Kiwisaver Strategy

[Snoopy]

A Sam Stubbs podcast interview, where he discusses Simplicity's investment in community housing is here::
https://simplicity.kiwi/learn/update...garner-podcast

Notes I have taken from this podcast on his community housing venture are below.

Simplicity manages the savings of 147,000 New Zealanders. Being a charity, the management structure of Simplicity will never make any money, as fees are set 50-70% below the rest of the industry. So they will never be bought out or sold to another market player.

Community housing being built now by Simplicity includes a 51 unit complex of one and two bedroom apartments in Mt Albert (where there is the biggest demand). 10 year leases are on offer, and Simplicity intends to be the long term owner. 42% of people in the OECD live in apartments. In NZ it is about 3%. This is because we have built out, out and out. By land area, Auckland is now the fourth largest city in the world. Building up next to transport hubs, supermarkets and schools is where residential development has to head. Simplicity buys the land, builds the apartments, rents them and maintains them in a vertically integrated 'in house operation'. The building code says you have to build something to last 50 years. Simplicity builds are designed to last 100 years, built out of concrete, brick and aluminium (windows): Never needs washing, never needs painting. But despite the quality build materials, costs are saved by building all of the apartments to be exactly the same, including colour schemes. Interior decor is all white, although tenants are allowed to paint the walls a different colour if they wish. Architects will say that is 'cookie cutter' design. But everything else people buy, be it cars or baked beans, is cookie cutter. Cookie cutter does not necessarily mean poor quality.

In some parts of Germany, renters are into their third generation renting the same house. They regard these long term rental units as their own home and treat them as such. When you have happy tenants with long term occupation security, they are not 'tearing the place up' and they are 'looking after each other'.

Construction expertise has been provided by townhouse developer 'NZ Living' (who have built state houses for Housing NZ before) which was formerly owned by philanthropists Shane and Anna Brearly, who transferred that company to become 'Simplicity Living'. The target for Simplicity Living is to be building 1,000 homes per year within five years Simplicity are even prepared to build on hospital board land and iwi land that they do not own, with suitable lease arrangements in place. Tenants could include the elderly who want to live close to hospitals and hospital staff (including the cleaners) who can avoid 'the big commute'.

What is Sam Stubb's view on the wider housing market, that has drawn him towards taking his own path, via Simplicity, into investment in this space? State house building and private house building were a match for each other up until about 1980. But since then the build rate of state housing has halved, leading to a 45 year supply/demand imbalance that has pushed up house prices well ahead of inflation. Leaving the private sector to take most of the initiative in house building is a convenient way to keep house prices high and house owners feeling wealthy and free to spend their own money. But it also disenfranchises a whole generation that cannot get onto the property ladder. 25% of NZers spend more than 40% of their income on rent or mortgage, making NZ the least affordable country in the OECD in which to live. The last bill you won't pay is the rent or the mortgage. So if you are invested in housing it is very secure cashflow.

SNOOPY