Legal & General Capital (LGC) and Dutch pension fund manager PGGM have started a partnership to build properties in the UK specifically for renting to private tenants.
The joint venture will initially invest £600m ($855m) into constructing purpose-built private rental housing across the UK and supply more than 3,000 homes. LGIM Real Assets, the real estate management arm of LGC, will manage the partnership, and PGGM will bring 40 years of experience in investing in built-to-rent housing.
An LGC spokesman told Insurance Asset Risk this is its first foray into build-to-rent although LGIM does run more than £12bn in property.
"The LGC and PGGM partnership aims to help address the UK housing crisis by increasing the supply of new homes. The UK does not achieve its minimum house building target – building only around 50% of its 250,000 annual requirement, forcing a higher proportion of its population into sub-standard rental accommodation," said L&G.
"LGC plans to disrupt the status quo of ever-increasing rental rises by investing long-term institutional funds into building new homes to rent at scale, and by developing a UK institutional rental market."
The constructions will be of a high standard and meet sustainability standards, the partners said.
Through this project, LGC will increase its exposure to housing and create build-to-rent as an institutional asset class. This will swell its balance sheet and create attractive long-term investment opportunities for L&G's retirement and LGIM's pension fund clients.