This research examined social impact investment (SII) in social and affordable housing in Australia, concentrating on the opportunities for, barriers to, and risks to SII. The research utilised key understandings from the US and UK to inform the analysis.
SIIs are those that intentionally target specific social objectives along with a financial return and measure the achievement of both (SIIT 2014a: 2). Financial returns may be concessionary (impact-first) or non-concessionary (financefirst).
SII in social and affordable housing reflects government investment. In the UK and the USA government financial support of social and affordable tenants and NFP housing organisation provides an implicit government guarantee for investors. In Australia, the gap in funding between the tenant’s capacity to pay and the cost of provision is the most significant barrier to SII.
SII in social and affordable housing in Australia does not fit the simple ‘impactfirst’ versus ‘finance-first’ investment typology found in the literature. Adopting a new typology which includes investor reconceptualisation of risk and modified lending criteria, in addition to return requirements, we find most investment can be described as ‘partial finance-first’ reflecting a combination of nonconcessionary returns and modified investment parameters. A far smaller proportion is ‘fully impact-first’ in that concessionary returns were accepted and investment parameters were modified. There was no evidence of fully financefirst or partial impact-first investment.
Bank SII in community housing providers (CHPs) constitutes the largest component of SII in social and affordable housing and it is estimated to be in the order of $1.5 billion. $20 million of non-bank SII was invested in noncommunity housing models.