London’s primary pension investment firm must invest more of their £51billion worth of assets in affordable housing in the capital, an Assembly Member has said.
By Kumail Jaffer, Local Democracy Reporter
London’s primary pension investment firm must invest more of their £51billion worth of assets in affordable housing in the capital, an Assembly Member has said.
James Small-Edwards, who chairs the Planning and Regeneration Committee in City Hall, has said that thousands more homes could be unlocked if London LGPS CIV (LCIV) increases the proportion of capital it invests in housing and infrastructure.
LCIV, the pension investment pool for all 32 London boroughs and the City of London, say they have allocated around £530million for affordable housing, which equates to just over one per cent of their total assets.
How can pension funds help increase the supply of affordable housing?
Currently, many housing projects in London are stalled due to high interest rates and construction costs.
But pension funds can provide developers with cheaper, long-term financing compared to traditional bank lending.
Pension funds can also fund entire projects to ensure spades are in the ground as soon as possible.
Are they doing enough?
Mr Small-Edwards told the Local Democracy Reporting Service (LDRS) that copying the Australian and Canadian models of investing in “real assets” instead of stocks and bonds would yield a significant return.
Both Canada and Australia’s largest pension funds invest more than a fifth of their holdings in housing, infrastructure or transport.
“Something like three per cent of LCIV’s capital is currently deployed in ‘real’ assets – things like infrastructure – this is very, very low compared to other public sector pension funds,” he said in an interview last month.
The Labour Assembly Member, who represents the seat of West Central, suggested that new government rules which will compel LCIV to transfer around £17million worth of legacy assets to their current pool of £34billion means it is the perfect time for reform.
“If you’re talking about 10 per cent of real assets of £50billion invested in London’s infrastructure, that’s billions of pounds of uplift with no extra taxpayer money going into housing,” he added.
“You’re talking about thousands of homes over a five to ten year period – that’s obviously quite significant in solving London’s housing crisis. It could be important for infrastructure projects as well. Pension pooling isn’t an issue that necessarily gets the hairs on people’s neck standing up, but new housing and new trains do.”
What does LCIV think?
A spokesperson for LCIV told the LDRS: “Government Fit For Future reform for the LGPS will require Pools and Administering Authorities (Partner Funds) to work with relevant local authority bodies in implementing Partner Fund local investment strategies. For London CIV and our Partner Funds this mean a continuation of the strong engagement already ensuing with the Mayor’s Office and the Greater London Authority.
“Local investment has long been a core part of London CIV’s strategy, and pooled assets are already being invested in affordable housing and critical infrastructure across London. We are already incorporated into the Mayor of London’s and London Councils’ Growth Plan, which acknowledges London CIV’s ‘strong track record of innovation-led investment in the capital’.
“To date, London CIV has allocated approximately £530 million to UK affordable housing through the LCIV UK Housing Fund, with a quarter of Partner Fund schemes invested. For London, this is already translating into real delivery.
“At Abbey Place in Greenwich, forward funding supported 245 affordable homes, reconfigured from private rental in response to strong local demand. At Wood Wharf in Canary Wharf, 294 regulated rental homes are being delivered within a major mixed-use development, with completion expected from 2026.
“Alongside housing, The LCIV London Fund (£250m) is investing in regeneration and critical infrastructure, including Shepherd’s Bush Market, EDGE at London Bridge, and VIRTUS Data Centres, which provides connectivity and access to online services for residents and businesses in London and beyond.
“As the LGPS reforms increase the scale, capability and expectations placed on pools, London CIV will continue to expand on these initiatives working with our Partner Funds, London Councils, the Mayor’s Office and the GLA to help identify a stronger pipeline of investable London projects, to meet the local investment strategy requirements of each Partner Fund.”
What has the Mayor said?
In response to Mr Small-Edwards during a City Hall session in October, Sir Sadiq told the London Assembly that it doesn’t “make sense” that pension funds in Canada are investing in housing in London while domestic funds aren’t.
Sir Sadiq said: “Investing in housing is a slam dunk. You are guaranteed a return and all these pension funds that he is talking about are in it for the long term. They are not in it only for the quick returns, otherwise they would.
“I am more than happy to take this forward working with colleagues in City Hall, London Councils as well, to make more progress here.”
A spokesperson for the Mayor of London told the LDRS: “Tackling the housing crisis in London is the Mayor’s top priority and we are doing everything we can to deliver more homes of all tenures. Sadiq is committed to building on the progress which has already been made in the capital, with more new council homes started in London than at any time since the 1970s.
“The Mayor is encouraging institutional investment to deliver more affordable homes for Londoners, including through Key Worker Living Rent homes, potentially saving key workers up to £600 a month on their rent, and providing a new, simpler rent-setting model for developers to deliver thousands of these homes across the capital.
“The Mayor will continue to work closely with the Government, councils and developers to boost housing delivery as we continue to build a better, fairer London for everyone.”
