Community housing funder takes ‘big step’ forward in bid to tackle housing crisis

Thursday, 23 November 2023

Twenty-one new community homes in Manurewa in Auckland are the first to be completed through Positive Capital and Community Finance’s co-ownership programme.

A low cost community housing funder has hit a multi-million dollar investment milestone, and it will help get more people out of motels and into homes.

Community Finance, which raises private and philanthropic capital for social and affordable housing, has now had over $150 million in investments.

It hit the milestone after attracting nearly $50m in new lending since July, and with the help of first time investments from some leading KiwiSaver providers and fund managers.

After it launched in 2019 with $10m of cornerstone investments from the Lindsay and Tindall Foundation, the first KiwiSaver provider, Generate KiwiSaver, got on board in 2020.

Seven fund managers, including Westpac KiwiSaver Scheme, Harbour Asset Management, Pathfinder, and Simplicity were now investors, and there were active and passive funds involved.

Hitting the $150 million investment milestone shows impact investing is coming of age, Community Finance chief executive James Palmer says.

Community Finance chief executive James Palmer said it marked a coming of age for impact investing in New Zealand, and showed investors were willing to “walk the talk” on responsible investment.

It unlocked development support for Community Housing Providers (CHPs), and enabled more desperately-needed, high-quality community housing to be built at scale, he said.

“To have advanced more than $150m demonstrates how fund managers, CHPs and Community Finance can work together to help get people out of motels and transitional housing.

“It highlights Kiwis’ growing awareness about the benefits of impact investing and the power of working together to efficiently build more homes for families in need.”

While it was a big step forward, it did not solve the problem as there were currently 25,283 households on the waiting list for public housing, he said.

Generate KiwiSaver partnered with Community Finance to build community housing in Christchurch with the Otautahi Community Housing Trust.

“But with over $260 billion in funds under management in our country, if we collaborate on addressing this problem, we can solve it.”

The most recent investments allowed Community Finance to facilitate lending to Emerge Aotearoa Housing Trust, Penina Trust, the Salvation Army and Cort Community Housing to help them build affordable housing in the Waikato and Auckland.

Its first investment financed 118 new affordable homes in Royal Oak, Westgate, and Flat Bush in Auckland for the Salvation Army, and since then it has helped finance over 300 new community homes.

Palmer said Community Finance now had over $150m in the pipeline for housing projects with a range of CHPS, although the final number of homes for that was not confirmed yet.

The new Manurewa homes are owned by Positive Property Fund and Emerge Aotearoa Housing Trust, which will manage them.

“Our longer-term aspiration is to reach over $1 billion in lending for positive impact.'

Its model enabled investment in quality housing projects through Community Bonds. It operated on a low margin, targeting a lower cost of finance for CHPs and a positive financial return for investors.

But Community Finance was also working with its associate company Positive Capital, which Palmer set up in 2021, on a new co-ownership programme for CHPs.

It allowed up to 90% of the cost of new public homes to be unlocked through a mix of finance sourced via Community Finance and equity from Positive Property Fund, an impact investment fund managed by Positive Capital.

The fund invested 50% of the purchase price as equity and Community Finance lent up to 40% as debt to the CHP, to enable it to acquire its 50% share.

Twenty-one, new two-bedroom homes in Manurewa were the first homes to be completed under the programme, and tenants would be moving into them this month.

They were owned by Positive Property Fund and Emerge Aotearoa Housing Trust, a CHP which would manage them.

Palmer said the aim for the fund was to build $200m of new public housing, with Alvarium and KiwiSaver provider Pathfinder as cornerstone investors, and that $200m could build around 400 homes.

Economist Shamubeel Eaqub, a director of Positive Capital, said housing availability for those in need was going backwards, making innovative solutions for financing and building homes more critical.

New ways to help get people out of motels or transitional housing and into warm, dry homes was needed, he said.

“The co-ownership programme is good for the government, because it supports the increase in higher quality affordable housing stock at a lower cost than motels, it’s good for investors, and, ultimately, it’s a game changer for people who are on the waiting list.”