Having taken the plunge and finally becoming a homeowner this week, I know all too well about Britain’s chronic housing shortage. I still occasionally wake up in a cold sweat from nightmares of yet another group viewing of yet another tiny, windowless box in Walthamstow, only to be told that I didn’t stand a chance unless I was willing to offer at least £5,000 over the outrageously inflated asking price.
So I was heartened to hear this week that institutional investors are planning to improve matters, where successive government have dismally failed.
Insurer Legal & General, one of the UK’s biggest institutional investors has announced plans to build five new towns over the next decade in a £5bn bid to tackle the country’s housing crisis.
The move is one of the first and more exciting results of the agreement made between insurers and pension funds and the government to pump institutional money into infrastructure.
For years, pension funds from Canada, California and Singapore have been snapping up UK companies and infrastructure assets, but our own pension funds have long been unwilling or unable to do the same. Size has naturally played a part in this lack of activity, something which, if it ever gets going, the the Pension Infrastructure Platform (PIP) will go some way towards rectifying.
While the Pip appears to be forever delayed, insurance companies have been busy. L&G, which has assets of £433bn under management, has already bought a Scottish housebuilder and also aims to become a significant private-sector landlord, providing homes for rent, especially for the young and the old, through the creation of garden cities.
“The UK needs innovative housing solutions”, says the firm’s chief executive, Nigel Wilson. “Demand far outweighs supply and if we’re going to tackle this problem we should look at what has worked in the past, and see how it can be updated and improved.
“One of the great British problems over the last 20 or 30 years has been an absence of supply and excessive house prices inflation, which has made it unaffordable to large parts of our communities. We don’t want house price inflation. We want steady growth in house prices.”
Hopefully there are a lot more such deals on the way; Prudential, Aviva, Standard Life, Friends Life and Scottish Widows have all pledged to invest in UK infrastructure and pension funds will no doubt eventually follow.
It is exciting to think just how much of a difference institutional investors can make to the future of the UK if they use their funds in the right way. The country gets the benefit of investment and the creation of housing and infrastructure it desperately needs. The institutions benefit from the ownership of real assets which should guarantee an income long into the future.
It seems like a win-win solution and if institutional investors can match their own needs with those of the entire country, they will be building a lot more than just houses and towns.
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