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Impact: How to invest in solving homelessness

Impact investors can make a strong return while helping provide housing for vulnerable Australians. Pendal ESG credit analyst MURRAY ACKMAN explains how it works

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.

Bonds issued by NHFIC are held in Pendal’s Sustainable Australian Fixed Interest Fund and the Regnan Credit Impact Trust.

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. “

Performance and purpose

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.”

Adviser Natalee is invested
in making our world

A better place.

Natalee shows us how
investment in affordable
housing changed a
woman’s life

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.”

Housing essential workers

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.”

About Murray Ackman and Pendal’s Income and Fixed Interest boutique

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.

This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at June 22, 2022. PFSL is the responsible entity and issuer of units in the Regnan Credit Impact Trust (Trust) ARSN: 638 304 220 and Pendal Sustainable Australian Fixed Interest Fund (Fund) ARSN: 612 664 730. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund and Trust are available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or Trust or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com

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