Report

Financing rental housing through institutional investment

21 Mar 2013
Description

 This Investigative Panel considered private financing models that can deliver additional supplies of quality, well located rental housing in areas of need that is affordable to low- and moderate-income households. This included provision initiated by both for–profit and not–for–profit providers, as well as cross sector partnerships. 

The panel agreed that:

  • Increasing the supply of affordable rental housing will require increased public and private finance—mainly from superannuation and other managed funds which operate with long-term investment horizons.
  • Institutional investment is currently constrained because it requires: higher rental yields than those typically available in the rental investment market, larger scale investment to allow liquidity, good market information, and certainty (around the long-term future of NRAS).
  • For institutional investors to be attracted to affordable rental property they would want to invest in other rental property in order to improve the scalability of the investment, improve the rate of return and offset risks associated with the affordable rental property.
  • Investors would need to invest at least $500 million per annum in aggregate to create liquidity and establish a sustainable market.
  • Financial incentives and credit support will be essential to achieve increased supply at the affordable end of the market, and more diverse forms of government support (apart from just NRAS). To optimise policy outcomes, governments at all levels must give greater consideration to packaging the various policy mechanisms on offer and allowing investors flexibility in the ways in which the various forms of assistance can be used for specific projects.
  • To help deliver scale and liquidity for institutional investors, specialist intermediaries will be desirable to pool together larger portfolios of different types of rental investment opportunities in a range of locations and managed by a variety of providers.

The panel provided a set of sixteen recommendations to Government in relation to the strategic development and financing of affordable rental housing in Australia. This included establishing a specialist task force to implement a two–year national ‘proof–of–concept’ initiative geared to institutional investment. 

Publication Details
Published year only: 
2013
26
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