As well as creating much-needed public housing stock, well-structured affordable housing investment products can have a similar risk profile to infrastructure.
Affordable housing is increasingly being pitched as a core strategy for investment, as super fund interest and longer-term infrastructure investors look to alternative asset options.
The recently-rebranded Aware Super is the latest super giant to enter the sector, launching a 102-unit project—50 per cent of which will be dedicated to affordable stock—in southern Sydney’s Miranda earlier this month.
Formerly First State Super, the super fund has spent $250 million in affordable housing, joining Cbus and Australia’s largest superannuation fund Australian Super lending to the sector.
Australia’s shortfall of affordable housing stock is growing at a rate of 150,000 per year. And with the biggest contraction in GDP since the 1930s and growing unemployment, Covid-19 has only exacerbated the issue, Investec’s Nils Miller says.
Miller, who is speaking at The Urban Developer’s upcoming affordable housing vSummit, says more government support is needed.
“A major stumbling block for this sector has been the ‘funding gap’ between revenue from rents paid by low-income tenants and the cost of developing and maintaining good-quality housing.
“Infrastructure investors are long-term investors, and typically seek a lower, more consistent return than developers.
“To make this model viable investors need government support to mitigate risk and provide land that can be developed into integrated communities.”
While no major announcements have been made on public housing in the lead up to Tuesday’s federal budget, the government’s National Housing Finance and Investment Commission has a large portion of its $1 billion infrastructure loan facility left to spend.
For now, the facility provides finance for eligible infrastructure projects that unlocks new affordable housing supply.
The NHFIC, which functions as a bond aggregator to support affordable and social housing, recently finalised a $100 million agreement with the NSW Land and Housing Corporation.
“This agreement will [support the] delivery of 781 new social and affordable homes at significant development sites across Sydney,” NHFIC chief executive Nathan Dal Bon said.
Dal Bon is joining The Urban Developer’s upcoming affordable and social housing vSummit on Thursday 8 October to discuss Covid-19’s impact on policy and investment in the sector.