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Government Guarantee Will Open Investment in Affordable Housing

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In a move that will accelerate investment in affordable housing in Australia, the Australian Government has announced a government guarantee to back bonds issued by the National Housing Finance and Investment Corporation. The main aim is to create an efficient, safe and private investment pathway into social and affordable housing.

The main aim is to create an efficient, safe and private investment pathway into social and affordable housing. 

The announcement will be especially embraced by Superannuation funds, Insurance companies, and other investors looking for low-risk investment returns. It also indicates a growth in affordable housing construction, which should be appreciated by the industry.

The concept is not a new one, with the Australian government having a track record in facilitating investment in housing for low and middle-income earners. One of its better-known initiatives was to broaden the possibility of home ownership for returned soldiers in the periods after the world wars. However, the initiative of utilising the most efficient levers available to the government (land supply and direct public investment), is the first of its type since the 1990s.

The latest investment support by the Government will be backed by secure cash flow from rental income supported by Commonwealth Rent Assistance. The initiative has been applauded by industry, political, and community welfare groups.

The initiative has been applauded by industry, political, and community welfare groups. 

According to University Of Queensland research, the costs of keeping a chronically homeless person are actually higher than those of needing homelessness; the government has to invest less to provide permanent supportive housing. Look at the figures: Over the course of a year, each person who was chronically homeless was found to have cost AUD 48,217 in state government funded services compared to AUD 35,117 if they were tenants of permanent supportive housing.

The affordable housing guaranteed in the latest government announcement includes rental accommodation geared to income, below-market-rate rental accommodation, and affordable home ownership for those unable to afford housing at market rates.

International research by the Australian Housing and Urban Research Institute has already established the model is viable as investors welcome the steady cash flow from rent revenue for secure returns. It is well suited to pension funds and other investors interested in a long-term and stable performance rather than higher risk capital gains strategies.

Australia’s efforts are in line with that of other countries.

In December, the UK Government announced a new round of debt guarantees for “build to rent” development programs, more than $15bn in investment for social and affordable housing, and increased borrowing caps for social housing.

Australia’s efforts are in line with that of other countries. 

Finland, on the other hand, has a well-established program of low-cost government loans and builds 9,000 social housing buildings per year. With its national population of just under 5.5 million, it also has the lowest number of homeless people.

Canada released its first national housing strategy at the end of 2017, highlighting housing as a fundamental human right and setting in place a plan to increase moderate rent and supportive housing by more than 100,000 homes in a decade. A Canadian National Housing Co-Investment Fund will contribute AUD16.5 billion for repair and expansion of affordable housing.

The Australian Government’s guarantee to back bonds and enable more cost-effective and secure private finance will signal enormous gains for investors, the construction Industry and, most importantly, for those who need the homes the most — those seeking affordable or social housing.

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