Investors Begin The Affordable Homes Pile-On
Legal & General Affordable Homes has bought its largest single scheme to date, taking 207 new affordable homes at part of Ballymore’s Royal Wharf regeneration scheme, east London. Construction work is due for completion in 2023.
Legal & General Affordable Homes’ development pipeline now stands at more than 6,000 homes across the UK, with 1,000 homes currently in operation. The business estimates its portfolio has a gross asset value of more than £1B.
The move comes as private equity and institutional interest in the affordable housing sector accelerates. Patron Capital and Abu Dhabi's ADIA sovereign wealth fund have pivoted toward affordable housing.
The Legal & General move came just days after the debut investment of PGIM Real Estate’s affordable housing fund.
Launched with £190M backing from the Local Government Pension Scheme and the Bunrel Pension Partnership, the PGIM fund acquired single-family residential development sites in seven cities in the north and Midlands capable of delivering 433 two- and three-bed homes.
The logic of investment in affordable housing is that it is a sector where demand easily outstrips supply, a scarcity exacerbated by the coronavirus pandemic and government policy, and where the hallmark is long-term stability. Research by Savills published in 2019 also showed the sector's liability-matching return characteristics and potential for growth.
In April L&G revealed research that showed that the availability of quality affordable housing is most pressing in London, the south east and south west. It also found pockets of undersupply in every region, even those apparently untroubled by supply constraints.
Further momentum is coming from the top of the property business. Earlier this month the British Property Federation created an affordable housing committee to 'provide leadership' as the sector expands. Simon Century, Legal & General’s director of build-to-rent and affordable homes is part of the leadership team whose aim, said the BPF, is “to maximise the real estate industry’s investment in affordable housing, and ensure better understanding within central and regional governments of the opportunities that the industry can offer to expand its provision of affordable homes”.
Representatives of Grainger, M&G Real Estate, LaSalle Investment Management, Quintain, Federated Hermes and PGIM Real Estate are on the committee.
“The pandemic has affected every corner of our lives and has emphasised the need to provide safe, secure, affordable housing for families right across the country. We continue to prove the model of deploying institutional capital at scale to meet affordable housing need,” Legal & General Affordable Homes Chief Executive Ben Denton said of today's east London buy.
