The London Pensions Fund Authority is to provide 85 per cent of financing needed to help build more than 200 homes in the capital.
Susan Martin, chief executive of the LPFA, said the Greater London Authority had selected a consortium, backed by the LPFA, to help fast-track the creation of new high quality homes in Newham, East London.
The development will use a covenant to help relieve pressure on the capital’s housing market, accelerate development and raise standards of private renting.
The development is called Pontoon Dock, a 0.69-hectare site within Royal Docks in the London Borough of Newham. At the moment it is a public car park and coach stand but with the funding boost from the pension fund, it will be transformed into 137 private rented sector homes, 42 for affordable rent and 31 for shared ownership.
Ms Martin added: “Investing directly in the redevelopment of the Pontoon Dock site will not only deliver essential housing for London, but also provide LPFA with the attractive, liability matching, long-term returns we need to provide for our pensioners.”
The LPFA administers a £4.8bn pension fund on behalf of approximately 250,000 people.
Andrew Montlake, director of London-based Coreco, said: “There is still a big imbalance between supply and demand in the property market. If this is to change, then we need to see more investment into building more properties. It is encouraging to see large pension funds getting involved.
“This is just one of the ways that we can alleviate imbalances and there should be more incentives for pension schemes to help build property in high-demand areas such as London.”
Background
In the Budget earlier this year, chancellor George Osborne claimed 230,000 to 300,000 homes would be required each year. Official government statistics put the total number of homes built by the private sector over the past decade at an average of 115,000 a year.
In September 2013, a senior actuary called on the government to encourage pension schemes to invest in building care homes and affordable homes suitable for pensioners.
Geraldine Kaye, managing director of consultancy Gaaps Actuarial, said: “This would result in greater savings being made to the economy, for the pensioner, and to the state.”
Industry view
Mark Littlewood, director general at the Institute of Economic Affairs, said: “For more than three decades the UK has been building fewer new homes a head than any major country in Europe.”
He said that residential floorspace relative to each household is now the lowest in Western Europe.
He added: “These stark figures reveal just how hard life is for many families. It is more urgent than ever that we start to expand our meagre supply of housing.”
Key facts
1993 to 2013: Virtually no homes built in England
1955: 300,000 homes built, two-thirds of which were public housing.
170,000 to 240,000: Shortfall in annual house build
11.8 per cent: Annual average house price growth to June 2013
Source: Brewin Dolphin/Nationwide
