The Treasury has release a discussion paper to explore ways the Australian Government can develop the social impact investing market. It is potentially linked to the question of housing affordability.
The Treasurer’s media release said:
There are currently over 180,000 people on social housing wait lists across Australia. The number of social housing dwellings would need to grow by almost 50 per cent in order to accommodate this number of people.
We need to create an investment environment to make a meaningful increase to the available stock of affordable housing, one where the involvement of private investment can contribute to increasing supply as demand grows.
One of the challenges faced by all countries developing affordable housing is access to longer-term, low-cost finance. Access to capital is a critical issue for the affordable housing sector and the ability to leverage private sector investment is required to boost the supply of affordable housing.
While in the UK, I am meeting with leading institutions and entities that have been developing more innovative forms of investment. This includes institutions involved with the £1 billion “build to rent” policy that leverages public spending to encourage large private investors into providing more affordable housing.
This week, I visited the Lendlease Elephant Park site in London, UK. The visit provided an opportunity to view first-hand the affordable housing being offered by the project.
The UK Government has been successfully implementing innovative forms of finance to provide additional sources of funding for social infrastructure, including affordable housing.
The Elephant Park project in London offers 25 per cent affordable housing. Half of the 550 affordable homes will be available as a mix of affordable and social rent, with the other half available under shared ownership. The L&Q Group will take ownership and manage the affordable housing to be built at Elephant Park by Lendlease.
Housing affordability is an important issue for Australia. The Turnbull Government is continually looking at ways to improve supply in the area of affordable housing.
At present, the Commonwealth and state and territory governments combined are spending over $10 billion a year on housing, but it is failing to improve outcomes, particularly for those with low-moderate incomes.
The discussion paper proposes that the Australian Government could primarily support social impact investing by creating an enabling environment for private sector-led social impact investing and by funding (or co-funding with State and Territory Governments) investments which generate savings or avoided future costs to fund reforms and deliver better outcomes for Australians.
Taking a social impact investment approach provides the Australian Government with an opportunity to fund ‘what works’ and reinvest spending that would otherwise not achieve beneficial outcomes.
In many policy areas relevant to social impact investing, the Australian Government is a funder or regulator. For example, the Australian Government has funded social impact investments in the Indo-Pacific region as part of a move towards innovative financing across the whole Australian aid program. The Australian Government is also responsible for financial market regulation, including the regulatory settings that affect social impact investing.
State and Territory Governments are leading on social impact investing, consistent with their responsibility for the delivery of many services which could be delivered through social impact investing, including justice, homelessness and out of home care services. The discussion paper also seeks views on areas where the Australian Government has direct policy responsibility.
The Australian Government could form partnerships with other levels of government to develop social impact investments. Such partnerships could involve sharing data critical to determining the outcomes of interventions. The split of roles and responsibilities between the Commonwealth, State and Territory and local governments shapes the role each level of government could effectively play in developing the social impact investing market.
Two reports have recommended the Government consider moving towards a social impact investment model for funding some social services. The 2015 review of Australia’s welfare system, A New System for Better Employment and Social Outcomes (known as the McClure Report), recommended that the Government consider expanding outcomes based social impact investment models to target financial investments towards addressing social problems.
In 2014, the final report of the Financial System Inquiry recommended that the Australian Government ‘explore ways to facilitate development of the impact investment market and encourage innovation in funding social service delivery’. As part of the Australian Government’s response to the Financial System Inquiry, the Australian Government agreed to prepare a discussion paper to explore ways to facilitate the development of the social impact investment market in Australia.
Social impact investments are investments made with the intention of generating measurable social and/or environmental outcomes in addition to a financial return. Social impact investing is an emerging, outcomes based approach that brings together governments, service providers, investors and communities to tackle a range of social issues.
This discussion paper seeks comments on issues that are relevant to the role of the Australian Government in developing the social impact investing market in Australia.
This discussion paper invites consultation on the Australian Government’s role in developing the social impact investing market. We encourage participants from the community, charitable and private sectors, State and Territory Governments and the public to consider the issues set out in this paper and make a submission.
There are three key components for consultation in this discussion paper:
1. The role the Australian Government should play in the social impact investing market. This discussion paper proposes that the Australian Government could primarily support social impact investing by (i) creating an enabling environment and (ii) by funding (or co-funding with State and Territory Governments) investments which would likely achieve savings to fund the intervention and deliver better outcomes for Australians.
2. The principles for social impact investing have been developed by looking internationally and at the State and Territory level to identify the key principles for effective social impact investments. The principles have also been informed by the Australian Government’s experience in this field to date and consultation with stakeholders. We seek feedback on these principles from interested parties before they are finalised. Once the consultation closes, we will create a revised version of the principles that takes into account submissions.
3. This discussion paper also outlines potential regulatory barriers to the growth of the social impact investment market identified by stakeholders and research on the sector. It seeks views on potential ways that the Australian Government can act to address these barriers, with the aim of facilitating social impact investing.
The submission is open until 27 February 2017.
