Tag Archives: legal & general

Insurer Legal & General details PRS push

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.

Ten ways to ease the housing shortage – Legal & General contributes

Changes to the UK tax system could help encourage more companies and organisations into the business of being professional residential landlords. This, and the construction of properly designed, well-managed rental apartment blocks could go some way to encouraging the growth of the sector in a more professional way, benefiting both tenants and landlords.

Those are some of the key suggestions from insurance and investment company Legal and General, which recently produced a report entitled Let’s House Britain. A review of the current situation in the UK housing market, it came up with a ten point plan to address the housing shortage.

Legal & General sees the private rented sector as a key plank in the drive to improve housing in Britain. It notes the fundamental problems – prices have doubled in real terms since the 1990s, almost a decade after the legislation obliging them to do so, less than half of local authorities have prepared a Local Plan detailing where they will permit the construction of new homes. While recognising there is a housing shortage, it notes that older people who want to downsize are just as poorly served in the current market, as those wanting to get their first home.

The ten steps Legal & General calls for are:

1) build more – we need lots more homes to be built

2) planning needs to be reformed, with local authorities being more interventionist and forward thinking

3) more smaller homes would suit downsizers, singles and the divorced – not everyone wants a home with a garden

4) more flexibility on funding formats is needed, to help affordability. What about longer mortgages and rent to buy schemes being extended?

5) more social housing is needed, as currently too much of the government input into this sector is simply paid to private landlords as rent

6) equity release needs to be expanded and positively endorsed as an option

7) incentives could be used to help retired people downsize – and to encourage the construction of more suitable homes

8) prepare borrowers for the inevitable interest rate rise

9) encourage the growth of a larger private rented sector, with purpose built blocks that deliver inclusive additional lifestyle services

10) professionalise private rented by reforming the tax system and copying what works well in other countries

Legal & General edges towards involvement in private rented sector

UK institutions need to be part of the solution in resolving the UK’s housing shortage. “The private sector has a role in finding a solution,” insists Bill Hughes, managing director of Legal & General Property, in an opinion piece published by Property Week magazine.

Hughes notes that his organisation was historically a major owner of private rented housing, but this declined over time, with the move aided by the extension of rent controls by earlier governments. However, he now sees the mood of the UK consumer changing, away from an obsession about buying a property and towards the flexibility and other attractions of renting.

Today, just 1% of the nation’s private rented sector homes are owned by institutional investors, with private amateur landlords dominating. As a result, few homes are being built that are designed from the outset to suit renters i.e. homes with the right sized rooms, in the right places, that are easy to maintain efficiently.

Government, too, now understands the importance of renting homes, he says. “A vibrant rental sector is now recognised as being a key factor in the productivity of international cities.” Build to let will be just one part of a multichannel solution to the UK’s housing problems.

Hughes says L&G is already strongly committed to encouraging more homes. It has a stake in a house builder, is investing in student accommodation, and is lending to housing associations.

“Housing designed and built for long-term private-sector renting is virtually absent in the UK, despite being a large and mature investment class in both the US and Europe,” says Hughes. Here’s hoping Legal & General will take an active role In getting that private rented sector housing built.