Legal & General’s Dan Batterton on the race to a £10bn housing portfolio

This reflects a maturing sector now underpinned by long-term policy certainty – something institutional investors require.

“We’ve had that long-term grant settlement and a long-term 10-year settlement on rental increases, so we know rents in the sector are going to go up by CPI [Consumer Price Index] plus [1%] for 10 years. For investors, that is very attractive. Long-term certainty of cash flow in a market where we are 1.3 million homes under-supplied will attract much-needed investment.”

L&G is also structurally better placed than many affordable housing landlords to act quickly. “We don’t have legacy affordable homes which we need to invest in to improve energy efficiency, and nor do we have cladding problems to fix. Everything we own is new,” Mr Batterton says.

A growing affordable platform

L&G’s for-profit registered provider, L&G Affordable Homes, now owns around 9,000 homes that are operational or under development. These span affordable, social rent and shared ownership tenures.

During 2024-25, it recorded the largest number of housing starts of any for-profit provider – and Mr Batterton is confident of this trajectory continuing.

L&G’s affordable housing delivery model is deliberately flexible. It will develop 100% affordable schemes, buy homes from house builders at regulated rents, invest in mixed-tenure sites and add to its portfolio by buying up affordable homes built by developers to meet Section 106 planning agreements.

Given that most house builders won’t start constructing other homes until the Section 106 homes have been sold, Mr Batterton argues: “If we buy those affordable homes, it allows house builders to accelerate their speed of building private homes.”

And affordability flows directly from pricing discipline. “The lower the price we can buy those homes for, the lower the rent that we need to charge. It’s not about squeezing additional return, it’s about delivering bigger social impact,” he says.

L&G also exerts influence over specification and quality, including increased use of modern methods of construction for aspects such as bathroom and kitchen pods to improve consistency and reduce defects.

Unlike some investors, L&G is not fundamentally averse to investing in modular-built homes – perhaps unsurprising, given that it invested heavily in its own factory. This was closed down in 2023 because there was not enough industry demand, but L&G feels in principle that modular construction can be a good solution.

“We’ve taken 10 years to get to £5bn in housing… So the idea of doubling in the next five years actually feels achievable”

In the coming years, L&G would like to increase its portfolio across all tenures, but expects a focus on social rent over shared ownership.

One reason, Mr Batterton says, is income certainty. “With shared ownership, you don’t have certainty of cash flows, whereas social rent is certain.”

Another reason is the greater societal impact. Many of L&G’s affordable investors are local authority pension schemes, which are accountable for both performance and impact. “They need to show they are getting good, strong returns and show the positive impact they’re having to local communities,” he notes.

Affordable housing sits inside a broad portfolio at L&Q that includes build-to-rent housing and student accommodation.

Mr Batterton launched L&G’s build-to-rent operation in 2016. It now exceeds 10,000 homes and is worth more than £4bn. His former team also developed the group’s direct-let student strategy, which has grown to nearly 2,000 beds.

The build-to-rent market itself has changed.

“A real challenge 10 years ago was if you wanted to invest in the sector, you had to build it. Today you can come in as more of a long-term core investor because the assets exist,” Mr Batterton notes.

Rising construction costs have shifted the development logic, with buy-side strategies increasingly favoured in city centres, while suburban single-family housing remains development-led.

Having established its position early, L&G has already attracted overseas investment from North America, Asia and Europe. In many of those markets, residential is a familiar institutional asset.

What remains unfamiliar is UK planning.

“The approach to planning is different in every country. I would feel uncomfortable trying to learn about the planning system in the Netherlands without understanding the politics.”

As a result, “overseas investors do find taking planning risk uncomfortable”, Mr Batterton says.