The interim National Housing Supply and Affordability Council has delivered its inaugural report, entitled ‘Barriers to Institutional Investment, Finance and Innovation in Housing’ to the Minister for Housing, the Hon Julie Collins MP.
Australia is facing a significant housing supply and affordability challenge which has been decades in the making, affecting affordability for owner occupiers, those who rent in the private market and those in social and affordable housing.
In the report the Council focused on what could be done to increase the supply of rental dwellings via institutional investment. Australian superannuation funds invest in this real estate asset class in offshore markets but have yet to do so at scale domestically.
Chair of the Council, Susan Lloyd‑Hurwitz commented:
‘Many of the barriers to institutions investing in long‑term residential rental stock in Australia are fundamentally related to the nascent nature of their participation in the asset class.’
‘This elevates their perception of risk in many regards and, in turn, an expectation of higher returns than the market currently offers. Evidence from the UK suggests that a suite of interventions can reduce many of the risk barriers, thus encouraging further investment and significant growth and acceptable scale in the asset class over a ten‑year period.’
Supported by the right policy settings, regulatory systems and financial structures, the Council concluded that there is a realistic and early prospect of establishing a significant new investment asset class.
‘A vibrant institutional market for housing can add to the supply of rental stock and improve rental affordability. Institutional investors are an untapped resource for meeting Australia’s rental housing challenge, providing secure homes in a rental format, improving environmental outcomes and raising quality in management while at the same time providing stable and attractive risk-adjusted returns for investors.’
To develop institutional housing as an asset class, the report provides 11 recommendations.
These recommendations seek to ensure a pipeline of residential projects suitable for institutional investment, de-risk the development of large-scale housing assets, improve the provision of housing services, and support the expansion of social and affordable housing.
The recommendations focus on building a larger private rental sector and reinstating social and affordable housing as essential infrastructure for cohesive and productive communities.
The recommendations build upon the various Federal and State level incentives which are already in place and are mutually reinforcing. They are proposed as a package in order that Australia can realistically meet the targets set under the Housing Accord.
In preparing its report, the Council consulted with a range of stakeholders and also conducted its own research.
The Council is grateful for the generous input from the community housing sector; Commonwealth, state and territory governments; residential construction and development entities and peak bodies; research institutions, and institutional investors and associations.
Read the report on Barriers to Institutional Investment, Finance and Innovation in Housing Report.