Legal & General (L&G) has pledged to invest at least £125 million of pension funds into affordable housing, aligning with the UK government’s initiative to tackle the housing shortage. This significant financial commitment aims to address the UK’s chronic housing deficit. The FTSE 100 pensions giant, also a major housebuilder, has launched a new affordable housing fund with an initial £125 million from the Local Government Pension Scheme, Access. This fund will finance the construction of homes nationwide, initially holding over 750 residences. Most of these homes will be designated for affordable rent, with the remainder for shared ownership and social rental purposes.
Labour leaders Keir Starmer and Rachel Reeves are driving efforts to unlock substantial investment from pension funds to support large-scale housebuilding and infrastructure projects across the UK. Their election manifesto promises to overhaul pension regulations, enabling easier investment into assets like infrastructure and private companies. This policy shift aims to unlock billions in pension funds, redirecting them towards tangible assets that can generate economic and social benefits.
Antonio Simoes, CEO of L&G, emphasised the need for private and public sector collaboration to release investment and address the UK’s housing deficit. He noted that this launch is a crucial step in mobilising pensions capital to invest in real assets, benefiting the broader economy and enhancing local communities. L&G, a pioneer in channeling pension money into private markets and alternative assets like property and infrastructure, underscores its commitment to innovative investment strategies.
Historically, pension funds have been excluded from such assets due to higher management costs. However, over the past two years, ministers and regulators have worked to facilitate the investment of retirement funds into these areas. L&G’s new private markets platform, launched last month, aims to enable more pension money to flow into sectors beyond traditional stocks and bonds, providing its 5.2 million members with diverse investment opportunities. This influx of capital can stimulate new projects and partnerships, driving growth and innovation in the housing sector.
The Labour government’s focus on narrowing the UK’s housing shortfall is a key agenda item. The shortage of affordable housing is acute, with fewer than 55,000 homes built in the past decade, far below the National Housing Federation’s recommendation of approximately 145,000 annually until 2031. In her inaugural speech as Chancellor, Rachel Reeves emphasised the government’s intention to get Britain building again, reintroducing compulsory housebuilding targets with a plan to construct 1.5 million homes in England during this parliamentary term. She identified pension investment as crucial to financing these plans, indicating that the party would leverage the pension system to fund construction and support British companies.
Leading property and housebuilding firms in the UK have welcomed Labour’s commitment and the reinstatement of compulsory housebuilding targets, describing them as hugely encouraging. David Thomas, CEO of Barratt Developments, highlighted the economic and social benefits of building more homes, stressing the need for collaboration between local and central government and the industry to deliver high-quality new developments nationwide. Rob Perrins, CEO of Berkeley Group, also praised the new direction, calling the plans a very positive start.
This collaborative effort marks a significant step in addressing the UK’s housing crisis. The involvement of major financial institutions like L&G in affordable housing initiatives showcases a strategic approach to mobilising substantial capital for public benefit. By leveraging pension funds, the government aims to create a sustainable model for funding large-scale housing projects, potentially setting a precedent for future infrastructure and development ventures. Successful implementation of this initiative could not only alleviate the housing shortage but also stimulate economic growth and community development across the country.
(Source: BBC)