The Salvation Army's Te Manaaki Tangata community development in Westgate has 20 two-bedroom and two one-bedroom units with shared outdoor spaces and a communal lounge.
Impact investment company Community Finance knows it can't singularly solve the country's affordable housing crisis but it is determined to make a real dent in improving the situation.
Established in 2019, Community Finance has linked KiwiSaver schemes, fund managers, banks and other investors with community housing providers, which have pushed ahead with much-needed projects.
So far Community Finance has raised more than $110 million for the social housing projects by organising community bonds — and at the same lifted the profile of impact investing.
Community Finance, founded by chief executive James Palmer, matches ethical money with positive social and environment outcomes, and helps build better, more resilient communities with access to warm, dry and healthy homes.
Paul Gilberd, general manager of Community Finance, said the impact investment market in New Zealand is immature but developing rapidly as investors become more conscious of the power they have with the choices they make.
"We are seeing a grassroots, consumer-led tide change as people decide to make their money work harder for them in favour of environmental and social impacts.
"We are seeing growing interest from investors who want to know what their money is being invested in.
"If you have your capital doing good and getting a return, then that's the holy grail of investment," he said.
Community Finance was established with capital from five stakeholders, The Lindsay Foundation, The Tindall Foundation, The Matua Foundation, Christian Savings and Wilberforce Foundation, and the ambitious social enterprise has set a five-year target of raising and lending $1 billion for affordable housing.
This is adopting impact investment for social good at scale.
"It's an audacious goal but the housing system is broken and every new home is a victory," said Palmer. "We have the biggest waiting list for social housing in history, more than 23,000 people.
"As a country that has reached 5 million, we haven't invested in community housing over the past 50 years. We spend $1 billion a year on supplementing accommodation; we can't keep affording that.
"Providing a good quality home for all New Zealanders has proved hard work, with the private sector and Government unable to do it on their own. Unfortunately, for a large and growing number of New Zealanders, a safe, warm, affordable home is out of reach, and for many they are giving up hope of ever having one.
"Community Finance was born out of this problem. From this initial foundation, we have developed and grown by taking a basic human rights-based approach focused on every person having the right to live in a good quality home. We simply need to build more affordable homes," said Palmer, who graduated as a lawyer.
Through a new associated company Positive Capital, Community Finance is organising an equity scheme based on shared ownership with housing providers to speed up the building of affordable homes. "I'm fizzing about this," said Palmer. "With the equity option, instead of just issuing bonds and doing debt, co-owning will enable us to do a lot more."
In May, Community Finance was named the Best Impact Investment Fund at the Mindful Money Ethical Investment Awards, and then Palmer won the Emerging Leader category at the Institute of Finance Professionals New Zealand (INFINZ) awards.
Community Finance first raised $40m through a community bond for the Salvation Army to build 118 one and two-bedroom homes at Royal Oak (50 units), Westgate (22) and Flat Bush (46) in Auckland, housing 150 adults and 59 children. The Salvation Army put in $10m of its own.
Twelve investors bought the bond including $20m from Generate KiwiSaver Scheme and $5m each from Tindall Foundation and Lindsay Foundation — Chris Lindsay is the owner of Sistema Plastics.
The over-subscribed bond closed two months ahead of schedule last November, the investors receive a return of 2.3 per cent a year, Community Finance charges a management fee of up to 0.65 per cent, and the Salvation Army obtained lower cost finance. Generally, the housing providers are charged up to 2.5 per cent interest on their loan.
"A win-win for everyone," said Gilberd. "The capital is going towards projects that improve society and provide a secure return for the investor. The ethical finance framework has been a missing piece from the ecosystem of community and affordable housing and investment for a long time."
The Salvation Army projects, with shared outdoor spaces, a community garden and communal lounge, attracted up to 10 times more tenants than places available. They were all coming off the social housing waiting list, and the successful tenants pay 25 per cent of their benefits towards the rent and the government subsidises the remainder of the rental.
The units were built with structural insulated panels that are double the thermal efficiency of buildings, ensuring the tenants are living in warm, dry community homes.
Community Finance is also working with the Salvation Army on projects in Hamilton and Masterton.
Because of the demand, Community Finance has launched the Aotearoa Pledge to raise $100m for community housing, and has so far reached $71m. The pledge has been endorsed by Mindful Money, Te Matapihi and Community Housing Aotearoa, the main bodies for New Zealand's 100 community housing providers.
The pledge attracted seven cornerstone investors, ANZ ($10m), Generate KiwiSaver ($10m), Pathfinder Asset Management ($10m), broker Forsyth Barr, Lindsay Foundation, Clare Foundation, and Waikato's WEL Energy Trust, together committing $51m. Simplicity KiwiSaver Scheme then chimed in with $20m.
Community Finance is talking with housing providers about new projects in Queenstown, Dunedin, Nelson, Wellington, Northland, as well as Auckland, Hamilton and Masterton, and has committed $10m to a bond for the Community of Refuge Trust (CORT) development at Puhinui Park, Manukau City.
CORT provides housing for residents with mental health issues and is well underway with 300 rented units at Puhinui Park.
Gilberd said there were 450,000 households in New Zealand that can't afford to rent or own a home.
This intermediate market includes key workers such as nurses, teachers and police who don't have access to equity or the Mum and Dad bank.
"We define affordability as any household paying up to 30 per cent of its total gross income on rent.
Many are paying 50-60 per cent and are falling off the cliff. That's why the social housing list is growing. We can help them into new affordable homes through Positive Capital," Gilberd said.
Positive Capital will manage the Positive Property investment fund and share the ownership of new builds with the community housing provider, with investors receiving an annual dividend of up to 3.5-4 per cent, paid quarterly.
Positive Property and the community housing provider will share the ownership for up to 25 years to give the government certainty that the new homes will be available for social housing, and the tenants can receive an income-related rental subsidy from the Ministry of Housing and Urban Development.
At end of the 25 years the housing providers will own the homes as charitable organisations. Through the arrangement, they have paid off the money they borrowed for the 50 per cent share of the homes and can move on and build more houses.
Community Finance is in contact with three community housing providers to kick off the Positive Property programme nationwide. The aim is to build 1000 houses under the shared ownership model over the next three to four years.
Palmer said "I don't think we are the magic bullet to solving the housing affordability crisis but we will certainly make a hell of dent in it."