Muse and Pensions Insurance Corporation (PIC) have agreed a £54m affordable housing deal with Homes England, the government's housing and regeneration agency.

The public-private joint venture, Habiko, will serve as a vehicle to develop 3,000 low-carbon, low-energy affordable homes for the rental market.

Habiko is expected to become self-funding over its 12-year lifespan and aims to diversify the supply chain for future efficient housing developments. 

The programme will set out to provide up to 100 percent of affordable homes for rent for those whose needs are not met by the market, with rents set at 20 percent below the local market rent.

During the 12-year lifespan of the partnership, PIC will be able to continue to forward fund the development of affordable homes and ultimately own the houses and places they have helped to create through its investment and long-term stewardship approach. 

Muse claimed the 12-year partnership will "unlock institutional investment" focused on affordable housing delivery.

Muse managing director Phil Mayall said: "The government has set out a bold and ambitious challenge to deliver a significant number of new affordable homes over the next five years.

"Working with PIC and Homes England, we can combine our collective resources and unique experience to deliver thousands of low-carbon and low-energy homes that, by working alongside our local partners, meet the needs of communities across the country."

PIC CEO, Tracy Blackwell, added that meeting the UK's affordable housing needs is a challenge best met through "effective collaboration between Government, developers, and private investors."

"PIC has invested around £4bn in social and affordable housing to date, helping provide the secure, long-dated, inflation-linked cashflows to back the pensions of its policyholders over coming decades, creating considerable social value."

Homes England chief executive, Peter Denton, said attracting institutional investment into the housing sector is "critical" to build the new homes the country needs.

"This partnership supports our partners' objective to deliver low carbon, low energy, affordable homes, bringing together the technical expertise and capability of Muse with the financial capacity of one of the UK's largest pension fund insurers, cementing PIC as a significant force in delivering affordable housing."

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