The state’s largest not-for-profit housing provider is looking to shake up the sector with a bold new funding model.
Affordable housing provider Access Housing is preparing to tap private equity investors to accelerate its rollout of dwellings across the metropolitan area, in response to a shortfall of government funding in the sector.
Access Housing chief executive Garry Ellender said state and federal governments were not able to keep up with demand for community housing, while existing schemes such as the National Rental Affordability Scheme added pressure to tight government budgets.
The not-for-profit group manages more than 1,800 properties across the metropolitan area and the South West of Western Australia, and holds about $150 million in assets on its balance sheet.
Its most recently completed project was its largest to date – a $7.2 million, 38-unit development on Waverley Road in Coolbellup, built under a community housing agreement with the Department of Housing.
The group is also advancing plans for a 26-apartment project in Gosnells, while a 14-dwelling project in the centre of Mandurah is due to be completed by the end of the year.
Mr Ellender said Access Housing’s reliance on debt financing to fund the bulk of its projects was set to change.
“We’re in negotiation at the moment to bring in very substantial private equity capital into a fund structure,” Mr Ellender told Business News.
“That really is one of the missing pieces in the response to the affordability gap at the moment.”
While details of the fund structure remain under wraps as negotiations continue, Mr Ellender said he believed Access Housing had found a solution that did not require significant government contribution or subsidy.
“We’re hoping to do a proof-of-concept delivery in the next few months,” he said.
Mr Ellender said private equity funding of social housing hadn’t been explored before because community housing rents were capped at a maximum of 30 per cent of tenants’ incomes, making it difficult to provide a return on investment.
“You’ve got to be able to structure it in a way that all the stakeholders coming into the fund will get a reasonable return,” Mr Ellender said.
“We’ve got certain benefits we can bring in construction, land supply and costs, because of our tax exemptions as a not for profit.
“State housing authorities don’t get all the benefits that we get, and those taxation benefits enable us to do a commercial transaction and give a commercial return.”
Mr Ellender said the proposal had received a significant amount of interest from major capital sources.
“It makes sense, it’s a solid rate of return and it meets what the investment community is looking for,” he said.
“The NRAS scheme attracted mum and dad investors, but this model is actually targeted at a much more sophisticated investment market and it’s on a much bigger scale.”
