Investment is part of a unique housing leaseback scheme which will save the local authority £20m

Croydon

Legal & General has invested nearly £45m into Croydon council as part of an innovative approach the local authority’s housing ambitions which both sides believe to be an industry first.

The partnership deal has seen L&G buy 167 homes – mainly two and three-bedroom flats and houses located in Croydon and neighbouring boroughs – from the local authority and then lease them back to the council over a 40-year term.

Croydon said it will rent out the homes, which it will manage through its own housing team, at Local Housing Allowance levels to previously homeless local families.

Once the 40 years are up the homes will revert to Croydon’s ownership.

The arrangement is being supported by a £44.6m investment which Croydon says it will spend on other affordable housing schemes and will save it approximately £20m on traditional loan costs.

L&G, which has stepped up its own housebuilding ambitions in the past two years, said it was creating “a blueprint for institutions and the public sector to work together to tackle the UK’s housing crisis”.

The £44.6m investment is being made on behalf of Legal & General Retirement Institutional as part of its long-term annuity and pension commitments.

L&G said: “It demonstrates the positive social impact that a proactive local authority and long-term investment can deliver, enabling Croydon Council to meet its affordable housing needs and reduce the burden on the public purse.”

A spokesperson for L&G said the group needed 40 years of income to pay its pension commitments. “More than a million people across Britain have entrusted their pension savings to Legal & General.

“While that goes into a well-diversified pot, we have invested the equivalent of thousands of people’s pensions into this investment, and we will use the rent we receive from Croydon to directly meet those pension contributions.”

Alison Butler, Croydon council’s cabinet member for homes and gateway services, said L&G’s investment would save it around £20m in loan costs. “That means we can assist even more families in the long term.”

Butler said the council had set up Croydon Affordable Housing to house hundreds of local families in good-quality homes with secure tenancies.

Faced with government cuts, Butler said: “this innovative partnership offers us better value for money than more traditional loans available to councils, and I hope this encourages other councils and financial institutions to follow suit.”

Croydon council said it had transferred a further 96 properties it had acquired and used for temporary accommodation into the Affordable Housing partnership, plus more than 300 new-build affordable rented properties would be delivered through its housebuilding arm Brick By Brick.

And 90 more affordable homes are due to be built for the partnership on the site of Taberner House, a former council office building.