Legal & General Group PLC (LSE:LGEN) has agreed to co-invest £1 billion in build-to-rent developments in the UK with pension scheme giants Nest and PGGM.
The three organisations will initially invest a combined £350 million in building new homes that they will own and earn rental income from, promising that all will be built on brownfield land in city centre locations.
It is part of a growing interest in build-to-rent in the UK in recent years, which has attracted companies from both inside and outside the building industry, including banks such as Lloyds Banking Group, retailers like John Lewis and, most recently, housebuilder Berkeley Group Holdings.
L&G says it has invested more than £3 billion into the BTR sector, having teamed up with Dutch pension group PGGM to deploy cash in the UK housing market in 2016 as a way of creating stable returns for institutional investors.
The FTSE 100-listed life insurer says the Access Development Partnership as it is called has led to more than 10,000 rental homes being built, with the residential portfolio "one of the largest and most diverse in the UK".
Today’s announcement is for the second phase of the ADP partnership, with Nest joining as a third co-investor.
L&G chief executive António Simões said: "We’re proud to have facilitated investment from domestic pension schemes as well as international private capital – underpinning the UK Government’s push to boost investment into productive assets, accelerate growth, and deliver pensions savings."
He noted that there is "a big gap to fill" between UK housing supply and demand, and he expects investor demand in the UK’s BTR sector to continue to grow.
The new investment in the partnership is "not only accelerating delivery but also unlocking DC pensions access to the investment opportunity within the residential sector".
Nest is a public corporation set up to manage the national auto-enrolled workplace pension scheme.
The government has previously called on the UK-defined contribution pension industry to consider boosting investment in UK assets to aid UK economic growth.
Emma Reynolds, Minister for Pensions, said the new round of investment "highlights the opportunities for our pensions sector to contribute to our communities and grow the economy".
She said Nest is "harnessing the financial power of pensions to deliver more of the homes this government has pledged to build, which also serves as an excellent investment opportunity for future pensioners in their scheme".
"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."