Legal & General has invested nearly £45m into Croydon council.
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 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.”
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.
She 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.”
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