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Legal & General plans Greater London Authority investment

Legal & General Property has become the first institutional investor to reveal it will be investing in the Greater London Authority’s proposed new multi-billion-pound housing zones.

The firm’s managing director Bill Hughes told Construction News it would look to invest in London’s “best” zones, which could provide billions in work for contractors.

He added: “We’ve got a commitment to the sector, we’ve got some expertise, we have a significant volume of capital – all of those situations we’ll be reviewing.”

But he said the firm would not look to invest in “every single housing zone”, but would choose “the best, the most deliverable and the ones most likely to deliver success”.

The GLA launched its housing zones prospectus this year, inviting London boroughs to bid for a share of £400m of funding to boost housebuilding on brownfield sites in their areas.

“It could mean your scheme riding out potentially tricky waves as elections come up and the politics begin to change in several local areas”

Jonathan Seager, London First

Twenty London housing zones are expected to be created in total, with boroughs due to submit bids for funding by the end of September.

Ealing, Enfield and Harringey boroughs are among the frontrunners to secure the funding, which is being provided by the GLA and central government.

The initiative has been identified as an additional route into the property market for institutional investors, providing large-scale residential opportunities for firms to invest in, as the UK continues to suffer from lack of supply in areas such as affordable housing.

Government figures last week showed housing starts were up 22 per cent year on year to 137,780 in the 12 months to June 2014, but still a long way short of the estimated 200,000-plus needed annually to tackle the housing crisis.

Prudential subsidiary M&G Real Estates told Construction News the GLA’s housing zones were something it was “monitoring with interest”.

A spokeswoman said: “Depending on which local authorities come forward – and obviously where there is an opportunity for us to get involved in place-making – then yes I think we would potentially be interested.”

London First director of housing policy Jonathan Seager said political support for housing zones would help attract developers and investors.

Local authority and GLA backing for the initiative would help provide continuity for the private sector ahead of the general election, Mr Seager added.

“Housebuilders can’t get onto sites quick enough… if you can speed up that planning system then you will see increases in supply”

Home Builders Federation spokesman

“That is important for a developer… it could mean your scheme riding out potentially tricky waves as elections come up and the politics begin to change in several local areas.”

The government, which has set up a £200m fund for housing zones outside London, hopes the initiative will attract the interest of the private sector, working together with local authorities to provide all types of housing.

A Home Builders Federation spokesman said speeding up planning decisions would be the main benefit of establishing housing zones.

“[Housebuilders] can’t get onto sites quick enough… if you can speed up that planning system then you will see increases in supply.”

On the criteria needed to attract housebuilders and institutional investors to build more homes in the UK, Legal & General Property’s Mr Hughes said the two sectors took a “different approach”.

“Housebuilders are thinking about turnover and the next scheme where they can make a margin,” he said.

“Long-term capital is thinking about place-making… and multiple decades of ownership because you’re interested in sustainability and the wider sense of community, so it’s a different approach.”

He said he was confident long-term capital from institutional investors would flow into the residential sector, adding that “half way through 2014, it’s still very early days”.

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