They want to raise billions. And they need to overcome the sceptics. Still, build-to-own newcomers Bloxx are confident of making an impact on the housing crisis, and now have star power backing with Cliff Curtis.
Curtis spoke to the Herald from his home in Rotorua, saying he joined the Bloxx advisory board after growing concerned about the social impacts of expensive, unattainable housing. He also drew on his own upbringing and struggles his family had in securing their own home.
After starring in multiple successful movies here and abroad, Curtis was able to buy his own home but said many other Kiwis could not, even when they worked hard and tried saving.
“I’ve done pretty good in life and I’m pretty comfy in my hometown of Rotorua where my dad’s from, my iwi is from and I’ve managed to help some of my family and friends... but I’ve seen this housing crisis. Really I think it stems back from the 1990s when there was a policy to relinquish a commitment to social housing.”
Curtis says he’s a layman, but from his perspective Bloxx had an approach worth trying.
The model involved a homeowner buying in to a home owned by Bloxx, backed by investors, with a deposit of 1% of the house price, although larger deposits were optional.
A fixed platform fee was charged to the homeowner within their weekly payment, and would be a key source of Bloxx’s revenue.
Bloxx said homeowners were still required to pay rates, insurance, repairs, and maintenance as they would with a mortgage. But the company aimed to make these payments more affordable - akin to renting rather than a punishingly high mortgage.
The company said it also allowed institutional investors such as pension funds to access the residential property market at scale while supporting Kiwi families into homes.
Icehouse is among the investors and has a small (1.61%) shareholding in the company.
“I’ve been looking for some kind of solution,” Curtis adds. “And I know there’s been a lot of effort made but Bloxx to me seems like a common sense approach to it.”
There will likely be sceptics - and already have been.
After Bloxx co-founder and managing director Chris Smith wrote an opinion piece about New Zealand’s home-buying model last month, one Herald reader replied: “We need to start with the tax system. It incentivises unproductive property investment at the expense of other productive investments.”
“Great until the company goes bust and you own nothing,” another commented.
A 2018 PwC study examined housing affordability and asked why New Zealand did not have big residential rental options, the likes of which were common in the United States.
“There is an expectation that privately-held residential investment housing stock will gain traction in New Zealand. Some parties are already positioning to establish investment housing portfolios, albeit there is no depth in the market at present,” the PwC authors said at the time.
“The challenge to date with this type of housing model in New Zealand [or more particularly Auckland] has been that yields... have been insufficient to attract development and investment capital.”
Bloxx said it had $2.8m of funds under management in New Zealand and the UK and had also opened its first tranche of local funding to wholesale investors.
“We currently have verbal commitments of up to $50m with further investment to be made once other investors come on board.
“Not to shy away from this point, securing significant sums of funding over the coming months and years is the key to be able to scale Bloxx to help thousands of Kiwi families and that is our core focus and where we have spent the last 18 months building our capability and infrastructure.”
The NZ Fintech Fund in partnership with Icehouse Ventures had a minority equity position within Bloxx, which said it had 4500 homes secured in the pipeline over the next three years in New Zealand.
Curtis and Smith both seem to acknowledge they’re up against some challenges but the actor says he welcomes the debate.
“I’m a sceptic. I think that’s welcome conversation. It’s healthy. We need that. Things should be examined when [they] are this important and this ambitious.
“I’ve been a property investor, I’ve been a landlord. So for me it’s the best solution that I’ve found so far.”
Curtis says people don’t need to wait another five or 10 years for policies to come around or market forces to amazingly change. He says right now seems like the perfect time for an alternative.
“In order for Bloxx to work, you’re balancing two things. You’re balancing the home buyer and then the investor that makes Bloxx possible. And it’s a really specific communication that needs to happen.
Curtis said successive governments, property developers, iwi and others made efforts to address social housing needs, and the “housing shortage” in general, but success had often been elusive.
“And some would argue there is no housing shortage.”
Curtis said in some places there were plenty of houses but market forces made them inaccessible to working-class and middle-class people.
He said he remembered outsiders snapping up Rotorua properties in the early 2000s.
“There were offshore buyers, a lot of them from Australia primarily, that were coming into town and they were buying them by the baker’s dozen.”
Curtis said these buyers had the attitude “I’ll buy it as long as there’s renters.”
He said he was frustrated at house price rises racing ahead of wages and what that meant for social cohesion.
“I don’t know how people can keep up with that. Where’s the solution for the people who want a home and need a home?
“There’s nothing set up in any way that’s going to stop housing prices from soaring and getting further and further away from normal, hardworking Kiwis.”
Curtis said it was not just up to the Crown, iwi, hapū, or regional councils to try to address the shortage of affordable housing. “Everybody cares about this. Everybody has family members that want a home, need a home.”
The actor said the debt-free Bloxx model appealed to him.
“It’s not just New Zealand or Australia. I see it throughout the developed Western world and it’s debt... The businesses are running on debt, the housing markets are running on debt and the governments are running on debt.”
A Herald report last month on housing affordability found Auckland home buyers had to earn $219,000 to keep their annual mortgage payments to 30% of their income - or $85,000 more than the city’s typical household income.
That 30% of income is a commonly cited example of what buyers could be comfortable with when mortgage costs are considered. Even in Dunedin, earnings of more than $155,000 were required.
Curtis suggested the current trajectory was setting the country up to betray many of its core values, and make it a less desirable place to move to.
“I want to see more people who don’t have that kind of security in their lives to get into homes, because I think it will make at least the town I live in feel a lot more safe and secure.”
He said many people moved here to get away from “feudalist” societies where small elites controlled most wealth but now New Zealand seemed to be backsliding.
“There is a solution and Bloxx is a commonsense solution. If you don’t have a family who can help you get into a house, Bloxx can.”
Smith said he spent years working on the model, at first trying and failing to persuade a big bank he worked at to try something similar.
“The reason why we’ve taken 18 months behind the curtain developing this model is because we don’t just want to help a couple of people... we actually want to create a model that we can scale very quickly and help thousands of Kiwis. And our minimum target is 5000 Kiwis in three years.
“Our only constraint is how much investment funding we can bring into the business. We purposely want to supercharge that.”
Smith, like Curtis, said he worried about the social implications of more housing inequality, especially for the current generation of aspiring first-home buyers.
“People getting into the market now are predominantly being helped by wealthy parents. So you’re driving more inequality in society. So that social contract that used to be there... if I rerun my time again I wouldn’t be able to get into the market, even with a degree, even with working in banking.”
Smith previously worked for Yorkshire Building Society, Westpac and BNZ.
“The bank’s not making bad decisions purposely for society, it’s just doing what it’s set up to do, to be risk-averse and protect the outcomes for shareholders. Whereas, what we’re creating is a very different vehicle where the same funding, if you like, that’s coming into the market, we’re able to give it a much better return by giving it direct access to the actual underlying investment class, which is residential property.”
Bloxx said it has first options on 4500 homes, secured and growing.
At the contracted fixed price, with the weekly payment the homeowner buys a minimum of 0.25% equity per month from Bloxx in their home.
The company said if the homeowner wanted to move out and sell the home, the price is determined by market as it would be with a mortgaged home sold by a homeowner.
But what happens when a Bloxx customer gets sick, laid off, or can’t pay the fees?
“We have way more tools to manage life,” Smith says. “It’s not that people are going in there purposely as negative and terrible people going ‘I’m going to stop paying my mortgage’, right?”
He said divorces, health crises or redundancies were behind the vast majority of mortgage delinquencies.
“Unfortunately in a mortgage structure or a rental structure, the person who’s given you the deal or given you the house has cost lines that they need to pay out every single week. So as soon as you stop paying, they struggle to help you through that period whereas, from our perspective, the underlying property is still there, which is the security in the arrangement.”
Smith said Bloxx might consider “stopping the buy-in for a couple of months while you get back on your feet and we can support you through that phase”.
Reserve Bank says leaving banks to their own devices hasn't worked.