Insurer Legal & General has signalled it plans a major investment in the private rented sector, for the long term. Speaking at a MIPIM UK debate organised by Estates Gazette and sponsored by Macfarlanes, L&G managing director Bill Hughes said he foresaw a time when specially designed, specified and built homes for rent would form a significant part of the company’s investments.
Hughes also said he believes so firmly in the long term value of rental homes, that he does not see the need for planning incentives to help get development going; nor does he believe there will be the need for the safety net of open market sale, were the rental sector to develop problems – as some have argued for.
“We’re mainstream and large investors in the residential sector,” said Hughes. That investment was across all sorts of touch points, but he said of the private rented sector: “It’s an existing part of the future. It’s principally an urban phenomenon. The thing that matters to me the most, if you’re a long term investor, is that rental housing is a very attractive investment.” That did, however, require a long term time horizon, and good management.
Hughes said there was a major problem with the wider market right now. “The housing industry needs to deliver more supply. All forms of participant will need to do more. PRS is something that all forms of housing market participant should be looking at.” There were other issues to tackle, he believes, including helping the older generation downsize – “last time buyers”, as he called them.
“The UK will only ever rise to the challenge if buildings are built specifically for rent,” added Hughes, noting that such buildings may well be so different from blocks of flats built for sale, that they could not easily be converted. “My greatest concern is delivering suitable quality buildings at scale.”
He said that while others wanted the flexibility of a sale exit route as a safety net – something that a specific use class would conflict with – that was not his concern, so confident is he of the sector’s returns: “We will invest not expecting to have that exit route.” Changes to the planning system such as a special rental use class “are not the central question,” he added, saying there are signs local authorities are starting to think sensibly about their options.