Welcome to the first edition of LFG. Seeing as I’m a millennial living in London, where the average tenant spends 41.6% of their income on rent, it feels right to begin with an article on fixing home ownership worldwide. 1.2 billion people are estimated to be renting globally, receiving no equity on their monthly payments. Could there be a better way to do things?

Chris Smith and Cliff Curtis, who you may recognise from films like Avatar, Training Day, and Hobbs & Shaw (from the Fast and Furious franchise), believe that there is. 

Enter Bloxx, piloted in Curtis’s native New Zealand, which is building new homes and creating an alternative model for ownership. If all goes to plan, this is a model that creates returns for investors, helps more people get on the property ladder, and creates demand and investment for the building of new homes.

How does it work for the home buyer?

And here’s the part that should really get the attention of any frustrated deposit saver. Smith says home buyers typically spend 30% less per month than they would on rent, and amass equity at a faster rate than they would with a typical mortgage. 

Speaking of the M-word, it’s worth mentioning that there’s no mortgage involved here at all. Instead, equity is gradually bought from institutional investors who co-own the properties, and the customer enjoys the same rights as a typical owner. If desired, they can buy extra equity (at a pre-agreed rate) during the term, and if they choose to sell, they’ll receive a payment that corresponds with their ownership stake, minus selling fees.

What’s in it for the investor?

A Fairer Model for Home Ownership?

Renting is optimal for many, but in other situations it can be viewed as a miserable transfer of wealth to people who can afford property. This model could flip home ownership on its head, especially for those who are trusted to make rental payments each month, yet can’t get a mortgage.  

There are cost savings to look at too, like the 30% undercutting of rent. This is a big claim. Smith explains that these savings are created by more than just the replacement of mortgage interest. His team has, in essence, removed many of the intermediaries that you’d expect in property ownership.

“There’s no need for a bank, real estate agent, property manager, or mortgage broker. That value can now be given back to the customer.”

It’s early days for Bloxx, but the initial response to the New Zealand pilot has been promising. “We did two or three podcasts and a newspaper article, and within a couple of months 2,500 people wanted to buy a home.” 

The biggest roadblock is accessing capital at the scale required. “The capital is there. We just need to give it the confidence to shift,” he adds.

Built for a Web3 future

The Bloxx team tells me the platform has been built with a ‘future-ready architecture’, which will allow Web3 elements to be introduced as the product scales. People tend to react emotively when ‘Web3’ is dropped in, but what it means here is genuinely sensible.

For instance, investment in the property portfolio may eventually be tokenised, fractionalised, and traded as an asset-backed digital currency. This should make it easier to invest, and easier to raise capital from across the globe. Equally, the transfer of property may eventually be made easier by using NFTs to demonstrate ownership.  

A lot needs to be done before any of this happens, but Smith and Curtis speak optimistically about their engagements with the UK and New Zealand governments respectively. The necessary changes might not happen immediately, but the upside to a global version of this model would be considerable. 

“We’re kind of digitising the shit out of a $300 trillion market,” Smith remarks.

What happens when things go wrong?

Naturally, there are scenarios that could really test the Bloxx model. For instance, what happens if people can’t or don’t pay their subscription fee? 

The Bloxx team tells me that costs relating to damages are recovered through the occupant’s equity position. Bloxx also manages an insurance policy, which is in line with standard mortgage requirements. 

And let’s say an occupant can’t make a payment. If this happens, Bloxx can pause the buy-in, and allows occupants to sell back their equity to the platform or investors at a preferential rate. 

Smith explains that missed payments are usually for reasons we can easily sympathise with.

“I’ve managed mortgage books in my career, and I can tell you that everyone thinks that missed payments are for illicit reasons, and we can manage that at a portfolio level. But 99% of people who are unable to pay for their mortgage or rent are unable due to redundancy, divorce, death or serious illness. It’s often something they didn’t expect to happen and they don’t have a cushion.”

“The worst thing that can happen is for that person to lose the house, because then it spirals. Instead, we give them the option to pause, sell back, and then start buying in again. All that people need in that environment is time to get back up on their feet.”

A shared vision

It’s not very often that former bankers and Hollywood actors go into business together. However, Smith and Curtis are brought together by a shared belief that the housing market should be more accessible. Curtis, who is of Maori descent, says Bloxx “offered a solution to me and my community.”

“In my community in New Zealand, this is a growing, deep concern. I’ve helped half a dozen families in my community get into homes over the last 25 years, but it’s just not enough… My focus isn’t just the housing market, it’s community based.”

“Why now? Because right now, the government, financial models and property developers don’t have a solution. It’s the biggest asset class in the world and they don’t have a solution.”

Smith’s ethos is clearly compatible with this. “We connected as I always had a philosophy around helping millions of people into homes,” he says. “But I always knew that what we’re doing here is helping people who should own homes. Where I come from, in the North of England - and I’m from a single parent home and social housing - there’s a real need to help people in lower paying jobs, and to get millions of people into homes and make a real difference to people in the community I come from.”

Big plans for the UK

If Bloxx gets the traction its founders hope for, this vision may soon be realised. “We’ve built all the infrastructure to launch in the UK, but we’ve kind of held off because we want to go in with a big bang, rather than just creep in,” says Smith.

Given that the Labour government has pledged to build 1.5 million homes by 2029, he might be pushing an open door. “They need institutional capital to come into the market,” he adds, “and developers will not turn up if they don’t have certainty that somebody is going to be able to buy the house. We can create that certainty, and create confidence in the market.”

“So not only do we create homeowners, we create the ability to build homes, which is what every country needs.”

Looking further down the line, Curtis hopes that Bloxx can also tackle community based home ownership, social housing, and opportunities for the unbanked. “I’d like to see us get into that in five years time,” he says. 

“We believe we can do something positive in the world with technology and with people. We can look at a market and turn a failure into an opportunity.”

Final Thoughts

Bloxx has a long way to go, and as Curtis rightly suggests, real estate is the world’s largest asset class. There are legal and governmental hurdles to overcome, and a huge amount of capital is required - it will take time to build trust with investors and homebuyers.

Nevertheless, the Bloxx concept is a tempting one and the response to the New Zealand pilot appears to confirm consumer demand.

Should everyone be looking to own rather than rent? Obviously not. But for those intending to live in the same place for a long time, or those who would choose to do so if they could keep some equity, there might soon be a better way. Likewise, those who fall into temporary or unexpected hardship could benefit from an alternative to the traditional mortgage model. 

Speaking on behalf of a generation that’s, at least in Britain, been spitefully accused of prioritising a daily coffee and smashed avocado over home ownership, I’d say this could be the sort of property market overhaul that we need. Let’s see how it goes.

Get involved with LFG

This newsletter exists to tackle the big questions and curiosities of fintech. If you’re building something exciting, get in touch at [email protected]. 

If you enjoyed this piece and are seeking a writer for editorial or marketing copy, also use the email address above.

Features are not endorsements unless explicitly stated.