Social & affordable housing: A holistic, next generation approach to drive long term housing security

On any given night in Australia, more than 122,000 people are homeless, including over 17,000 children under 12. This ranges from couch surfing, to sleeping in a car, to sleeping rough on the street.

On a cold, damp Melbourne night, when it feels like -5 degrees, spare a thought for those huddled under bridges and under awnings on Collins Street. With housing affordability at its lowest level in over 30 years, homelessness and housing distress are increasingly prevalent:

• 175,000 households (equivalent to 437,000 people or 1.6% of the Australian population[1] ) are on public housing waiting lists
  
• 50% of low-income rental households are experiencing rental stress (equivalent to ~40% of income earners).
  

Access to safe and affordable housing is a human right, yet it is an issue that modern society has grappled with for decades. The issue starts with supply. Economics would imply that the answer isn’t rental caps, which ultimately lead to a reduction in new housing because the long-term returns of new builds are insufficient. This is further amplified by the current escalating cost of building. So how do we facilitate the flow of capital into developing affordable housing?

Federal and State governments are increasingly focused on deploying capital into social and affordable housing, with recent announcements including:

• NSW Social and Affordable Housing - $6.6 billion (announced 2024)
• NFIC (Housing Australia) Federal Government Agency - $3.4 billion in concessional loans that facilitate and support delivering more social and affordable housing (as at June 2023).
• Federal Government’s Housing Australia Future Fund (HAFF) - $10 billion (announced 2023) generating $500m per annum of availability payments to support 30k new homes in 5 years + 20-year concessional top up payments
• Queensland’s Housing Investment Fund (HIF) - $2 billion (announced 2022) generating $130m per annum of availability payments to support 5,600 new homes + 20-year concessional top up payments
• The Big Housing Build Victoria - $5.6 billion (announced 2019)

However, the size of the challenge is considerably larger, with an estimated funding gap of ~$13,000 per household per annum (AHURI, 2019). By 2036, UNSW’s City Futures Research Centre predicted a total unmet need of 372,700 social and affordable houses Australia-wide (According to the 2019 Estimating need and costs of social and affordable housing delivery report).

The key to addressing this need is to catalyse private sector capital. Infrastructure investing has expanded rapidly since the 80’s and 90’s, when public and private sectors recognised the benefits of infrastructure assets as a means of sourcing returns and driving economic growth. Since then, investors have been increasingly drawn to the stable and reliable cash flows associated with core infrastructure assets like airports, roads and utilities. This argument has never been made for social and affordable housing, which has consistently been considered a cost.

A recent study Give Me Shelter highlighted the infrastructure credentials of social and affordable housing, which also creates greater economic benefits than most infrastructure assets. The report emphasised that the present value of bridging the housing gap is 2:1: the total cost is $55 billion, while the benefits – in the form of increased productivity, improved human capital and more – amount to $110 billion (By 2051, in present value terms, 2021 base year). 

For investors, funding social housing is an opportunity to access increasingly economically relevant assets with solid, risk adjusted infrastructure-style returns.

However, to reap the full benefit of social and affordable housing, it is important to acknowledge that residents require more than just a roof over their head to equitably participate in society. Providing access to reasonably priced services and utilities ensures that recipients have a fair chance to engage in society, and that the gains from committing investor capital to these projects are fully realised. This also has the benefit of creating more enduring assets that are greater than just a house – helping to protect and grow investor capital for the foreseeable future.

Facing housing affordability challenges

At Palisade Impact, we take a holistic approach to facing the challenges surrounding housing affordability – more than just roof overhead. Palisade Impact is looking to invest directly in social and affordable housing as well as affordable retirement living. In addition, Palisade Impact will continue to invest in utilities like Gigacomm which provide low-cost internet to social and affordable housing; and Pure Sky and other community energy networks which provide low-cost green energy to low-and moderate-income housing.

Finally, some challenges cannot be solved with financial capital, so outside our fund, the partners and owners of Palisade Impact support You Matter, a charity that has created more than 200 homes for women and children that are survivors of domestic violence.

Housing is a wicked problem that takes a village to fix – and Palisade Impact is dedicated to catalysing the capital required to do so.

[1] Assuming average dwelling population of 2.5 people, according to 2021 census data