Victorian social housing commitment potential opportunity for impact investment

The Victorian state government has committed $5.3 billion to build social and community housing over the next four years, a move that could catalyse impact investment in social and affordable housing.

Earlier this week, Premier Daniel Andrews announced that the $5.3 billion spend will increase Victoria's state housing supply by 10%, with 9,300 new social housing homes - including replacing 1,100 old public housing units.

A further 2,900 new affordable and low-cost homes will be built to help low-to-moderate income earners live closer to where they work and provide options for private rental.

The program will deliver secure, modern, and affordable homes throughout Victoria - This allocation will be in addition to new housing builds from existing allocations such as the state's $185 million Public Housing Renewal Program and the $1 billion Social Housing Growth Fund with $1 billion to support partnerships between government and the community housing, private and not-for-profit sectors.

Social and affordable housing is an area of investment in the impact investment sphere. According to the Benchmarking Impact: Australian Impact Investor Insights, Activity and Performance Report 2020 by the Responsible Investment Association Australasia (RIAA), the total impact investment universe in Australia stood at $19.9 billion, with $2.2 billion invested in real assets such as housing.

Experts have told FS Sustainability that there are barriers to scaling up investment in social and affordable housing, including, but not limited to, the need to work across sectors to provide housing solutions that are fit for purpose. There is also a lack of long-term funding options for specialist housing providers which is contributing to a shortage of appropriate accommodation and shelter for Australians in need.

"We have to solve for the barriers that are stopping progress here," said Shamal Dass, chair of Constellation and head of philanthropic services and family advisory at JBWere.  How do we work together across sectors - private and public capital, for-profit and not for profit have to work together, because no one sector is capable of solving this."

The Constellation Project is a collaboration of the Australian Red Cross, Centre for Social Impact, Mission Australia, PwC Australia to drive work to solve housing unaffordability and rising levels of homelessness, including by increasing the number of affordable, accessible and secure housing options and preventing entry into homelessness.

National Australia Bank (NAB) recently announced it has joined Constellation Project as an alliance member. NAB has also made a $2 billion affordable housing commitment.

Dass differentiates between social housing and affordable housing. Within building new social housing, there are intertwined barriers that have to be solved together. There are considerations around finding land to build social housing, which can involve conversations with local and state government, plus there are considerations about the communities that need to be served with greater social housing and how to involve the voices of people who are experiencing homelessness and the challenges of different groups, including older women, Indigenous communities, younger people and others.

"You need a mix of social and affordable housing," noted Dass. "But social housing can only be feasibly built by government ...

"The second part is affordable housing, and this is where NAB is getting involved. That involves putting in all the types of capital that are needed to create big, scale deals that create the amount of affordable housing you need, which is a significant amount."

Leanne Bloch-Jorgensen, head of thought leadership and insights at National Australia Bank, also distinguished between social housing and affordable housing.

"We have to solve for the barriers that are stopping progress here. How do we work together across sectors - private and public capital, for-profit and not for profit have to work together, because no one sector is capable of solving this."

Impact investors, including superannuation funds, have begun making allocations to affordable housing and housing for people with disabilities.

Conscious Investment Management CIO Matthew Tominc previously told FS Sustainability that the pipeline for social and disability housing remains tight.

"[T]he one that we don't have as much investment pipeline is social and affordable housing, and this is an area we've been focused on for a really long time," he said. "We'd love to see more investment pipeline and more structured investment pipeline, but that has to be done in conjunction with government. It's potentially great from an economic perspective and a post-COVID-19 recovery perspective, and looks at the really big challenges with homelessness and the need for social housing, which is felt everywhere. We'd really love to find a way to bring those two things together.

Conscious Investment Capital's impact fund has $45 million in assets under management and focuses on social infrastructure like disability housing, deep impact, such as social impact bonds, property, including affordable housing, and environmental infrastructure.

Read more: NABConstellation ProjectNational Australia BankAustralian Red CrossCapital Investment ManagementCentre for Social Impactimpact investingJBWereLeanne Bloch-JorgensenMatthew TomincMission AustraliaShamal Dass
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