£100m financing secured as L&G commits UK pension money to increase the provision of affordable housing
18 Feb 2020
Legal & General announces that it has provided £100 million of long term debt financing to its affordable housing business, as it opens the door for UK pension money to back the provision of much-needed affordable housing. Secured against the income stream of a UK-wide portfolio of high quality operational affordable housing, this represents its first deal to generate attractive matching-adjustment, compliant direct investments from affordable housing for its growing annuity portfolio. A further £175m of development finance is being provided by a consortium of external investors to support the delivery of its current pipeline of 3,500 homes.
Legal & General is uniquely placed to invest annuity money into the UK economy, supporting its long-term pension commitments and creating real assets which provide new jobs, housing, productivity and wage growth. Affordable housing is an appropriate asset for Legal & General’s Pension Risk Transfer business, offering a secure portfolio of inflation-linked rental income which delivers long-term, diversified, stable returns. This latest investment demonstrates how Legal & General’s varied capital streams can be put to work in order to tackle the UK’s housing crisis and deliver extraordinary social outcomes.
The UK continues to suffer a growing crisis as 1.3 million households remain on waiting lists for social housing. One in three low income earners have had to borrow money to pay their rent and the steep decline in social housing has led to huge increases in government welfare costs, as well as rising homelessness. Legal & General is leading the evolution of the affordable housing sector; committed to raising service standards and deploying long-term institutional capital into a sector which continues to suffer from chronic undersupply.
Across its growing portfolio, Legal & General’s Affordable Housing business is delivering a mix of social rent, affordable rent and shared ownership homes. Established in 2018 and delivering its first homes in 2019, it is on target to create 3,000 homes each year by 2023 working in partnership with 14 established housing associations and providers.
Nigel Wilson: "Legal & General’s continued activity in the affordable housing sector demonstrates our unique ability to create real assets which match our long term pension liabilities, recycling the UK’s hard earned savings and pensions to support those most in need in society. We have already directly invested over £22bn into new homes, urban regeneration, clean energy and transport infrastructure. Bringing in pension fund capital gives us the scope to do even more. This is inclusive capitalism at its best."
Simon Century: "There is an urgent need to provide stable homes for millions of households on waiting lists. Legal & General is increasingly innovating with how to deploy institutional capital at scale to meet these needs and have a significant long term socio-economic impact. We have made a great start in executing our development programme, which now stands at nearly 3,500 homes all across the country. This investment from Legal & General Retirement will help us further bolster this pipeline."
Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with over £1.2 trillion in total assets under management* of which 39% is international. We have a unique and highly synergistic business model, which continues to drive strong returns. Legal & General provides powerful asset origination and management capabilities directly to clients, which also underpin our leading retirement and protection solutions. We are a leading international player in Pension Risk Transfer, in UK and US life insurance, and in UK workplace pensions and retirement income. Our purpose is to improve the lives of our customers and create value for our shareholders. Through inclusive capitalism, we are investing in long-term assets, such as real estate and infrastructure, that can help build a better society for the future.
*as at HY 2023
Legal & General Capital (LGC) is Legal & General Group’s alternative asset platform, creating assets for Legal & General Retirement and third-party clients in order to achieve improved risk-adjusted returns for our shareholders. LGC has built its capabilities in a range of alternative sectors, including in residential property; specialist commercial real estate; clean energy; alternative credit; and venture capital, which are all supported by long-term structural growth drivers, meet a financing gap and respond to a scarcity of supply that is underpinned by enduring societal needs.
Its purpose is to invest society’s capital for society’s benefit. Investing in the real economy and supporting the Group’s focus on climate and inclusive capitalism, LGC’s investments create jobs, change lives and contribute towards a net zero carbon future.
Legal & General has invested over £29bn in levelling-up regional economies, including through major UK-wide regeneration schemes and has recently made a commitment to enable all its new homes to operate at net zero carbon emissions from 2030.
*at 31 Jun 2021