Social Impact Investments Could Address Housing and Homelessness

Social Impact Investments (SII) could offer much relief for Australia’s housing crisis, a new report has found.

A report from the Australian Housing and Urban Research Institute (AHURI) said SII were an “innovative and growing mechanism” for funding solutions to complex social problems such as housing and homelessness.

Led by the Centre for Social Impact (CSI) at UNSW Sydney the report, The Opportunities, Risks and Possibilities of Social Impact Investment for Housing and Homelessness, identified key areas of opportunity in terms of SII impact and the likelihood of success.

Centre for Social Impact CEO Professor Kristy Muir told Pro Bono News that the potential for SII was “exciting” but “it was no panacea”.

“We have a really wealthy country and we have record growth in GDP over the last few decades yet the scale of our housing problem is quite bewildering,” Muir said.

“We have about 100,000 people on a given night who are homeless, that’s around one in 200 of the general population, but for groups it gets higher such as Indigenous people, people with a disability, women and children experiencing family violence and older people.

“So we really need alternative options in how we address that and SIIs are one of the innovative solutions.”

Muir said although SII are still in their infancy in Australia but there were several examples of how they have been successful overseas.

“What we found in this bit of research is that social impact investment in Australia could help to increase social housing, make it fit for purpose, and help residents achieve positive outcomes,’ Muir said.

She said the report revealed three key areas of opportunity in terms of their potential impact and likelihood of success.

“Under certain conditions, social impact investing has the potential to: significantly increase the supply of affordable housing, significantly increase the supply of fit-for-purpose social housing and support other positive outcomes and act as an incubator for government to trial innovative and new ways of providing services that effectively deliver desired outcomes.”

Muir said the research considered overseas examples and found three successful models.

The report listed these as:

• investment funds that finance property (e.g. the bond aggregator model, low income housing tax credits);
• social enterprises which generate a profit to reinvest in affordable housing or homelessness support services (e.g. some community housing providers); and
• social impact bonds (which are a pay-for-performance instrument where government pays on the basis of outcomes achieved).

Muir said in all the overseas examples there had been  “supportive and stable public policy” and  active government support.

She said the Australian government needed to play an active role in getting social impact investment off the ground, managing investor and beneficiary risk.

“The very definition of a social impact investment is one that intentionally aims to achieve social impact along with a financial return, while measuring the achievement of both. It’s an appealing model. But it’s important to remember that we are dealing with people’s lives,’ Muir said.

“Our most vulnerable have complex needs, and we need to be careful we’re not paving the way for future harm if the investments don’t work out. This is one of the key reasons why government has an important role.”

She said there was a “significant financing gap” for investors looking to invest in social and affordable housing.

“Government has a critical role in filling it if it wishes to engage the investment community in collaborating and contributing to solutions.

“Where we can see that SII has a role to play, other funding solutions and policy interventions will need to run in parallel. These are safeguards that need to be in place in order to minimise that risk to our most vulnerable Australians,” she said.

The full report is available here.