Insurance giant Legal & General has announced the launch of a new wholly-owned division which aims to become the leading private affordable housing provider in the UK.

Formed as a subsidiary of Legal & General Capital, which invests capital into sectors where there has been a shortage of investment and innovation, focusing on growth opportunities and scale ups, Legal & General Affordable Homes is targeting all areas of the affordable housing market, including new build Section 106 and grant-funded affordable rent, social rent and shared ownership units.

Legal & General Affordable Homes aims to be fully operational and delivering 3,000 homes per year within the next four years.

Nigel Wilson, CEO of Legal & General, said: “Despite the fact that the UK is a great place to invest, thirty years of underinvestment have led to poor productivity, low real wage growth and numerous market failures. Affordable housing is a classic example of underinvestment with minimal new equity capital being deployed to the sector. This is not a sustainable position - either for the sector or for the 1.3million households currently on a waiting list. This important sector has now been added to Legal & General’s £15 billion UK direct investment programme.”

Legal & General already owns house-building company CALA Homes and a modular housing factory near Leeds.

Simon Century, head of affordable housing, added: “Many housing associations are becoming increasingly highly leveraged, as they have funded significant amounts of development through debt funding for many years. They have no ability to raise equity and maintain a sustainable financial structure – therefore forcing many to significantly limit their growth ambitions. Legal & General Capital is building a more natural and sustainable model – one in which institutional investors are the long-term holders of the assets working alongside the best-in-class affordable housing operators who will provide the highest-quality housing management.”