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Social impact investment key to solving housing crisis but beware of risks

Social impact investment potential key to solving Australia’s housing crisis

A report released by the Australian Housing and Urban Research Centre (AHURI) indicates social impact investment (SII) could potentially solve the housing crisis but is heavily dependent on the role of the government and its ability to overcome risks.

The final inquiry report comes after three separate sub-reports based on the analysis, workshops and interviews with stakeholders. The result shows that SII could potentially provide additional policy tools and a promising framework to design and fund more effective solutions to address homelessness and housing affordability.

Professor Kristy Muir, CEO of the Centre for Social Impact, said: “We have seen that social impact investing has the opportunity to increase capital for the supply of affordable housing, and fit-for-purpose social housing in Australia. This is really exciting and could be a game changer in helping to address our housing crisis.”

Muir, however, cautions that the results are highly dependent on the government’s role as market builder, steward and participant in the SII market and that in order to continue to overcome the crisis, effective infrastructure needs to be implemented.

Further risks to the plan includes high transactions costs of SII, the potential of diverting capital away from grants to repayable finances, attitude of the stakeholders involved in SII, and poor design and implementation. SII, as a sector that is still new and evolving, may not be the most effective solution in all cases.

According to the report, “not all social problems can be solved, and where this is the case, other measures must be in place to ensure that in these instances they are managed effectively, and that this shift does not leave the most vulnerable members of the community behind – but serves to increase the resources available.”

“On top of this, and most importantly, we need effective and robust impact measurement to understand the social and financial outcomes,” Muir said.

The federal government provided a boost in budget over the next four years to build capacity of the SII sector via longitudinal studies and the development of an impact framework. This budget also included a $1.6 million trial and evaluation.

“We welcome the news from the recent budget that the government will provide $6.7 million for building capacity in impact measurement, including through the development of an impact framework aligning with the ‘Australian Government principles for social impact investing,” Muir said. “This is a significant step forward.”

The report illustrated challenges and barriers in using SII and highlights the risks of potential negative impact on Australia’s most beneficiaries if the SII market falls, including Indigenous people, people experiencing domestic and family violence, young people, people with complex needs or disabilities, and the older generation.

This final inquiry, however, draws on opportunity and possibility of the SII market to address the social issues as well as outlining the understandings of the roles associated with supporting vulnerable households to achieve affordable housing goals.

The SII instruments and models that could be the most viable options in contributing to the housing outcomes includes housing supply bonds, property funds, funding social enterprises, social impact bonds, and social impact loans. The report notes that the most effective models in the past have used a mix of capital from different sources.

“We know the facts around housing and homelessness. 194,600 people are on social housing waiting lists in Australia, and one in 200 people are homeless on any given night,” Muir said. “A huge portion of the population is in housing stress. We know that new solutions with the right financial resources are required.”

“What this report shows us is that SII has the potential to be one such solution.”

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