Radical thinking could back new towns with pension funds

Could Britain’s chronic housing shortage be solved by using insurers’ assets? Jamie Dunkley and Russell Lynch report

To millions of Londoners caught up in the devastation of the Second World War, the prospect of a new life in Stevenage probably seemed like a nice idea.

Designated Britain’s first “new town” in 1946, it was viewed as the antidote to urban overcrowding and decay and hordes of new residents headed to Hertfordshire, lured by the promise of modern homes, new schools and a better standard of living.

More new towns were to follow, including Crawley, Basildon and Milton Keynes; yet since the 1970s, only a handful of projects have managed to get off the ground, even though there is still a chronic shortage of housing across the UK.

In 2007, before the onset of the credit crunch and financial crisis, Gordon Brown, the then prime minister, announced with much fanfare a competition to build 10 “eco-towns”. However, only four sites have been approved and none has any prospect of being completed, with former housing minister Grant Shapps cutting the budget for eco-towns by 50 per cent after the last election.

Indeed, the debate on the development of new towns seemed all but dead until comments this week by Legal & General’s chief executive Nigel Wilson, who said: “If we can bring communities with us and agree planning, we’d like to help build several new towns across the country. We’re already developing towns within cities, in partnership with enlightened local authorities and boroughs.” 

L&G, which manages £440bn in assets, has already agreed to pump millions into the English Cities Fund, to kickstart regeneration, and has pledged to commit £25bn to UK infrastructure along with peers including Aviva and Prudential.

However, the difference between wanting to build new towns and actually doing it remains huge. Roger Hepher, head of planning and regeneration at property consultant Savills, claims the problem with getting new towns off the drawing board is a lack of structure – particularly since regional development agencies were scrapped by the Coalition – as well as political will.

“In my view you can only do it if central government seizes the initiative and sets up development corporations, and then gives them the resources to make new towns happen,” he said. “There is no government structure capable of picking it up and making it happen, because they are too timid to do so.

Stevenage was the first of Britain's 'new towns' Stevenage was the first of Britain's 'new towns'  

“You have to assemble the land, which if you are very lucky is in few hands, and do compulsory purchase orders. Then there are so many objectors – and that is why you need an authority like a development corporation, which is going to tough it out when the flak starts flying. Eco-towns just ran out steam, developers found there were too many hurdles.

“The fact is that there have been very few new towns not because developers haven’t been willing to build them, but because the system hasn’t been willing to receive them,” Mr Hepher concluded.

If ministers do decide on a change of direction, then insurers such as L&G, Aviva and Prudential certainly have the capital to back large scale developments, because of their billions of pounds worth of assets.

Julian Brown, a director at advisory JLT Employee Benefits, says the appetite exists within the investment community – including pension funds – to back more infrastructure projects, including roads and railways. He said: “The long term, predictable and – crucially – index-linked cashflows of infrastructure investments are a perfect match to a pension fund’s pension payments. We are certainly seeing a great deal of interest from pension funds...  on the various aspects of infrastructure investments.”

For now, what we are likely to see is more investment through schemes such as the English Cities Fund, which recently announced an investment in Salford. This will result in 1,000 new homes being built, as well as new council offices and commercial property. 

Mr Brown added: “The notion of pension funds building entire towns, to quote Ian Fleming, ‘goes wildly beyond the probable, but not, I think, beyond the possible’. For a pension fund to develop and build a sustainable new town, complete with commercial employment, would require an unprecedented level of partnership with a multitude of stakeholders – and be an ambitious undertaking. It would also be a significant foray into the volatile residential housing market, which isn’t typically the preserve of pension funds.”

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?