Outward VC co-led the £3m funding round alongside Axeleo, with participation from Seed X as well as existing investors Global Founders Capital and Activum.
Housing affordability has been a recurring theme to anyone looking to get on the property ladder in the UK, whether you were once dealing with the high interest rate environment of the late 80s and 90s or the 100-year-high home prices (as a multiple of average earnings – source) that have outstripped income growth over the last decade. But for the millennials looking to buy their first home today, the problem is more acute. As a result of more stringent mortgage requirements being put in place in the aftermath of the 2008 financial crisis (larger deposits, tighter loan-to-income ratios, etc.), record high home prices and a volatile interest rate environment; youth homeownership rates have dropped to all-time lows (29% in 2020 vs. 51% in the early 1990s – source). As mortgages become less accessible, young households are forced to stay in the rental market for longer periods where uncapped rental price inflation further delays their ability to save and for some, kills their dreams of ever becoming homeowners.
...youth homeownership rates have dropped to all-time lows (29% in 2020 vs. 51% in the early 1990s)
While the causes leading to the housing affordability crisis are wide ranging, the housing models traditionally available are narrow (i.e., buying or renting) and it can be argued that there has been insufficient innovation in the models by which we live. More recently both the UK government and the private sector have made attempts at helping first-time buyers, with various schemes such as shared ownership, equity loans, and Help to Buy (albeit coming to an end in 2023). While these options have their benefits, their criteria can significantly limit their ability as solutions for the majority of both aspiring homeowners and housing stock.
Take for instance a young couple in their 30s, both key workers, living in the Greater London region looking to buy their first home to raise their young children in. Although diligent savers with stable jobs, the increase in the cost of living has outstripped the family’s income growth, coupled with lenders pulling out of the 95% LTV (Loan-to-Value) mortgage market means that they are unlikely to have a large enough deposit to buy their dream home. Without a minimum deposit, the young family is likely to be forced back into renting – where increasing rent prices and an uncertain housing market erodes their aspirations of ever buying a home. This is where Keyzy comes in.
Founded in 2021, Keyzy provides potential first-time homeowners with a clear path to ownership through its innovative rent-to-own model built to provide its users with simplicity, flexibility, and certainty.
How it works:
Keyzy acquires homes on behalf of its customers – assisting with price negotiations and taking care of the onerous closing process – and subsequently rents the property back to the customer at a fixed monthly rental amount for a 3–7-year lease period. Having provided the customer a fixed buy-back price at the start of the lease, Keyzy’s customers have a saving plan with fixed goal posts that will put them in a realistic position to finally become homeowners. Over the course of the lease, a portion of the rent is saved by Keyzy to build up the deposit needed by the customer to buy the house at the end of the term. The solution is adequately termed by the company as “Move-now, Buy-later”! If at any stage during the lease a customer is looking to leave the property, they can benefit from any increase in the value in the property by managing the sale – in turn giving the user the upside of homeownership without ever fully taking the leap of buying.
The potential impact this could have on the UK alone is enormous
- Over 500,000 millennial renters are estimated to generate incomes that meet mortgage lending requirements for their target property but who, for various reasons, do not have adequate savings to fund the required deposit
- Over a quarter of 25–34-year-olds have their mortgages declined annually in the UK and who, with some extra time and a clearly defined pathway could become homeowners
With clear evidence of the magnitude of the problem in the UK (and equally in many European countries) Keyzy’s tech-led platform and simplified product structure is well positioned to service this market at scale.
Beyond providing a solution to hopeful homebuyers, the Keyzy platform has been built to add value to all stakeholders involved in the acquisition and funding of a residential property including:
- Traditional mortgage brokers gain access to a simple and effective new product that can serve their pipeline of customers whose mortgages have been declined on grounds of insufficient deposits (this go-to-market strategy is already proven with one of Keyzy’s earliest customers themselves a mortgage broker partner)
- Institutional residential real estate investors providing capital to Keyzy can access more stable and robust rental yields from lower vacancies and lower maintenance costs achieved by the nature of customers in the portfolio who behave more like homeowners than renters
We couldn’t be more excited to be partnering with founders Jeremy and Simon as they make the dream of home ownership a reality again.
Not only are we excited by how Keyzy is looking to help people get on the housing ladder today, but more so, the future of the company at scale. By leveraging technology, Keyzy will accelerate the home application process, improve the speed at which it is able to close property transactions, and provide value-added services to both its customers and brokers.