Australian Government Moves on Impact Investing

The Turnbull government is exploring ways it can develop the impact investing market in Australia, with a focus on the affordable housing supply.

Its discussion paper proposes a whole-of-government approach to impact investing, as well as creating an enabling environment by funding or co-funding investments and working with the private sector.

Treasurer Scott Morrison highlighted Australia’s housing affordability crisis as a priority for impact investing.

“There are currently over 180,000 people on social housing wait lists across Australia. The number of social housing dwellings would need to grow by almost 50 per cent in order to accommodate this number of people,” Morrison said.

“We need to create an investment environment to make a meaningful increase to the available stock of affordable housing, one where the involvement of private investment can contribute to increasing supply as demand grows.

“One of the challenges faced by all countries developing affordable housing is access to longer-term, low-cost finance. Access to capital is a critical issue for the affordable housing sector and the ability to leverage private sector investment is required to boost the supply of affordable housing.”

He said the $10 billion a year the federal, and state and territory governments were spending on housing was “failing to improve outcomes”.

Morrison is currently in the UK looking at its models for engaging the private sector to increase the supply of affordable housing.

“This includes institutions involved with the £1 billion (A$1.6 billion) ‘build-to-rent’ policy that leverages public spending to encourage large private investors into providing more affordable housing,” he said.

“The UK government has been successfully implementing innovative forms of finance to provide additional sources of funding for social infrastructure, including affordable housing.”

The release of the impact investing discussion paper came as Morrison rejected renewed calls, including from his own party, to change the negative gearing policy.

MPs Andrew Hastie and John Alexander told The Australian that changes need to be considered.

Hastie said housing was a “moral issue” and “everything should be on the table”.

Housing and homelessness organisations have repeatedly called for changes to negative gearing, and said it contributes to the lack of housing affordability.

Morrison said the government would continue to work closely with the states and territories to address the issue, including assessing the viability of a bond aggregator to provide cheaper and longer-term finance for affordable housing.

The government will now move into a consultation phase to explore ways to facilitate the growth of the social impact investment market.

The sector’s peak body, Impact Investing Australia (IIA), welcomed the government’s interest in impact investing.

“The Australian government has a critical leadership role to play in catalysing the market and realising the opportunities impact investing offers,” IIA chair Rosemary Addis said.

“Impact investing holds enormous potential to address some of our most intractable societal challenges, by unlocking additional forms of capital and finding innovative solutions.

“International evidence and local experience demonstrates the powerful effect of government leadership and the difference that policy initiatives and relatively modest government spending can have on catalysing market activity.”

The Australian Advisory Board on Impact Investing, of which Addis is also chair, has reiterated its call for an independent financial institution which would act as a wholesale investor and an impact investment “market champion”.

“The establishment of an independent financial institution – Impact Capital Australia – has been singled out as the most significant step that can be taken to mobilise greater capital and achieve greater outcomes across a range of social issues facing Australia,” Addis said.