There are plenty of great examples of impact investing in action in Aotearoa New Zealand. This time, we're zooming into the Bay of Plenty.
Our aim at the Impact Investing Network is to educate and connect the Impact Investing sector in Aotearoa, so we can channel capital towards initiatives like the Housing Equity Fund in order to make a positive impact in Aotearoa and globally.
Instigated by BayTrust, the Bay of Plenty Housing Equity Fund (BOPHEF) is a collaborative venture between five community organisations: BayTrust, Trust Horizon, Rotorua Trust, TECT and Tauranga City Council.
Their mission is to catalyse the development of much needed, large-scale new housing supply across the Bay of Plenty for members of the community most in need of improved housing options, whilst delivering a commercial rate of return to investors.
Founding shareholders have committed $45m to the fund — the fund aims to leverage its equity with debt to provide a starting pool of capital close to $100m.
We spoke to Terri Eggleton, BayTrust Impact Investment Manager, about the launch of the Bay of Plenty Housing Equity Fund, their collaborative and co-design process with multiple organisations, and the importance of mainstream investors investing in impact.
A discussion with Terri Eggleton, BayTrust Impact Investment Manager:
What are key challenges within the housing sector? How does the fund address these?
Each region has their own unique housing challenges. Bay of Plenty (BOP) has four distinct geographical areas: Western and Eastern BOP, Rotorua and Taupō/Tūrangi.
In Western BOP, critical issues are servicing the need of the ageing population with one and two bedroom units (not typically built by developers) and addressing the high growth rate.
In Eastern BOP it’s addressing the needs of the lower socio-economic bracket, where housing has often been repurposed to service the horticultural workers. This leaves an extreme shortage of affordable rentals.
In Taupō/Tūrangi many former rental properties are now Airbnb properties — causing a shortfall in rentals.
Rotorua has been in the news in recent years for a surplus of people in motels due to a lack of affordable rentals.
This Fund aims to tackle these shortfalls by providing investment funds that will address areas where either Government or the market has not fulfilled the needs of the people.
A further key consideration is assisting the Māori community to utilse their land for housing, a well known issue present across Aotearoa, as Banks are reluctant to lend on multiply-owned Māori land.
We are engaging with Iwi and Hapū. Through these partnerships, we hope that this Fund will help to solve this problem.
What opportunities do you see within the New Zealand housing market?
There is an opportunity to utilise the balance sheets of Funds, especially Kiwisaver Funds and Philanthropic Funds, to invest in housing in a long term sustainable manner, while generating satisfactory returns and providing a social good. Investment into housing is a standard for most overseas investment funds, at roughly 5% of their portfolio.
The BOPHEF provides an investment mechanism to allow investors to participate in the housing market through a Fund with a social focus, and the aim of a market rate of return.
What's unique about the housing fund?
The formation of the BOP Housing Equity Fund was through a collaborative, co-design process between a group of interested parties who want to address the housing issues in the BOP region.
→ The investors are philanthropic funds and a Council.
→ The managers are New Ground Capital and Brightlight, who have worked together with the investors and consulted with the community on the design of the Fund to ensure it will have the ability to service the needs of the community.
An equity fund was desired as the most suitable structure and one that we hope will attract other investors as the Fund develops and the impact/returns are known.
What impact metrics will be tracked?
The key metrics for impact have been developed based on:
The Impact Management and Measurement Framework, which identifies the areas we will invest; and
Our Theory of Change, which our projected impact is based.
Key metrics are:
To create more housing supply of typologies/tenures currently under-delivered by the market and government.
To create more affordable housing.
To house more people who are not able to afford quality housing in the BOP region.
To improve the well-being of the underserved in the BOP region.
To scale up the impact of the above, by attracting more capital to the Fund from other investors.
This will be achieved through community partnerships, and new and existing investment funds deployed into environmentally sustainable and affordable housing options.
Have you seen any trends encouraging further investment in social housing?
There is an increasing realisation from philanthropic investors that:
Our housing issues are not going to be solved by the Government.
Investment into housing is a win-win for the community and for the investors by providing a long-term, stable, financial return.
Addressing housing needs is a fundamental requirement to the health and wellbeing of the community.
For mainstream investors (for example, KiwiSaver Funds), there is still only a small number (very small number!) invested into housing. We are hoping this Fund will demonstrate that housing investments can return a risk reflective return and achieve impact. Impact investing does not mean concessionary returns.
Anything else our community should know about BayTrust, or the Fund?
BayTrust is a member of the Community Trust family in Aotearoa, of which there are 12 trusts. We have around $240m of investments and grant ~$8.5m into the community each year. Our driver in supporting the development of the BOPHEF reflects our desire to increase the impact we make in the BOP community beyond the ability to grant. We also recognise that addressing housing issues through grant funding alone is not achievable and although we have provided loan funding to CHPs in our region in the past, this is also limiting.
The Fund is open for further investment. We encourage other community trusts, philanthropic foundations and mainstream funds to support the BOPHEF to amplify the impact we can make. The Fund has provided an opportunity to gather significant funds together to address housing issues.
If you are a community trust and interested in co-designing something similar for your region. Please reach out to the Impact Investing Network here. We will connect you with organisations who are happy to help!
Interested in reading more?
You can find the BOPHEF website here.
If you are interested in investing, please reach out to Roy Thompson at New Ground Capital: roy@newground.co.nz
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