Nest - the public body that runs workplace pension schemes - is investing £350 million in build-to-rent (BTR), meaning that some landlords’ pensions are effectively funding competitors.

The UK pension scheme has announced a new partnership with Legal & General and Dutch firm PGGM, collectively investing in new BTR schemes on city centre brownfield sites across the UK. It is expected to grow into a portfolio worth £1 billion during the next few years.

Nest manages £43 billion of assets on behalf of a third of the UK workforce and is accountable to Parliament through the Department for Work and Pensions but is generally independent of government in its day-to-day decisions.

Critical

Elizabeth Fernando (pictured), Nest’s chief investment officer, says: “We can see there’s a critical shortage of housing supply, coupled with increasing demand for high-quality rental homes. By building more properties, we can extend to our members a great investment opportunity while helping to meet this demand and bolster the rental market.”

L&G and PGGM have been investing together in UK build-to-rent schemes through their Access Development Partnership. Since 2016, this has injected more than £3 billion of capital into the BTR sector, building more than 10,000 rental homes.

António Simões, group chief executive officer of Legal & General, adds: “With an inherent supply and demand imbalance, there is a big gap to fill – and thus a need to drive up the delivery of all homes, across all tenures. Institutional investment has an important role to play, and we expect investor demand in the UK’s build-to-rent sector to continue to grow.”

Analysis by the British Property Federation and Savills found that exceptional growth in the build-to-rent sector has already pushed completions to a record high of 22,000 homes during the last 12 months.