HOUSING affordability is one of Australia’s most pressing problems that investors are helping solve by investing in bonds issued by the government-backed National Housing Finance and Investment Corporation.
In its three years, NHFIC has approved $2.9 billion in loans supporting more than 15,000 new and existing homes and issued more than $2 billion in bonds. It also administers government schemes to help people buy their first home, helping more than 61,000 people.
The bonds provide low-cost financing to community housing providers, says Pendal credit ESG analyst Murray Ackman, who has recently met with residents benefiting from the arrangement.
Pendal also recently produced videos of Australian financial advisers meeting with residents of Community Housing Providers.
You can see one such meeting below:
Ackman recently visited two new CHP developments in the inner-Sydney suburbs of Redfern and Glebe.
“These are two new buildings have been put up to house hundreds of people,” says Ackman.
“Importantly, this is not about shipping people out of the communities that they’ve got a long association with.
“Glebe and Redfern have long-standing Indigenous communities and these types of buildings make sure that people can maintain a connection with family, while also giving them subsidised rent. “
From an investors point of view, not only is social housing delivering improvements to society, but it is also generating stable and safe income returns.
“For one thing, despite the myths, the default rate — the percentage of people that fail to pay their rent — is very, very low. One housing provider told us it was as low as 1 per cent,” says Ackman.
“The reason for this is quite simple — many of these people are getting their income from the government through a disability support pension or age pension.
“The rent takes a percentage of their pension with the rest subsidised by the government.
“So, the rent is partially being paid by the government. That means it’s a safe investment for landlords.”
Ackman says the buildings in Sydney’s inner city are all but indistinguishable from the million-dollar apartments that surround them.
“These are brand new buildings. You walk past them, and you wouldn’t consider that these are different types of buildings to the ones just up the street.
“That’s quite impactful for the people that live in them — it’s a big de-stigmatisation of social and affordable housing.”
He told the story of meeting one tenant who had gone from a successful career to sleeping rough, with a three-year period of not having an address.
“Once he got the keys to this place, he’s crying in the kitchen. The dignity you get from having your own keys is quite profound.
“These are changes that it can be perhaps a little bit difficult for people who have not faced such hardship to relate to, but people aren’t necessarily always given the best deal in life.”
Perhaps surprisingly, one of the fastest growing cohorts of homelessness in Australia is single women over the age of 50, says Ackman.
“Partly it’s just the maths of divorce — if you split the family house, what does that get you? Especially if you don’t have superannuation to rely on.”
And the problem of affordable housing goes beyond people living with homelessness — one of Australia’s biggest affordability problems is housing essential workers.
“Nurses, police, teachers and other essential workers simply cannot afford to live in the communities that they’re serving.
“Some have to solve the problem by moving back in with their parents as they try to save up for a mortgage.
“It’s the unseen cost of the housing boom.”
Ackman says organisations like HOPE Housing, a not-for-profit fund manager that co-invests in housing with essential service workers, are trying to help solve this problem.
Part of the difficulty in solving social and affordable housing is jurisdictional, says Ackman.
Federal, state and local governments all have programs aimed at the issue.
“It’s a huge challenge.”
Credit ESG analyst Murray Ackman joined Pendal’s Income and Fixed Interest team in 2020 to provide fundamental credit analysis and integrate Environmental, Social and Governance factors across credit funds.
Murray has worked as a consultant measuring ESG for family offices and private equity firms and was a Research Fellow at the Institute for Economics and Peace where he led research on the United Nations Sustainable Development Goals.
Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.
The team’s awards include Lonsec’s Active Fixed Income Fund of the Year (2022) and Zenith’s Australian Fixed Interest Manager of the Year (2020).
Regnan Credit Impact Trust is a defensive investment strategy that puts capital to work for positive change.
Pendal Sustainable Australian Fixed Interest Fund is a defensive Australian bond fund that delivers market-leading performance with positive environmental and social outcomes.
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