Simplicity and NZ Living launch major build to rent housing programme

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Simply Living’s proposed Hinaki Street development in Pt England, Auckland.

Unlike standard residential developments where units are built for individual sale, build to rent (BTR) developments are designed and built specifically as long-term rentals.

The properties are normally owned by institutional investors and managed by specialist operators. Tenants — including families, the elderly and those saving for their first home — are treated as customers, enjoying the benefits of living in high-quality dwellings with secure long-term accommodation, and the freedom to give notice when they choose.

Major home builder NZ Living has partnered with KiwiSaver provider Simplicity to fund and build as many high quality, affordable BTR dwellings as possible to help provide security to the growing number of people struggling to get onto the property ownership ladder in New Zealand.

Simplicity, a default KiwiSaver provider, has announced a significant build to rent housing programme, in co-operation with major home builder NZ Living.

The long-term intention is to build high quality, affordable homes for rent across New Zealand, providing many New Zealanders with another housing option.

“This is a very well proven model overseas. Pension funds in Europe commonly invest 5% to 20% of their funds this way, and achieve solid returns,” Simplicity managing director Sam Stubbs says.

“Within 18 months we’re aiming to build and rent one home a day,” he says.

The homes will be built by Simplicity Living. Certain funds within the Simplicity KiwiSaver Scheme (not including its default fund), and the Simplicity Investment Funds, will own and provide funding to Simplicity Living through a wholesale funding arrangement.

The apartments and terrace homes will be Homestar 6-rated, with a 100-year design life.

The full NZ Living team, expertise and established subcontractor and supplier base will transfer to Simplicity Living. NZ Living owners Shane and Anna Brealey will manage Simplicity Living on a pro-bono basis.

“We have decided to devote the next phase of our lives to building as many affordable, quality homes for rent as possible,” NZ Living managing director Shane Brealey says.

“Simplicity shares our long-term vision. With our skill in building and managing, and their ability to fund at scale, we are well placed to make a positive difference in the housing sector,” Brealey says.

“NZ Living has completed, or has in construction, 700 new homes, selling at a discount to valuation of $30 million, to assist mostly first-home buyers to get on the property ladder.”

Subject to necessary approvals, Simplicity Living will purchase NZ Living’s two remaining developments in Auckland, including 159 apartments in Onehunga and Point England.

“We aim to rent for the long term, so families, the elderly and those saving for their first home can have true housing security without having to own a home,” Anna Brealey says.

Build to rent housing continues Simplicity’s history of disruption of the finance sector. As well as very low fees on KiwiSaver and Investment Funds, it currently offers first home loans at a 2.25% floating rate.

“With Simplicity Living, we have a huge opportunity to offer high quality homes at long-term, affordable rents,” Shane Brealey says. “The returns should be very reliable too.”

Simplicity intends to offer its members the first option to rent the homes.

Simplicity was recently appointed a KiwiSaver default provider. It has $3.9 billion of funds under management, and more than 74,000 members in its KiwiSaver and Investment Funds.



25,000 planned build to rent homes at risk due to government policy

New data from the Property Council New Zealand (PCNZ) suggests that more than 6100 build to rent homes could be on the market within two years if the Government loosened the reins on the legislative barriers holding the sector back.

And further analysis suggests this number could swell to more than 25,000 new homes within a decade.

“This government has said time and again that they are focused on delivering more affordable housing, but history has shown that the private sector is often much better placed to build sustainably and at scale,” PCNZ chief executive Leonie Freeman says.

Unlike a standard residential development where units are built for individual sale, build to rent (BTR) developments are designed and built specifically as long-term rentals.

The properties are owned by institutional investors and managed by specialist operators, while tenants are treated as customers, enjoying the benefits of living in high-quality dwellings with secure long-term accommodation, and the freedom to give notice when they choose.

“We like to call it ‘renting for the Netflix generation’,” Freeman says, “where rent is treated as any other pay-as-you-go service, like Spotify or Netflix.

“Tenants can plug-in and plug-out of amenities as their life unfolds. They aren’t buying the house — they’re buying the living experience.

“A survey of Kiwi BTR developers shows that there are 853 BTR units either currently under construction or completed across 21 sites, with an average of just over 40 units per development.

“Over the next two years we’re estimating that, with the right policy settings, this figure could explode to over 6100 units across nearly 40 sites.

“These are credible, planned BTR developments that are currently in the pipeline for delivery, greatly expanding New Zealand’s rental stock,” Freeman says.

“With government support, the BTR sector has the potential to deliver over 25,000 homes in just 10 years. Our members — who are primarily large scale commercial and residential developers and owners — tell us that delivery of these developments relies on several changes to government policy, including:

• Better clarity on the Overseas Investment Act, which could currently disincentivise large institutional investment in BTR in New Zealand.

• Further definition of BTR as its own asset class — similar to that of student accommodation or retirement villages — which would make it exempt from recent interest deductibility changes. Reclassifying BTR as a commercial asset class would also change depreciation application and provide a genuine incentive to help unleash large numbers.

“BTR has the real potential to house more New Zealanders comfortably, quickly and affordably.

“But if we want large-scale BTR to be unlocked, then the Government needs to stop blocking the path to progress, and accept that this could be a simple solution to help ease Aotearoa’s housing woes,” Freeman says.

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