affordable housing development models - City of Port Phillip

Private Sector Finance
Context
The growing need for additional affordable housing and the involvement of the
private sector to help bridge this gap is well evidenced.
The Australian Government has recently made a significant investment in affordable
housing through the Nation Building Economic Stimulus Plan, the National
Affordable Housing Agreement (NAHA) and the National Rental Affordability Scheme
(NRAS). Over the next four years these three measures alone will support the
building of more than 80,000 affordable rental homes. 2
While these initiatives are significant it is unlikely they will solve the problem since
the demand continues to grow and outstrip new supply. It is because of this gap,
alternative funding structures are urgently needed to provide a long term solution.
Governments, restricted by regulations and operating in a risk adverse political
culture, recognise the need for private sector involvement to do what they are
unable to do, which is undertake and fund projects at the scale required to make a
real change to the sector and achieve the social outcomes required in affordable
housing.
Conversely, as is evidenced by the limited institutional take up of the Governments
NRAS scheme, private developers are as yet unconvinced there is sufficient
commercial return on equity from affordable housing projects and are wary of the
perceived risks 3 :
• Working with not-for-profit management organizations
• Inherent risks that government subsidies may be withdrawn in the event of a
change of Government
• Operating within government regulations and compliance frameworks which
may not have the level of security available in the private sector
As a consequence private investment has been limited to small amounts of equity
being made available to specific projects and attracting retail funds through
programs similar to that employed by the Defence Housing Authority.
A recent AHURI report reviewing international measures to channel investment
towards affordable rental housing looks at overseas examples, concluding that the
use of private funding has helped to create and sustain a diversified housing
2 Australian Government, April 2010, Regulation and Growth of the Not-For-Profit Housing Sector, Discussion
Paper
3 This view is that of the authors of this paper, Affordable Housing Solutions, which has been seeking to raise
private finance for investment in affordable housing at scale over the last three years.
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