Insurance giant Legal & General has teamed up with Dutch pension fund manager PGGM to build over 3,000 homes to rent out.
The firms will initially invest £600 million as part of a Build to Rent partnership that aims to help address the UK housing crisis.
Currently, the UK only builds about half the number of the 250,000 homes which are needed each year.
The first 650 homes to be built will be in Bristol, Salford and Walthamstow. The remaining homes will be built in well-connected urban locations where there is strong demand.
Paul Stanworth, managing director of Legal & General Capital, said: “The UK rental market, compared to the US and Europe, is dysfunctional, with ever increasing rents and increasingly poor accommodation.
“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. At Legal & General we’re going to play our part by disrupting the market, and invest significant sums of long-term institutional money to build new rental housing, and develop a UK institutional rental market.”
Alex Rose, managing director of data analytics at Hometrack, said: “L&G has joined many other investors pursuing the attraction of stable returns from investing in private rented housing. Build to rent unlocks capital intensive housing schemes, typically in city centres. Research by the Investment Property Forum showed that build to rent could accelerate housing delivery as it means the viability and risk profile of a development is less reliant on private sales to generate cash.
“The practice will be an increasingly important feature of the new build market, linked to regeneration and investment in infrastructure across major cities and it will complement the planned delivery from house builders. In order to meet the Government’s stated housing targets we need a broad range of builders delivering homes and therefore announcements like this can only be regarded as good news.”
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