Delivering more affordable housing: an innovative solution

Abstract

This paper provides an update on some aspects of community housing financing in Australia and complementary measures needed to close the funding gap that exists for community housing.
This gap is the difference between the costs of delivering and operating new community housing developments (including construction and ongoing management costs) and the rental returns.
The paper draws on new financial modelling that shows how different combinations of federal, state and private sector support – and tenure mix and geographic location – can narrow the funding gap for community housing.
It demonstrates that existing government resources such as underutilised land can be used more effectively to build more community housing across Australia.

The growth in the community housing sector has been constrained by low rental returns despite a growing need for its services.
• The demand for social housing will continue to increase, with recent research suggesting over 700,000 new social dwellings will be required over the next 20 years.
• New financial modelling shows that contributions of government-owned land, mixed-tenure developments, lower-cost NHFIC finance and additional private sector finance can help address the challenge of low rental returns for community housing projects.
• This new collaborative approach reduces the amount of additional state government funding support needed to deliver more social housing.
• For example, NHFIC modelling shows that the upfront cost of social housing to state government could be cut by up to 80 per cent, from $15 million to $3 million for a 100-dwelling social housing project.
Per dwelling, the upfront cost could reduce from $375,000 to $75,000 per dwelling for social housing.