Housing budget opens the door for private investors to help solve social housing

By Brad Braithwaite, CEO of Hume Community Housing | Tuesday 18th June, 2024

The New South Wales State Budget creates a pathway for private investors to contribute to the state’s social and affordable housing solution.

NSW has been promised 30,000 new homes, including 8,400 public housing dwellings. We join with many in the housing sector in welcoming the news that the State Government will use surplus public land for 21,000 new homes and spending $5.1bn on public housing that will be built and managed by Homes NSW.

It’s a big commitment from government, which should also appeal to investors looking for certainty and scalability before committing capital.

Because the challenge of plugging the ever-increasing funding gap for critical community and social infrastructure – such as social and affordable housing – is far from resolved.

While the government’s spend is positive, it comes with a warning.?The Treasurer said record public debt and other economic pressures mean government spending will need to be restrained and the state is expected to be in deficit until 2027.

It shows we need to broaden our thinking because of the macro and social-economic challenges facing government are not going away.

Governments of all persuasions are hamstrung by a confluence of forces including population growth, greater urbanisation, and increased public debt.

There’s not an endless supply of cash to finance solutions to our housing crisis.

The number of Australians sleeping rough has jumped 25% in the past year, with some areas in NSW seeing a nearly 80% increase. Skyrocketing property prices and rental costs are leading to more and more residents struggling to secure stable and affordable housing.

Despite many examples of positive outcomes and lives transformed through effective housing, the problem is worsening rather than getting better.

As a result, there is growing momentum for private capital – from the big super funds to smaller impact investors and non-bank lenders – to play a key role in the financing and delivery of critical social services such as community housing.

Because at its core, social and affordable housing is another form of real estate investment.

The investment proposition is clear for all to see; strong demand, long term lease arrangements, bi-partisan policy support, tax incentives, and planning and development concessions.

We have seen investor interest continue to grow in mature international markets. In the United Kingdom, for example, the scale of private institutional investment for social and affordable housing has reached 70% of the capital needed, up from 30-40% in the early 2000s.

The Federal Government's Housing Australia Future Fund (HAFF) has recognised the opportunity for private capital to support in addressing the acute housing shortage in Australia.

Managed by the Future Fund, with an investment of $10 billion, the HAFF aims to support the construction of 40,000 social and affordable homes. The first round saw applications for funding for more than 50,000 homes.

It has been a catalyst that has enabled investors and developers to engage with the affordable housing market, bringing in financial resources, innovation, and efficiency that can scale up housing projects beyond the capacity of public funding alone.

Community Housing Providers (CHPs) are uniquely positioned to act as intermediaries in this collaborative effort between the government and private investors.

Our deep understanding of community needs combined with our purpose to deliver safe, affordable, and accessible housing make us the perfect partners.

The provision of ‘wraparound’ services is another distinguishing feature of CHPs. Because housing solutions require more than just bricks and mortar – as important as these are.

Rather, many people in need of housing services often need supports such as employment assistance, health and wellbeing programs, education and training opportunities, and community engagement activities.

By addressing the holistic needs of tenants, CHPs ensure that affordable housing solutions are not only sustainable but also transformative.

The combination of private capital and effective policy, coupled with the expertise and comprehensive support services provided by CHPs, can significantly enhance the development and sustainability of social and affordable housing.

This approach not only addresses the immediate need for affordable housing but also promotes long-term stability and well-being for residents, ultimately building stronger and more inclusive communities across NSW.

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