$40 million investment target met to build 118 new homes
Impact Investors, community foundations and KiwiSaver provider step up to address housing crisis
An investment platform launched late last year has raised $40 million to build affordable homes for Kiwi families.
Community Finance brings together impact investors and philanthropists who want to make a positive impact in the community with Community Housing Providers to build homes for those in need.
The company provides affordable finance to organisations such as the Salvation Army to address homelessness and New Zealand’s ongoing housing crisis.
Community Finance’s first project, started in December 2019, was raising a Salvation Army Community Bond which required investment of $40 million to build 118 new homes in Royal Oak, Westgate and Flat Bush.
The $40 million Community Bond was closed on Friday 23 October with 12 investors involved, made up of, impact investors, community foundations and a $20 million investment by Generate KiwiSaver.
It makes Community Finance New Zealand’s largest open impact investment platform with $43 million of loans advanced already.
The $40 million Salvation Army Community Bond was kicked started by a $5 million investment from Sistema founder Brendan Lindsay and his wife Jo’s Lindsay Foundation. The Tindall Foundation also invested $5 million, as well as $2 million from both Foundation North and the Matua Foundation.
James Palmer, Community Finance Chief Executive, says Kiwi’s need to work together and support and supplement the work of the likes of Kāinga Ora and Community Housing Providers in addressing the housing crisis. No one can solve this on their own, so it requires business, fund managers, KiwiSaver providers and the Government to step up.
“Generate KiwiSaver coming on board to support the Salvation Army Community Bond is a tipping point and highlights how large-scale private investment can help bring positive and transformational change for the community and those in need.”
“It’s been a tough and uncertain year for everyone, but reaching the $40 million Community Bond milestone two months ahead of target, is testament to how the Community Finance model can make a huge difference and get people into homes. This is just the beginning.”
He says with the Royal Oak and Westgate projects completed and Flat Bush well underway the benefit is already being felt by more than 70 households.
“We are accelerating our work with community housing groups, government, iwi, and local councils to launch new Community Bonds across the country to deliver positive impact. Collaboration and partnership is essential for solving the housing crisis Aotearoa faces – He Waka Eke Noa – we are all in this together.”
Sam Goldwater, Executive Director and Lead Portfolio Manager at Generate KiwiSaver, says this type of investment was right for its KiwiSaver investors because it made financial sense, and also supports New Zealand at a time of great need.
“With this first impact investment, Generate is proving how large institutional investors can balance achieving competitive returns and enabling positive social outcomes. We hope others will follow our lead.”
Brendan Lindsay says the Lindsay Foundation was established to support Kiwis and organisations who aspire to make a positive difference in New Zealand.
“We helped kick start Community Finance and invest in its first project because there is nothing more important than ensuring all Kiwis have a well-built, warm, affordable and safe home.”
Sir Stephen Tindall, co-founder of the Tindall Foundation, says: “After working for more than 15 years in the community housing area we have experienced first-hand the on-going need to ensure every family in New Zealand has a safe and affordable place to live.”
“We are delighted to be backing Community Finance and we encourage other impact investors to do the same to help increase affordable housing supply. Impact investment like this delivers financial returns and positive outcomes for our nation. The time is now for genuine impact investment.”
The Community Bond is a fixed interest, five-year impact investment yielding 2.30% per annum, as well as making a positive social impact. This is achieved by Community Finance operating on a lower margin, enabling a higher return for investors and a lower cost loan for the community housing provider.
Economist and Community Finance director, Shamubeel Eaqub, says with the average five-year term deposit rate from leading banks paying investors little over 1% pa, the Salvation Army Community Bond delivers sound investment returns for a fixed interest product.
“It also delivers for New Zealand’s future at a time when the social housing register has never been higher. The investors in this first Community Bond have set an example for fund managers, KiwiSaver providers and other investors to follow.”
How the Community Finance model works
Community Finance works with Community Housing Providers to undertake financial modelling, social impact assessments and credit analysis and if the project stacks up, the loan is approved.
Community Finance acts as an intermediary with loans secured and managed through securitisation, to create a Community Bond. Community Finance charges less than 1% pa to manage both the investments and lending.
Investors receive regular reports on the direct social impact of their investment as well as a financial return of between 2% pa and 2.50% pa..
More About Community Finance
Community Finance was established with capital from The Lindsay Foundation, The Tindall Foundation, The Wilberforce Foundation, Christian Savings, the Matua Charitable Trust and the Tindall Foundation.
The Community Finance board includes veteran social housing advocate Major Campbell Roberts; economist and Generation Rent author, Shamubeel Eaqub; Jo Glen, an experienced Governance, Risk and Compliance Manager from the financial services sector; lawyer and author of Social Enterprises: A Legal Handbook, Steven Moe; and director Rod Robson, who has previously served as chief legal counsel at Work and Income.
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