Social Impact Investing Poses Potential Solution to Housing Crisis
16 May 2018 at 5:19 pm
Social impact investing could be a game changer in helping to address Australia’s housing crisis.
A new report, released on Wednesday by the Australian Housing and Urban Research Institute, found that when implemented in the right conditions, social impact investing (SII) has the potential to address housing and homelessness in Australia.
The report, led by the Centre for Social Impact at UNSW Sydney, said while SII was not a panacea and would not be the most appropriate nor effective solution in all cases, it provided “additional policy tools and a promising framework to design and fund more effective solutions”.
Inquiry lead, and CEO of the Centre for Social Impact, Professor Kristy Muir told Pro Bono News the potential of SII was significant.
“We know we’ve got this great problem around housing affordability and homelessness and what we need to do is to work out some new solutions for it. What we’ve been doing is looking at understanding whether social impact investing is a potential solution to addressing housing affordability and homelessness issues,” Muir said.
“I guess the big takeaway is that under certain conditions social impact investing can work by investing in different formats, in property, in organisations and in people.
“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.”
The latest report marks the final Inquiry into Social Impact Investment for Housing and Homelessness Outcomes and provides an analysis of the overall insights from across the inquiry’s three projects.
It revealed a number of promising SII instruments and models that could be viable options in contributing to Australian housing and homelessness outcomes including housing supply bonds, property funds, funding social enterprises, social impact bonds, and social impact loans.
However the report cautioned that success was dependent on multiple factors, including the role of government.
Muri said it was critically important that government played the right role, as market builder, steward, and participant in the social impact investment market.
“So the premise of social impact investing is that it does four things; one is that it has good intent. So the intention has to be around producing social outcome. Secondly there is a social and financial return. Thirdly you can measure those returns. And the fourth one is additionality, and that basically means the social impact investment is adding something to addressing the problem. It’s not just replacing another funding source,” she said.
“So thinking about what that means. We know that for institutional and other investors there is a gap in market return. So what we need is people to be willing to take a lower than market return but there are still gaps in the finances. So government playing a key role in that is really important.”
She said effective infrastructure was also needed to support the process.
“On top of this, and most importantly, we need effective and robust impact measurement to understand the social and financial outcomes,” she said.
Muir said she welcomed the announcement in the federal 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.
“This is a significant step forward,” she said.
In terms of the most effective models, the report found that the most successful examples to date used a mix of capital from different sources.
“Social impact investing gives us this great opportunity to tap into different money but actually the need for other types of funding is still there,” Muir said.
“Where we’ve seen some success has been where you’ve got a social impact investment, let’s say to a social enterprise for example, but they’ll also have funding from philanthropy. They might be getting tax offsets from government.
“If we can if we can get the conditions right for social impact investing I think it has real potential to play a key role in helping us address housing affordability and homelessness. We have to be super smart though about making sure that we are adding funding into the mix to address the complex problems and that social impact investing doesn’t take from the needs that we know already exist in essential social services.”
The report also explored the challenges and barriers in using SII, and highlighted the risks of the potential negative impact on Australia’s vulnerable beneficiaries if the SII market fails.
However, Muir said, given the urgency of the problem around housing affordability and the fact homelessness has grown in a environment where GDP has increased “at an unprecedented level”, Australia could not afford not to try.
“The current solutions that we have are not addressing the problem, homelessness has increased by 14 percent since between the last two census’,” she said.
“We know the facts around housing and homelessness. 194,600 people are on social housing waiting lists in Australia, and around one in 200 people are homeless on any given night. 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.”
The report is available from the AHURI website.