving partnership with Greater Manchester Pension Fund is testament to this, as well as the strength of the platform we have created to utilise Legal & General’s catalytic balance sheet capital in investment opportunities for our clients.”
What is Legal & General’s affordable housing fund?
Legal & General launched its new fund to deliver affordable housing across England in July, alongside a £125m commitment from the Local Government Pension Scheme (LGPS), ACCESS – a collaboration of 11 administering authorities.
The company said it plans to team up with councils and other providers to tackle the UK’s housing crisis, with the vehicle aiming to deliver a “diversified inflation-linked cash flow” for investors.
The fund is set to initially finance projects totalling 750 new affordable homes across regions from West Sussex to Cornwall.
These projects will include rented flats offered at 30 per cent to 50 per cent below market rent, or available under shared ownership schemes.
The firm anticipates raising “significantly” more capital by year’s end to support additional housing initiatives. Additionally, GMPF’s investment ensures that several projects will be located in the north.
To date, Legal & General has spent £1bn on its affordable homes business, where it acts as a developer and operator of affordable housing backed by its asset management division, since its launch in 2018.
It now comprises 8,000 homes: more than 5,500 existing ones and 3,000 in development. Last year, it built 1,304 homes, the highest annual total since its launch, and made a pre-tax profit of £1.3m, after a £7.5m loss in 2022.