Housing Bonds Could Ease Rental Crisis
17 May 2012 at 4:20 pm
Housing bonds could be used to fund affordable rental housing, according to a report by the Australian Housing and Urban Research Institute.
The report’s lead author, Dr Julie Lawson from RMIT University, said the 100-page report provided government and the finance industry with a financial instrument and strategy to achieve this.
Dr Lawson said the proposal for a suite of housing bonds for institutional, retail and public investors had been developed with international experts, Australian investment industry leaders, housing providers and government officials.
She said that estimates from Australia’s National Housing Supply Council suggested that up to 20,000 new affordable dwellings were needed each year for the next 10 years, just to retain a modest 5 per cent share of social and affordable
stock.
“The cost of meeting this is about $7 billion per year,” Dr Lawson said. “Until now, a critical issue has been how to channel substantial levels of investment towards the affordable segment of the housing market and, in particular, serve the needs of
lower-income tenants.
“This concrete proposal shows how conditional public subsidies, private housing supply bonds, a special purpose intermediary and regulated Not for Profit providers can be used to address the growing need for affordable rental housing.
“In Austria over the past 20 years housing bonds have generated $20 billion of investment in new affordable housing and the renovation of older social housing.”
Dr Lawson said Austrian housing bonds had helped reduce mortgage interest rates, support housing market stability and expand social housing.
“Ideally, long-term institutional investors would make the best partner for affordable housing providers, such as superannuation funds, which in Australia hold $1.3 trillion in funds, a sum anticipated to grow to $3.2 trillion by 2035,” she said.
Sarah Toohey, a spokesperson for Australians for Affordable Housing, says it’s an exciting development that will assist everyone.
“All the hard work has been done by AHURi. We now just need the backing of the Federal Government,” Toohey said.
“There’s a huge role for the Federal Government in making these bonds work. Because of the level of risk exposure, a level of government investment is needed to offset risk for financial investors.
“It’s designed to facilitate affordable housing investment for people on low incomes. And it’s incredibly important if we’re going to increase the supply of affordable housing.”
The study research team also included Dr Vivienne Milligan (UNSW) and Dr Judy Yates (University of Sydney), with Austrian collaborators from the Institute for Real Estate Construction and Housing (IIBW) and the Erste Bank, as well as local
industry partner Affordable Housing Solutions.
Full report is available to download.
