British insurer Legal & General to invest £5 billion to build five new towns

Legal & General recently agreed a £60 million multi-stage development in Salford, near Manchester in north-west England, with the council, which will result in about 1,000 new homes being built.

Residential housing on the Chafford Hundred development in London. Chris Ratcliffe / Bloomberg News

One of the United Kingdom’s biggest insurance companies plans to build five new towns over the next decade, investing about £5 billion (Dh30.6bn).

Legal & General, one of the biggest institutional investors in the UK, has made the commitment saying it is one of the best ways to tackle the country’s growing housing crisis.

The move by the insurer is part of a wider deal made between major insurers and pension funds and the UK government to pump institutional money into infrastructure.

For years, pension funds from Canada, California and Singapore bought UK companies and infrastructure assets but the country’s own pension funds seemed unable or unwilling to invest in home markets.

During the global financial crisis that started in 2008, negotiations between insurers and ministers produced a pledge from six of them, including the Legal &General (L&G), to pump £25bn into infrastructure projects.

Legal & General, which has funds of £433bn under management, has now revealed a few details of its plans to build the five towns.

It is part of its plans to invest widely in the housing sector. It 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.

“If we can bring communities with us an agree planning, we’d like to help build several new towns across the country,” said Nigel Wilson, L&G’s chief executive.

“We’re already developing towns within cities, in partnership with enlightened local authorities and boroughs.”

Mr Wilson says the company is determined to think long-term. “The UK needs innovative housing solutions. 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 an absence of supply and excessive house prices inflation, which has made it unaffordable to large parts of our communities,” he saiys.

“We don’t want house price inflation. We want steady growth in house prices.

Legal & General has also recently agreed a £60 million multi-stage development in Salford, near Manchester in north-west England, with the council, which will result in about 1,000 new homes being built.

As part of the housing proposals, the insurer will fund new council offices for Salford and pump cash into other prime commercial developments in the area.

L&G has also offered its support to “garden cities” – a type of urban planning that has its roots in ideas generated more than a 100 years ago.

Government ministers have said they want to build at least two garden cities in the highly-populated south-east of England.

The first garden cities, such as Letchworth and Welwyn Garden City in Hertfordshire, were developed before the Second World War in an attempt to combine town and country living and provide homes for working people.

However, any revival is likely to be controversial because the locations suggested for the first towns are in Conservative heartlands, where existing residents will probably resist major new building projects.

Other insurers that have also pledged to invest in UK infrastructure include Prudential, Aviva, Standard Life, Friends Life and Scottish Widows.

At the end of last year, Aviva, the UK’s largest insurer, said it would invest £500m in UK infrastructure.

Aviva already has £5bn invested in UK infrastructure assets, including private finance loans for schools, universities and hospitals, and corporate bonds in utility, airport and rail companies.