CEO eyes innovative evolution of NFP housing sector

10 Mar 2015

Access Housing Chief Executive Officer Garry Ellender used his keynote presentation at the 2015 WA Affordable Housing Development Summit last month to bring attention to the need to diversify and innovate within the social housing sector in order to tangibly increase affordable housing supply.

The WA Affordable Housing Development Summit was a one-day forum that brought key stakeholders from government, the NFP sector and private industry together to discuss their insights, strategies and practices to help advance affordable housing in Western Australia.

Mr Ellender outlined and discussed issues influencing the current affordable housing crisis in WA including the net decline in social housing in Australia over the last 25 years, the yawning gap between supply and demand, the financial constraints on Federal and State Governments and the reduced appetite by governments to move housing assets to the NFP sector to stimulate the affordable housing market. His presentation, titled Next Generation Community Housing Providers, sought to bring attention to Access Housing’s envisaged future of the community housing sector and how it has the potential to innovate and drive significant growth in housing supply. He coined the term ‘Super CHPs’ (Community Housing Providers) to describe the handful of large scale NFP housing providers that will emerge on the national stage over the next decade to dominate the social and affordable housing landscape in Australia.

Super CHPs were identified as commercially focussed NFPs operating at scale and across State borders and the housing spectrum. They will emerge through Growth Provider strategic alignments, mergers and formal partnerships and will be leaders in the community housing sector in terms of finance and technology innovation and choice of product to tenants. They will also offer new avenues towards home ownership for low income individuals. Their foundation will be access to capital, including long term debt (Bond Finance) and large scale private equity investment.

Mr Ellender said that while this evolution of the affordable housing sector was inevitable, there would be some difficulties in achieving it.

“The biggest barrier is not government, it is the NFP sector’s reluctance to embrace partnership or merger models,” he said.

“Government will be forced to work more productively with the NFPs offering scalable solutions by the sheer extent of the financial crisis facing all State Housing Authorities. The NFP sector, however, will need to step up and put system and client outcomes ahead of individual organisational interests if we are to make serious inroads into the affordable housing crisis.

“The first real partnerships to build larger scale Super CHPs will necessarily happen in the financing space.

“Debt ceilings and limited debt capacity will force the search for other sources of capital. Access Housing already has substantial sales programs to pay down and recirculate debt in order to have an ongoing debt funded development program. This is useful, but the overall quantum of new supply is still dictated by limited debt capacity.

“Larger CHPs will club together to access the first long term Social Housing Bond Finance in Australia to substitute out substantial bank debt for 20-year bond finance. Whilst, ultimately, Bond Finance will provide increased financing security, it won’t substantially increase debt capacity. That’s why we need private investment equity capital. Access Housing is pioneering this approach and will launch its first tranche of projects this year, which will be funded by private equity investors under a seven-year fund structure.”

Another area Super CHPs will stand out from the community housing pack will be with regards to customer focus and service excellence.

“From a tenancy and customer service perspective, we will need to be even more focussed and offer greater choice across the housing spectrum, with greater service flexibility,” Mr Ellender said.

“The roll out of the National Disability Insurance Scheme and changes to service delivery models in the aged care sector will drive individualised and consumer focussed approaches across all community service industries, including housing.

“Technology, for instance iPhone apps and the internet, will streamline much of the basic frontline service delivery and provide more flexibility for customers and CHP staff. This will also see a reduction in frontline service costs and service overheads, enabling higher investment in sustaining tenancies.

“Providing first class tenancy and property management services will increasingly become the starting point for CHPs, not the end game. There will be a growing focus on programs that increase the financial resilience of customers and those that create genuine employment, apprenticeships or training opportunities. Much of this will be delivered through partnerships with governments at all levels, other NFPs and the private sector.

“Creating opportunities for tenants to break out of welfare dependency and ultimately move through the housing pathways out of social housing will become a key driver of success. To that end, CHPs will increasingly embrace social value measures to promote the value of their investment in these initiatives. This will enable the introduction of private investment through Social Impact Bonds.”