More than 150 new homes will be built in Bristol city centre, but you won’t be able to buy them.
The flats in Avon Street, close to Temple Meads station, will be specifically for the rental market in a bid to address the rising rents problem in the city.
Pension funds Legal & General Capital and Dutch firm PGGM are behind the move, having copied the model from the United States and mainland Europe.
Official figures estimate the UK needs 250,000 new homes a year to meet demand from a growing population but is only building half of that.
The lack of new homes to buy drives up prices and in turn pushes up rents as demand for outstrips supply.
A recent study for Barbon Insurance Group showed the average rent in Bristol had risen 18 per cent in 2015 to £904 per month.
Property has long been a popular investment for pension funds, from shopping centres to office blocks. But in the UK the rental market has not held the same appeal, perhaps because of Brits’ love of home ownership.
Paul Stanworth, managing director of Legal & General Capital, said: “The UK rental market, compared to the US and Europe, is dysfunctional, with ever increasing rents and increasingly poor accommodation.
“For this to change, and renting to become more affordable, we need to invest in the new, and build new homes to rent, and just stop inflating the prices of old housing stock.
“At Legal & General we’re going to play our part by disrupting the market, and invest significant sums of long-term institutional money to build new rental housing, and develop a UK institutional rental market.”
The firm says in America and Europe, fully fledged institutionally funded and managed rental property markets have developed to increase the supply of homes, lower prices and provide better quality products and service.
In the UK the rental market is different, due to the lack of supply of quality homes, and its cottage industry nature.
Legal & General Capital plans to disrupt the status quo of ever increasing rental rises by investing long-term institutional funds into building new homes to rent at scale, and by developing a UK institutional rental market.
The partnership will invest £600 million in more than 3,00 homes across the UK with the Bristol project among the first, along with others in Salford and Walthamstow.
The Dutch firm has 40 years’ experience investing in the built to rent sector in Europe.
Mathieu Elshout, investment director real estate at PGGM, said: “Investing in residential is the perfect long term real estate investment, as it provides a relatively high income security and diversification relative to other sectors.
“This partnership allows us to build and own good quality residential assets in the UK at scale, with a high degree of control over our investments.”
“As a responsible investor we believe that we have an obligation to contribute to a sustainable world. We can do so via impact investment, or investing in solutions, as we call it.
“This partnership not only addresses the supply/demand imbalance, it also aims to improve the UK’s built environment; acting as a catalyst for wider urban regeneration and creating rental stock in sustainable urban schemes centred around key transport hubs.”
The derelict site in Avon Street, inside the Temple Quarter Enterprise Zone, is called ND7 and has permission for 168 homes.