A 3rd World problem in the 1st World How financial models can address the housing crisis

more than 100,000 Australian's sleep homeless every night

Low income households can be spending up to 85% of their income on housing

over 800,000 Australians lived in social housing in 2015

predicted national shortfall of 663,000 by 2031

The crisis

• Forecast of 39% increase in number of people living in private rental between 2011-2031 as tenure share creeps up towards 30% of all Australians

• Projections of 30% increase in housing assistance budget between 2011-2031

• Currently 897,000 households living in private rental housing satisfy income eligibility tests for public housing

• 652,000 either elderly (65 years or over), disabled (or with a long term health condition) or parents with dependent children.

• Source:Wood, G. 2016

Short-termism vs Long-termismThe shortfall between housing supply and ‘underlying’ housing demand has been greater in Australia than most other ‘western’ nations

Source: International Monetary Fund, Australia: Selected Issues,

Country Report No. 15/275 (September 2015), p. 11.

Short-termism vs Long-termism

• CHP investment is plagued by short-termism

• One term governments who won’t commit to change or governments who throw out change – Logan City Queensland

• Bank financing covenants and tenor – short term I/O or mid term P&I loans limit CHP growth

• Heightened regulation as a result of GFC

• Good signs coming out of SA – long term urban renewal

Old ways don’t work

Everybody is to blame - industry needs to get over ownership and focus on the outcome

Banks are part of this problem and need to be part of the solution

holistic approach to change thinking and do things differently

What is the power of the finance sector in Australia?

The Australian Banking Association www.aba.com.au notes that:

• In December 2014 the Finance and Insurance industry contributed $133.9 billion to Australia’s $1.6 trillion economy. Almost 10% of the economy.

• Over the three years prior to 2014, the sector improved with an annual growth of 4.0% compared with our economy moving at mid 2%.

• In June 2016 the market capitalisation of Australia’s retail banks was $411 billion. 26% of the S&P/ ASX 200 companies.

• Total value of lending by banks during FY 16 was $359.2 billion.

Finance sector activity that has supported social and environmental issue redress

Bendigo Bank

• Community Bank Model - 311 community JV’s investing 80% of their profits, $150 million so far.

• Creation of Community Sector Banking JV– 12,000 NFP customers and finance for 1700 new social housing dwellings.

• First bank in Australia to adopt an investment policy that excluded companies whose primary activity is the exploration, mining, manufacture or export of thermal coal or coal seam gas.

• Bendigo Mosque support, closing the account of anti- mosque group “Stop the Mosque”.

• First Green loans in Australia.

Finance sector activity that has supported social and environmental issue redress

National Australia Bank

• $48.8m invested in community since 2016

• 440,000 Australians supported with microfinance needs in partnership with Good Shepherd Finance since 2005

• $7.3 billion in financing activities that address climate change and support the transition to a low carbon economy

Finance sector activity that has supported social and environmental issue redress

Westpac Banking Corporation• Westpac Foundation - $28million since 1999• St George Foundation - $25m• Bank of Melbourne Neighbourhood Fund - $ 1m• Bank SA Foundation - $8m• Recently announced 100 Education Scholarships per year forever.

Ownership vs Outcomes

These are great contributions and banks love to be associated with them (ownership)

But what could happen if we change our approach and invest in the outcome?

Take a long termism approach?

Debt and equity structures that fit the problem

Creating a sustainable future

• Unlocking equity in superannuation

• Shared Equity model

• Make private investing in social housing more attractive

- example of Launch Housing

• Social Housing Bonds

• Community Land Trusts

Challenge current paradigms

Take calculated risks

Collaborate