Simplicity completes development with 48 inflation-pegged rentals

Sunday, 23 July 2023

Associate Minister for Social Development and Employment Priyanca Radhakrishnan has confirmed 480 applicants for emergency of transitional housing had lived 'a car' as their current accommodation.

Simplicity Living has completed its second build-to-rent development, creating 48 new homes where tenants will have the option of choosing to have their rental increases pegged to inflation.

Simplicity Living, which is linked to KiwiSaver provider Simplicity, is attempting to build 10,000 homes via an entirely integrated system where it runs the build, management, and filling of rooms.

The Onehunga development, named Oranga, is the second development to be completed, following a 69-home development in the Auckland suburb of Point England.

The rent from the homes will create revenue for the fund’s KiwiSaver members, and the apartments are offering rental increases pegged to inflation for up to 10 years.

Shane Brealey, the managing director of Simplicity Living, said residents were likely to start moving in next week.

He said for the first two years, residents’ rents would not change – a decision taken due to the current high inflation environment and cost of living crisis.

After that, there was the option for tenants to have rent increases pegged to inflation.

Brealey said about 450 parties had applied for the homes, and interviews were under way.

He said the development was expected to take up to a month to fill.

The development is a mix of one, two and three-bedroom apartments.

A two-bedroom apartment in the complex would be rented at $600 a week, and the apartments were fully applianced, meaning the likes of fridges, washers, and dryers were supplied.

“They are pretty up-spec from your average rental, but we are trying to keep rents as affordable as we can,” Brealey said.

Residents were not means-tested, but Brealey said focus was being placed on having a diverse group of people move into the development.

The new development has four main blocks.

“We are trying to create great communities, and they usually come out as a diverse cross-section of people.”

Phase two of Simplicity Living’s first residences, Kupenga, is also due to open in a month, with an additional 42 homes for rent.

Shane Brealey volunteers with Simplicity Living, as a means of helping the fund’s build-to-rent initiative.

Construction was also under way on a third development with 51 apartments, in Mt Albert, which were due to open in 2024.

Another 800 homes were in planning, on sites purchased or under contract in Mt Wellington, Remuera and Morningside.

This brought the total homes completed, in construction or in development by Simplicity Living to more than 1000.

“This is just the start, our aim is to have 10,000 homes built and rented nationwide,” Brealey said.

One of the new apartments, where residents will have to supply their own furniture.

“The fact that we have the first 1,000 completed or in development within 18 months speaks to the scalability of our business model.”

Sam Stubbs, managing director of KiwiSaver default provider Simplicity, said this was a living demonstration of what KiwiSaver investment could do for New Zealand.

“Pension funds owning rental homes is very common overseas,” Stubbs said.

“We are the first KiwiSaver manager to invest in a business doing this at scale in New Zealand, but I doubt we will be the last.

A second townhouse development is also underway in the area behind the main Oranga development.

“The underlying investment is in rental homes, which Kiwis really understand. And we expect the rental income generated by Simplicity Living will provide really reliable investment cash flow over time. We think it’s the type of long-term enterprise that KiwiSaver savings should be looking at,”

Depending on the type of fund people chose, the amount going towards building build-to-rent properties could sit between 0% in conservative funds, up to a maximum of 10% in growth funds, Stubbs said.

In the long run, Stubbs expected between 5% and 10% of funds investment will sit in build-to-rent assets, which he said was fairly typical of some European pension schemes.