This report is part of an AHURI Inquiry into social impact investment for housing and homelessness outcomes and addresses the question: What are the actual, potential and perceived opportunities and risks of social impact investment (SII) for housing and homelessness policy in Australia? It examines different SII finance options and uses financial modelling and case studies to address this question with a focus on access to housing and support for vulnerable households.
The most vulnerable groups requiring housing include: People primarily citing financial stress and/or housing crisis; those experiencing homelessness; people experiencing domestic and family violence (DV); those leaving home due to family and domestic violence and housing crises; people with complex needs such as mental health and/or alcohol and drug issues; people with a disability; the aged who have low incomes and have insecure housing.
The key SII options considered in the study are: the bond aggregator model for funding for affordable housing; Social Impact Bonds (SIBs), private capital impact investment firms; Impact Investment Mutual funds; and Social Impact Loans.
In terms of the role of impact investing to finance low-cost affordable housing, our empirical findings suggest that social impact financial models that rely solely on rental streams could provide a steady annuity stream to investors in the current low interest rate environment. Capital gains returns add to the financial benefit of an impact investing option. To supplement a bricks-and-mortar SII approach and support vulnerable populations to enter and maintain housing, the SIB instrument appears the most viable SII option.
There is much promise with various SII financial instruments and models, but numerous barriers need to be overcome. A viable SII market would require assistance by government to help close or minimise return gaps, especially because of -
(a) the low incomes of very vulnerable tenants;
(b) the finance gaps faced by Community Housing Providers (CHPs); and
(c) the limited number of impact first investors.
The study finds a limited existing use of SII in the case of social enterprises. Low levels of SII do not simply reflect a case of building understanding and capability among social enterprises and not-for-profits. Nevertheless, the study presents social enterprise case studies which demonstrate that SII can work when there is alignment of purpose and an understanding of the social impact of the investment, and there is an acceptance of a lower than market financial return and some level of risk presented by the enterprise.