Private sector interested in social housing, but there are risks involved

Taking a multi-sector approach may offer a critical helping hand in the development of social and affordable housing, new research suggests.

A partnership between government, community and private institutions is the best solution to ensuring the much-needed supply of social and affordable housing in Australia, according to the Australian Housing and Urban Research Institute (AHURI).

AHURI report ‘Private sector involvement in social and affordable housing’, found private institutions and superannuation funds find the sector appealing, especially during times of low interest rates, and that governments are increasingly recognising the scope for collaboration.

However, the research critically warned private involvement should be viewed as a way of extending, and not replacing, public subsidy to house low-income earners and those with special needs.

University of Sydney’s Richard Benedict, who led the research in conjunction with Curtin University, argues that taking a multi-sector approach to social housing is critical to promoting longevity and sustainability.

“In Australia we need around 36,000 new social and affordable homes each year. Prior to the COVID-19 pandemic, we produced about 3,000,” he said.

“To meet the demand, it is clear that forms of ‘hybridity’ of the housing system are essential, whereby social and affordable housing is increasingly financed, developed and managed by a combination of government, community-based and market providers, and cross sector partnerships. No one sector can address the need alone.”

According to the study, there are a range of viable established and emerging housing product types that can be supported through collaboration with private not-for-profit and for-profit partners.

These include mixed tenure developments, tax subsidies for affordable supply, home ownership schemes, build to rent and inclusionary planning mechanisms, which depend on a combination of government subsidy, policy settings and regulation that are suited to a variety of different development contexts.

However, there are risks involved in a cross-sector approach. The research identified geographical differences in the appetite of investors, with a greater focus on Australia’s larger cities including Sydney and Melbourne, where bigger population size means demand is consistently high.

Labour shortages and complex government tendering and planning approval processes were also seen as a challenge, as well as constant changes in government causing discontinued policies and programs and a lack of leadership continuity, which affected investor confidence.

Partnering with the private sector also poses risk to government, specialist housing organisations and residents, most importantly including the diversion of resources and opportunities from the community housing sector, as well as the possibility of tenant disruption and poor or inefficient project delivery.