Infrastructure Australia published an audit in 2019 to guide Australia’s infrastructure decision-making. It was a significant milestone as social housing was included for the first time by the independent infrastructure adviser.
The audit also highlighted social and affordable housing infrastructure as an emerging investment opportunity for the private sector, acknowledging that governments can’t solve the inadequacies of our housing system alone.
Fast forward another two years and this asset class was fully validated by the inclusion of social infrastructure in Infrastructure Australia’s 2021 Australian Infrastructure Plan. It recognises our social and affordable housing system needs substantial recapitalisation – A$290 billion ($211 billion; €190 billion) over the next 20 years, according to the 2021 Leptos Review of National Housing Finance and Investment Corporation (NHFIC) – to make it fit for purpose and capable of growing.
Leveraging private sector solutions is necessary as government investment in social and affordable housing has steadily declined. Between 1945 and 1955, one in every seven homes built in Australia was public housing; it now represents just 4.4 percent. Public housing is now best known as ‘social housing’, an umbrella term including housing offered by not-for-profit community housing providers and Aboriginal Housing organisations. Scarce availability means housing is focused on those most in need. It’s a necessary focus, but one that leaves a gap for those on low to moderate incomes. The scale of the challenge requires governments to leverage investment from an expanded pool of private investors through community housing providers.
Making an impact
Investors increasingly understand the ESG characteristics of this global asset class, which provides the benefits of low volatility, strong long-term demand and delivers social impact. There is added reassurance in working with regulated organisations like SGCH that have the capability to bring together the investment proposition with contributions from governments and NHFIC. To date, NHFIC has issued more than A$2 billion in social bonds for community housing and has been significantly oversubscribed on each issuance. SGCH has benefitted from A$475 million in facilities from NHFIC.
When Melbourne-based Lighthouse Infrastructure partnered with SGCH in 2021, the firm said the investment enabled them to deliver sustainable, competitive returns at utility scale in the community housing sector. It gave investors access to an attractive investment proposition underpinned by real assets and an unwavering demand for key worker housing.
Lighthouse’s A$59 million investment enabled SGCH to purchase and manage 85 turnkey apartments in the newly constructed Highline development from leading Sydney developer Deicorp. This is a proof point that social infrastructure investments can deliver strong financial and social returns.
I remain optimistic that governments see the value of leveraging private sector investment through community housing. If government gets the settings right, Australian super funds and other larger institutional investors will have more opportunities to invest in these ESG-aligned assets that put keys in the door of opportunity for lower-income Australians.