According to recent AHURI study, no one sector can deliver Australia’s needed social and affordable housing; it must increasingly be financed, constructed, and managed through partnerships of government, community-based, and market suppliers.
Governments are becoming more aware of the potential for partnership with private investors and organisations to increase funding for social and affordable housing.
Researchers from the University of Sydney and Curtin University conducted research for AHURI on options for involving private sector investors and developers in funding and delivering social and affordable housing. It also identifies any financial, regulatory, or development impediments that may hinder further financiers and developers from participating.
“In Australia we need around 36,000 new social and affordable homes each year; prior to the COVID-19 pandemic we produced about 3,000’ says lead researcher Richard Benedict of the University of Sydney.
“To meet the demand, it is clear forms of ‘hybridity’ of the housing system are essential, whereby social and affordable housing is increasingly financed, developed and managed by a combination of government, community-based and market providers, and cross-sector partnerships; no one sector can address the need alone.”
Governments are becoming more aware of the potential for partnership with private investors and organisations to increase funding for social and affordable housing.
Several institutional investors and superannuation funds expressed interest in investing in social and affordable housing during low interest rate periods, despite the fact that yields are often lower than in other types of residential investment. Lower returns were thought to be mitigated by lower risk in the social and inexpensive rental sector, which, according to some players, retains value for longer than market rate rental, attracting institutional investors. However, there are regional variances in investment appetite, with institutional investors focusing on Sydney and Melbourne, where demand is constantly high.
Participants emphasised that private investment in low and extremely low-income housing would always require some form of government subsidy or capital input.
AHURI said worldwide data clearly shows that private engagement should be considered as a means of extending, rather than replacing, governmental subsidies for housing low-income workers and people with special needs.
Reduced project costs, such as granting access to government property or employing inclusionary planning methods, are a partial substitute to direct government funding.
However, participants in the research from the private sector recognised challenges and hazards that must be addressed if the business sector is to support a major rise in social and affordable housing. Changes in government, modified and abandoned policies and initiatives, and a lack of stability in political and bureaucratic leadership all impede prospects to increase social and affordable housing through private sector participation.
Supply chain problems, increased material costs and labour shortages arising were also raised as issues from developers as construction becomes more expensive, alongside onerous planning red tape/
They emphasised the need of predictability for investor trust in all regulatory and programme contexts. Furthermore, development hurdles included a dearth of appropriate locations, labour shortages, and lengthy, complex government procurement and planning approval processes.