Research Summary

This research modelled five alternative pathways to funding social housing and found the ‘capital grant’ model, supplemented by efficient financing, provides the most cost effective model for Australia. The research also established the current and future unmet need for social housing in different parts of Australia.

Research Aim

The aim of this research is to inform the development of a more effective investment pathway that follows from the re-conceptualisation of social housing as needs-based infrastructure.

Research Findings

Ensuring necessary and appropriate levels of social housing investment begins with a well-evidenced understanding of the scale, type and location of need and secondly, an accurate understanding of the cost of procuring appropriate dwellings in the right locations. The design of an investment pathway, and the use of public or private equity and debt, also significantly influences the cost to government and the wider community.

Our research builds a customised method for establishing both current unmet need (the backlog) for social housing and future projected need, based on a proportionate share of expected future household growth. It also provides evidence for the diverse geography of land and construction costs based on industry and project level data.

Five alternative pathways involving a range of debt, efficient financing and capital grant strategies have been modelled to assess their relative costs to government. The research shows the ‘capital grant’ model, supplemented by efficient financing, provides the most cost effective pathway for Australia—in preference to the ‘no capital grant, commercial financing operating subsidy’ model.

Over the next 20 years, it has been estimated that 727,300 additional social dwellings will be required, with current price procurement costs varying from $146,000 to $614,000, depending on local land values, building types and construction costs in different regions. This report provides extensive data on needs and costs for 88 statistical areas (SA4 level).

Where rents are set at levels affordable to low-income households, revenues can only support modest levels of debt financing and thus co-investment is also required.

International experience on infrastructure investment pathways cautions that, while ‘off balance sheet’ Public Private Partnerships and Private Finance Initiatives (PPP/PFI) have been widely utilised in comparable countries (as well as in Australia), these have often proven sub-optimal in terms of cost efficiency and effectiveness (UK National Audit Office, 2018).

This report provides inspiration from more productive, supply-orientated social housing systems that flourish in countries such as Scotland, Finland, France and Austria and most prominently amongst our Asian neighbours, China, Korea and Singapore.