This research investigated Social impact investment (SII), which aims to generate and actively measure social and financial returns. There are several promising SII models—including housing supply bonds, property funds, funding social enterprises, social impact bonds and social impact loans. Effective SII requires suppliers of goods and services, intermediaries, suppliers of capital, government and beneficiaries to work together.
This is the final report for the AHURI Inquiry into social impact investment for housing and homelessness outcomes. Social impact investment (SII) is investment intending to generate social and financial returns, while actively measuring both (SIIT 2014; GIIN 2016). Key findings include:
Australia faces complex challenges across a spectrum of issues from housing unaffordability to social housing and homelessness. SII provides additional policy tools and a promising framework to design and fund more effective solutions. SII is however relatively new, not well understood, and there is a need for further evidence on how it might be applied to these issues in Australia.
Effective SII requires a system of actors to work together—including suppliers of goods and services, intermediaries, suppliers of capital, government and beneficiaries. Government has a key role as a market builder, steward and participant in the SII market. Beneficiaries are experts in their own lives who can assist in co-designing SII, and should be kept at the centre of SII initiatives.
There are several promising SII instruments and models—including housing supply bonds, property funds, funding social enterprises, social impact bonds and social impact loans. Almost all effective models to date have used blended capital. SII cannot supplant government funding, but it can enhance the return on it by attracting other sources of capital.
The success of SII depends on the role of government, stable policy conditions, effective infrastructure, better outcomes measurement, and understanding between different stakeholders of each other’s roles.
Challenges and barriers in using SII include the extent of housing and homelessness issues to be addressed, the extent of risk that suppliers of capital may need to take on, difficulties in scaling, the financing gap in social and affordable housing, and the disconnect between investors, projects and legal forms.
Risks include high transaction costs, potential for poor design and implementation of SII initiatives, diverting capital away from other effective policy solutions, moral hazards in how to most effectively link social and financial outcomes, and the potential for negative impact on vulnerable beneficiaries if the SII market fails.
Where it is implemented in the right conditions, SII has the potential to address some housing and homelessness issues in Australia. However, SII is not a panacea and will not be the most appropriate nor effective solution in all cases.
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Australian Housing and Urban Research Institute (AHURI) 2018