New ‘Invest-to-Rent’ fund plans $500m housing portfolio

Published: Thu 23 Aug 2018 01:27 PM
New ‘Invest-to-Rent’ fund plans $500m housing portfolio to disrupt industry and improve living options
Haven Funds, a property funds management company, today announces plans to launch an Invest-to-Rent fund and develop a $500m portfolio of residential properties to be made available for rent across the country.
The fund, called Haven Living, is the first of its kind in New Zealand, based on a model that has worked successfully overseas, particularly in the UK and US. Haven intends to disrupt New Zealand’s cottage industry of private rental operators to improve living options for Kiwis who choose to rent.
Invest-to-Rent as part of New Zealand’s housing solution
Homeownership has reached a 60-year low. House price inflation has been around 30% over the last five years in New Zealand – and a whopping 65% in Auckland – while incomes have risen by only 15% on average nationwide. This is causing more and more Kiwis to choose renting over homeownership, yet dissatisfaction of rental options is on the rise. It has become clear New Zealand’s housing system is failing too many people. Haven Living believes it’s Invest-to-Rent fund can be part of the solution.
“Invest-to-Rent will become an important part of New Zealand’s housing supply equation”, says CEO of Haven Funds, Tim Lichtenstein who, together with Executive Director Kerry Hitchcock, has founded the new fund. “We cannot expect Government alone to solve the country’s housing problems. The solution will be a combination of initiatives, which includes support from the private sector. About a third of New Zealanders rent and we plan to vastly improve their conditions and living options.”
Changes needed to address lack of quality and tenant rights
More than 98% of New Zealand’s rental properties are currently owned and let by private landlords. Whilst some stock is well-managed, many are poorly maintained, older properties with significant inconsistencies in tenancy conditions and tenure. This is exacerbated as demand outstrips supply of quality rental accommodation, particularly in Auckland, Wellington and Christchurch.
Private rental housing tends to be of poorer quality and the tenure of such housing is more fragile than home ownership. In the absence of any regulatory enforcement and as demand has out-stripped supply, there have been few incentives for landlords to maintain or improve the quality of their rental houses, which on average are of poorer quality than owner-occupied homes. The social and economic costs of these below average housing conditions with insecure tenure are well documented. In the current market there are few incentives for landlords to have fixed-term tenancy agreements longer than 12 months. This leaves most tenants with little security of tenure and no effective protection against frequent six-monthly rent increases.
“Despite significant challenges, we are seeing a strong customer demand shift toward renting in New Zealand. This is driven by a number of factors, in particular housing affordability. But for a growing number of people, renting is simply a lifestyle choice”, says Lichtenstein.
Hundreds of new homes to be made available
Invest-to-Rent housing is likely to feature prominently in our future housing landscape, regardless of what is achieved in building more social housing and in extending home ownership options for first time home buyers.
Haven Living aims to shake up the private rental market, onboarding hundreds of new, high quality, well-located properties over the next five years. The fund’s managers have a pipeline of development contracts across the country and will be continually acquiring more stock through deals with builders and developers.
Disruption for the private rental sector
It’s time for a change in attitude toward rental living. “With Haven Living, we’re taking a customer-centred approach. If you stop to think about how the term ‘landlord’ originates from English common law and denotes a dominant/subservient relationship between parties, you realise it’s terribly old-fashioned. Our point of view is that people occupying our properties are not ‘tenants’, they are customers and we are not landlords, we are service providers”, says Hitchcock. .
Haven Living will introduce a raft of innovations across its portfolio of homes to improve living options for customers. This includes scrapping bonds and letting fees altogether and, to provide greater security with multi-year leases with flexible exit options should the customer’s circumstances change. Every home comes with free broadband for the entire lease term, and its own AI assistant, making it easy for customers to order maintenance and supplementary services, such as cleaning, from Haven. The cost of renting a Haven home will be relative to market rents and rents will be consistent, with reviews occurring no more frequently than 12-month intervals.
Haven expects to bring hundreds of new homes to the market, all to the latest standards and specifications. “Developing an Invest-to-Rent fund in New Zealand will deliver thousands of new rental homes and give people who rent access to more housing choice,” said Hitchcock.
Invest-to-Rent is a major sector overseas
Internationally, the Invest-to-Rent sector is well-established, soaring in popularity in a market now estimated to be a trillion-dollar industry. In fact, the residential market now represents 25% of all institutional property investments in the US making it the second largest investor allocation after offices and well above investment in retail centres and industrial estates. Local wholesale investors are now examining the opportunity to invest at scale in this highly-secure asset class.
“Like other international markets, we expect this new sector to be very popular with New Zealand-based wholesale and institutional investors, while providing positive social impact.” Mr Lichtenstein says, “The Haven Living fund will deliver high quality rental accommodation; close to jobs, transport, schools and community amenities. We all know our cities are growing fast and we will need to provide more homes for people across these regions. We believe Invest-to-Rent will become an important part of New Zealand’s long-term housing solution."
Haven Living was founded with the purpose to enable liveability in New Zealand’s main cities. All New Zealanders deserve to have a secure, well-located, healthy, connected home. This is the foundation which allows us all to build happy and successful lives.
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