English insurance firm Legal and General has collaborated with a Dutch pension fund manager to develop 3,000 lofts all over the UK under a £600m "build-to-rent" plan.
L&G and PGGM will at first form 650 pads in Bristol, Salford and Walthamstow, north-east London, to handle the existing lodging crisis. Just about half of the 250,000 new homes that were required to support population each year are being built.
The UK private rental business sector has customarily been ruled by individual buy-to-let landlords, however in the past couple of years, huge institutional financial investors and developers, for example, Berkeley Homes have entered the market to build rental home units.
Paul Stanworth, managing director of Legal & General Capital from the insurer's main investment division, said, "The UK rental market, compared to the US and Europe, is dysfunctional, with ever increasing rents and increasingly poor accommodation. For this to change, and renting to become more affordable, we need to invest in the 'new', and build new homes to rent, and just stop inflating the prices of old housing stock."
L&G will go about as the developer, and once the pads, playing somewhere around one to four rooms, are finished, it will be the landlord and use rental yields to pay annuities. It is expecting yields within a 3-5% quota.
L&G plans to concentrate on urban zones with great transport systems around the country and on the edges of London. Its collaboration with PGGM comes about a year after the UK company made its first venture in private rental housing and set out plans to put £1 billion in the sector. In February 2015, LGC purchased a £25m site at Walthamstow to construct and lease more than 300 pads. It is putting this site into the new investment.
L&G has likewise been putting resources into leased student housing in collaboration with universities, and is conversing with local powers about giving affordable lodging. Stanworth said the route in which houses are built have to change, referring the home-building methods prominent in mainland Europe and the US.
