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EXECUTIVE SUMMARY: As home ownership rates decline across all age cohorts, the suboptimal quantity, allocation, and security of housing opportunities in the rental market has received increasing policy attention. To date, fiscal strategies for attracting investment towards rental housing have had limited success, especially in attracting institutional investors to this sector. Renewed policy ambitions aim to channel private investment more efficiently and effectively towards new dwellings in the affordable rental housing market targeted to low and middle income households and provided by third sector Community Housing Organisations (CHOs).
This Final Report on Social Housing Guarantees follows an international Positioning Paper (Lawson 2013) that detailed relevant and established mechanisms operating overseas. It recognises the context dependent nature of these market mechanisms and thoroughly reviews prevailing Australian conditions. In detail, the report offers a locally grounded and feasible proposal to lift investment in affordable rental supply in order to boost Australian economic productivity, and promote social inclusion and innovation in medium density housing provision. The report presents two options for increasing institutional investment targeted towards new development managed by not-for-profit community housing providers and puts forward a recommended model for implementation.
This chosen model learns from international best practice, adapting this knowledge to Australian market conditions, in order to address Australian housing policy goals to increase private investment in affordable rental housing to ensure appropriate and sufficient supply outcomes. The model acknowledges the substantial body of research that has already identified the barriers to investment (Investigative Panels; Berry & Williams 2011; Milligan et al. 2013) and advances their recommendations for more appropriate and attractive instruments (Lawson et al. 2012).
The research thoroughly analyses contemporary evidence of inefficient and mismatched commercial borrowing conditions, which underscores the imperative for a new investment pathway for CHOs. It examines the potential of superannuation funds to ‘fill the gap’ and draws on a wide and deep range of stakeholder views on suitable investment reforms through interviews, strategic literature review and deliberations of an industry Think Tank on investment in affordable rental housing.
The report offers a feasible proposal for a institutional investment mechanism for affordable rental housing, to be underpinned by government and operate across all participating states and territories. It combines the aggregated investment demands of the affordable housing sector, in order to provide a suitable scale of and pipeline demand for bond issues targeted at Australia’s growing superannuation sector. Further, the proposal manages risks through appropriate regulation, sufficient revenue, subordinated debt and specialist financial intermediation.