Legal & General has announced the launch of Legal & General Affordable Homes, a new wholly-owned affordable housing provider which it is establishing through a leading development and management platform.

Focused on supporting the UK's demographic and affordable living needs, and consistent with Legal & General's housing growth strategy, Legal & General Affordable Homes will lead the evolution of the affordable housing sector with an aim to become the leading private affordable housing provider in the UK. It forms a subsidiary of Legal & General Capital, which invests capital into sectors where there has been a shortage of investment and innovation, focusing on growth opportunities and scale ups.

The UK continues to have a chronic shortfall of over 100,000 homes per year. The position is particularly stark in the affordable housing sector with over 1.3 million households1 on UK waiting lists with new additions averaging only 30,000 properties a year over the last 10 years. Legal & General Affordable Homes will aim to be fully operational and delivering 3,000 homes per year within the next four years.

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With Legal & General's long term financial backing and utilising the housing management expertise of the leading existing affordable housing providers, the new business will be looking to accelerate and grow the provision of affordable housing across the UK, targeting all areas of the affordable housing market, including new build Section 106 and grant-funded affordable rent, social rent and shared ownership units.

Nigel Wilson, CEO of Legal & General, said: "Despite the fact that the UK is a great place to invest, thirty years of underinvestment have led to poor productivity, low real wage growth and numerous market failures. Affordable housing is a classic example of underinvestment with minimal new equity capital being deployed to the sector. This is not a sustainable position - either for the sector or for the 1.3million households currently on a waiting list. This important sector has now been added to Legal & General's £15 billion UK direct investment programme."

Simon Century, Head of Affordable Housing, added: "Many housing associations are becoming increasingly highly leveraged, as they have funded significant amounts of development through debt funding for many years. They have no ability to raise equity and maintain a sustainable financial structure – therefore forcing many to significantly limit their growth ambitions. Legal & General Capital is building a more natural and sustainable model – one in which institutional investors are the long-term holders of the assets working alongside the best-in-class affordable housing operators who will provide the highest-quality housing management."

(MH)