KiwiSaver providers are pledging to use some of their money to provide affordable housing.
Caresaver and Generate say they will back the Community Finance scheme, which seeks to raise $100 million to build new affordable housing this year.
The KiwiSaver providers will earn a return for their investors by investing in community finance bonds, with their money being used to develop affordable, and social housing.
KiwiSaver provider ANZ is also involved, though the money coming from the bank will be invested by its sustainable finance division, not its KiwiSaver scheme.
The KiwiSaver providers have joined what’s dubbed The Aotearoa Pledge, which aims to fund the building of affordable owner-occupied housing, as well as social rental housing, and shared equity schemes with community housing providers.
Shared equity schemes allow people who cannot save a deposit, but can fund a mortgage, to progressively buy out an investment partner, which at the start of the deal owns a portion of the equity in a home.
The scheme was the brainchild of James Palmer, the chief executive of the $230m Christian Savings scheme.
Palmer said that while Christian Savings was a large organisation, there was far too much demand for funding for social housing projects for it to be able to meet the demand on its own.
The charitable sector could not rely on charitable donations to fund their projects, he said.
But KiwiSaver providers had billions to invest, Palmer said.
Palmer researched “impact investing” models overseas while setting up Community Finance, which raised $40m last year with bond issues, including bonds that helped build Salvation Army social housing.
KiwiSaver provider Generate invested $15m in that issue of bonds, and would get a 2.3 per cent return on its money for five years, far more than it could get by depositing the money with banks, or in local council, or government bonds.
“We have been really slow as a country to get into impact investing,” Palmer said.
And while banks had money to lend, it was KiwiSaver which provided the opportunity for ordinary investors to see their money flow into profitable housing projects that improved society, while earning them a return.
“It’s such a game-changer. KiwiSaver just keeps growing,” Palmer said.
The Salvation Army’s 118 homes in the Auckland suburbs of Royal Oak, Westgate and Flat Bush, have housed 150 adults, and 59 children, Palmer said.
These were families able to build stable homes in which children could be raised without suffering what he called the “chaos of poverty”.
“Dragging kids from one home after another, from one school after another, is not setting them up for the next generation,” Palmer said.
John Berry, chief executive of Pathfinder and the Caresaver KiwiSaver scheme, said: “This is going to make good money for our investors, but it’s also good for the planet, and for our communities.”
“There is such a need for affordable housing in New Zealand,” Berry said.
“If we can use KiwiSaver as a part of the solution, and make money for our investors, it’s a win-win,” he said.