This report, part of an AHURI Inquiry into social impact investment for housing and homelessness outcomes, examines different social impact investment (SII) finance options and uses financial modelling and case studies to address this question with a focus on access to housing and support for vulnerable households.
The key SII options considered in the study are: the bond aggregator model for funding for affordable housing; Social Impact Bonds (SIBs), private capital impact investment firms; Impact Investment Mutual funds; and Social Impact Loans.
In terms of the role of impact investing to finance low-cost affordable housing, our empirical findings suggest that social impact financial models that rely solely on rental streams could provide a steady annuity stream to investors in the current low interest rate environment. Capital gains returns add to the financial benefit of an impact investing option. To supplement a bricks-and-mortar SII approach and support vulnerable populations to enter and maintain housing, the SIB instrument appears the most viable SII option.
A viable SII market would require assistance by government to help close or minimise return gaps, especially because of the low incomes of very vulnerable tenants; the finance gaps faced by Community Housing Providers; and the limited number of impact first investors.
The study presents social enterprise case studies which demonstrate that SII can work when there is alignment of purpose and an understanding of the social impact of the investment, and there is an acceptance of a lower than market financial return and some level of risk presented by the enterprise.