Coventry Society Vice Chair, Tim Brown, tells us about a new player in the social housing sector. Tim writes…..
There has been considerable coverage of the start of the demolition work – see, for example, the City Council’s video at Demolition has started – City Centre South.
But ‘under the radar’ there has been an interesting development on the delivery of affordable housing. Legal and General have agreed to buy 200 homes that will be built by the Hill Group in phase one of City Centre South. This comprises 145 units at social housing rents (approximately 50% of market rents) and 55 shared ownership properties where customers buy a proportion of their home with a mortgage and pay rent on the outstanding portion. The first of these homes should be available in late 2027.
Legal and General is a global financial services group providing, amongst other things, ISAs, mortgages, and insurance. It was set up in 1836 and its headquarters are in the City of London. It currently has assets of $1.7 trillion. One of its subsidiary companies is Legal and General Affordable Homes (LGAH) which was set up in 2019 – see Shared Ownership Houses & Affordable Housing Across the UK – Legal & General Affordable Homes. It already has 5,000 homes under management and plans to build or buy 3,000 new homes each year. It is, thus, a major player in the housing market. It has strategic partnership status with Homes England who runs the government’s affordable housing programme and is overseen by the Regulator of Social Housing. It, therefore, is similar in some respects, to housing associations already operating in Coventry such as Citizen, Midland Heart and Orbit, but it is a private company.
This may be the shape of things to come in the future delivery of affordable homes:
- Institutional investors (such as Legal and General) buying new affordable homes off the shelf from developers before construction even starts
- Direct development by institutional investors
- New products – Legal and General have taken the lead nationally since 2020 on single family suburban build to rent homes which now forms an increasing element of their portfolio.
The government with its ambitious target of delivering 1.5 million new homes by 2029 strongly supports institutional investment. Following the Chancellor of the Exchequer’s Spending Review on 11 June, the government has launched a national housing bank that aims to lever in £53 billion of private investment to help deliver 500,000 new homes.
But why would institutional investors seek to get involved in affordable housing? Basically, the rate of return on some types of affordable housing and on build to rent is seen as a long-term safe investment that will provide an acceptable steady return of 4.5% or more per year. It, thus forms, a small but useful part of an investment portfolio especially as it is becoming an established asset class within a property portfolio.
So, look out for new players in the provision of new affordable homes in Coventry over the next few years! As well as Legal and General and its LGAH subsidiary, we may see companies operating in Coventry such as Lloyds Banking Group and its social housing initiative as well as its Lloyds Living subsidiary, and Sigma Capital.
