Legal & General Partners with Nest and PGGM to Tackle Housing Shortage
In a significant move for the UK housing market, Legal & General (L&G) has announced a £350 million partnership with the UK pension scheme Nest and PGGM, a prominent Dutch pension fund service provider. This collaboration aims to build and manage rental properties across the UK, addressing the pressing need for high-quality housing while also generating stable returns for institutional investors.
A Vision for Investment and Growth
The partnership is poised to invest up to £1 billion in a build-to-rent portfolio over the coming years. Emma Reynolds, the Minister for Pensions, emphasized the potential of the pensions sector to contribute to local communities and stimulate economic growth. She stated, “The government’s landmark pensions review seeks to unlock billions of pounds of investment in the UK economy and drive pension capital into long-term growth assets to make every part of Britain better off.”
This initiative is not merely about financial returns; it represents a strategic effort to enhance the quality of life in urban areas by providing much-needed rental housing.
Building on Existing Foundations
This new partnership builds on the existing joint venture between L&G and PGGM, known as the Access Development Partnership (ADP), which was launched in 2016. The ADP was established to increase the delivery of rental homes and ensure stable returns for investors. With Nest’s involvement, this marks the second phase of the ADP, focusing on developing properties on brownfield sites in city centers. Importantly, all new rental schemes will aim for net-zero operational emissions by 2030, aligning with broader environmental goals.
Collaboration with Local Authorities
L&G has committed to working closely with local authorities to ensure that the housing developed is not only affordable but also integrated into the community. The partnership aims to provide housing that is accessible to residents and offers full facilities, enhancing the overall living experience.
Once the homes are constructed, L&G’s asset management division will take charge of managing the properties, ensuring that they meet the highest standards of quality and sustainability.
Addressing Housing Demand
Elizabeth Fernando, Nest’s Chief Investment Officer, highlighted the critical shortage of housing supply in the UK, coupled with the increasing demand for high-quality rental homes. “By building more properties, we can extend to our members a great investment opportunity while helping to meet this demand and bolster the rental market,” she stated. This sentiment underscores the dual focus of the partnership: to provide investment opportunities for pension fund members while addressing a significant societal need.
A Milestone for Private Markets
António Simões, Group Chief Executive of L&G, described the announcement as an important milestone for the company’s ambitions in private markets. He noted that the launch of ADP in 2016 has already facilitated the delivery of 10,000 high-quality rental homes across the UK’s city centers, demonstrating the effectiveness of this collaborative model.
Dirk Bootsma, Senior Investment Manager at PGGM, echoed this sentiment, stating that the investment not only generates stable financial returns for their clients but also contributes to alleviating the housing crisis affecting key workers in the UK.
Recent Developments and Future Prospects
Earlier this year, L&G launched a new affordable housing fund with a £125 million investment from local government pension schemes, which quickly grew with additional investments. The company has also been active in expanding its suburban build-to-rent platform, recently signing a £40 million deal with Vistry Group to develop new properties in Coventry.
In a strategic shift, L&G announced the sale of its house builder, Cala Homes, for over £1 billion, just six months after reporting declining profits. This move reflects a broader strategy to focus on rental properties, which are increasingly seen as a stable investment in uncertain economic times.
Conclusion
The partnership between Legal & General, Nest, and PGGM represents a proactive approach to addressing the housing crisis in the UK while providing valuable investment opportunities for pension funds. As the demand for high-quality rental homes continues to rise, this collaboration is set to play a crucial role in shaping the future of the UK housing market, ensuring that it meets the needs of both investors and communities alike. With a commitment to sustainability and community integration, this initiative could pave the way for a more resilient and equitable housing landscape in the years to come.