There’s no doubt that the UK is short of good, affordable housing and has been for decades. Whatever you think about the so-called `levelling up’ agenda, it’s interesting to see major insurance companiesbecoming serious investors in social housing projects, retirement villages and the regeneration of empty urban centres.
Insurance Edge caught up with Andrew Kail, CEO of Legal & General Retirement Institutional (LGRI), to find out why L&G is one of the trailblazers in the UK insurance sector and one of the biggest investors when it comes to investing in housing stock.
IE; It’s an impressive track record over the past 5+ years for L&G, with a variety of projects under construction. It’s brilliant to see investment in UK infrastructure. Tell us more about why an insurer wants to partner with Councils and Housing Trusts to create new living spaces, what’s the strategy?
AK; Glad you think it’s brilliant, but it’s also a wise investment for our customers who are invested in pensions. It’s good business as well as being good for ‘levelling up’. We invest pension funds in long-term projects and we want good performance over those years ahead, as well as enabling better lifestyles and communities, so we can pay back pension promises. There’s an energy and housing crisis and by building better, more efficient, homes we can solve those two problems long term.
IE; So the L&G pensioners also have a physical asset for the future, which is generating incomes too. The properties you’re building now have a higher than average EPC rating, so it follows that they will have a higher market value 20-30 years down the line?
AK; Completely agree. The EPC and other housing standards are only going one way in the future and that is higher, in terms of energy efficiency. So we do need to keep investing in better properties, everyone does.
IE; Is it an advantage being an insurance brand, because you don’t carry a legacy like say a Council might do?
AK; We do work very closely with Councils and housing associations and most are very keen to refurbish older housing, plus some are looking at a much bigger picture in terms of creating village type communities within urban environments.
IE; Had a look at Chapel Street in Salford, which is a very mixed lifestyle/leisure project as well as new apartments and houses. That has a different vision from places where more apartment blocks are being built to replace brownfield sites hasn’t it?
AK; Very much so. Salford Council wants to create a mixed community of students and long term residents at Chapel Street, with leisure spaces being part of the overall vision. That’s typical of many inner cities in the UK now, where retail and office space is in decline and so areas need to be re-designed for different ways of living.
IE; I said earlier L&G is a trailblazer, do you think there is a kind of movement now, a consensus that big insurers need to invest in housing long term?
AK; The numbers are mind blowing as regards defined benefit pension schemes. It’s something like 2 trillion pounds currently in these schemes. So we need to invest that to give pensioners a good return. That’s one aspect of this. But then think about the amount of outdated housing we have in the UK too.
The demand for these assets outstrips supply, and will do as we all race towards Net Zero, but yes, we do what we can do and it’s important that others in the industry play a part as well.
IE; I grew up near Port Sunlight, the model village built by Lord Leverhulme for his workers. That was built with a school, library, gallery etc. it wasn’t just a workers row of cottages. When I see your retirement communities concepts, I see the same joined up thinking; assisted living units, standalone houses plus apartments, shops and pharmacies on site. We can’t just keep building housing units without understanding how people want to live their lives can we?
AK; I’ve visited some of our L&G villages and thought `actually, I could live here.’ The thing is as life expectancies increase, plus people are much more active as older people now, we need to re-think the whole concept. There’s a long period in general of good health in retirement, so it’s ideal for someone downsizing, or looking for a quieter lifestyle away from a city or town centre. We have also chosen to focus on resident satisfaction, which has so far ensured they work well and are popular.
IE; Are L&G seeing people selling property in the South East and choosing a change of pace in other parts of the UK?
AK; Ultimately it’s all about giving people choice. Legal & General can help you downsize or re-locate, but equally some people want to stay where they are and release equity from their homes so they can get their children or grand-children onto the property ownership ladder.
Taking equity from the property solves a problem for many people and we are seeing that demand more from customers nowadays.
IE; How can technology in new homes help create better lifestyles?
AK; Some of the wearable devices now can really help older people stay independent for longer, which is great to see. You build up data over time, so in effect you are monitoring people 24/7 and you can intervene if needed. Smarter homes can also manage the energy consumption better, so there’s that wider benefit to society via tech as well includingthrough introduction of new tech innovation such as i air-source and ground-source heat pumps.
IE; The magazine will be following L&G as you build more housing and thank you for the insights.