$2M to Build Affordable Houses

The Lord Mayor’s Charitable Foundation (LMCF) has announced its first loan of $2 million to Habitat for Humanity to build new homes for low-income families.

The foundation launched the Affordable Housing Loan Fund in November last year, investing $3 million with Social Enterprise Finance Australia (SEFA) to address the homelessness and affordable housing crisis in Victoria.

SEFA manages the loan and application process, and selected Habitat for Humanity as the first loan recipient.

The Not for Profit will use the loan to build homes for low-income families in Greater Melbourne  and regional Victoria, including Yea, Geelong and the Mornington Peninsula.

“We believe low income families deserve access to affordable housing. We believe in the empowerment that flows from homeownership, and the improved long-term outcomes it generates in the areas of education, employment, health and lifestyle for parents and children,” Habitat for Humanity executive director Philip Curtis said.  

“This loan will help us increase the pace of construction and to build more homes.”

LMCF CEO Catherine Brown said the organisation fitted in with the foundation’s criteria of creating a social and financial return, and increasing the supply of affordable housing for people in need, specifically those with no more than 30 per cent of gross household income.

“We were interested in community housing, social housing, some privately-owned rental housing and low-market rate housing, which is [Habitat for Humanity],” Brown said.

“So [SEFA] came forward with Habitat for Humanity and they assessed them in terms of their ability to manage the loan and the outcomes it would have, knowing it would give them a lot more working capital. They could build 13 more houses… and also then speed up their pipeline for other houses.

“We were happy to say, yes, the social impact was there.”

She also said that Habitat for Humanity was chosen for its “really interesting approach”.

The homes will have an average market value of around $275,000. Construction costs are reduced through donations from corporate partners, volunteer labor and the 500 hours work put in by the future owners.

Most of the homeowners will be partner families on an income below $50,000 per annum, and are likely to be recipients of CentreLink unemployment or disability payments.

The homes are purchased at 95 per cent of the market value using a no interest home loan, with repayments capped at 25 per cent of gross household income.

SEFA provided the organisation with a flexible funding model based on its growth. The loan should also help Habitat for Humanity achieve financial sustainability and become less grant reliant.

This is the first time the LMCF, which provides around $9.6 million in grants every year, has branched into alternative finance models in its 93-year history.

“The issue of affordable housing and some of the other tough issues we’re working on, like youth unemployment and climate change, they’re so big you need more than grants,” Brown said.

“We needed to increase our capability to contribute to solving those problems. One way of doing that, which we’d seen a number of other foundations doing overseas was to actually unlock some of the capital in the corpus and apply that to a mission-aligned investment – to an investment that would have an outcome that aligned with our grants program.”

She said the organisation would eventually look to expand its impact investment beyond the Affordable Housing Loan Fund.