Time for a super investment in housing

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It’s not a new concept.  Influence and power, particularly when it comes to investment, has been shifting away from governments for a while now.  This is certainly the case when it comes to superannuation funds and the enormous resources at their disposal.

As at June 2017 the total assets of Australia’s superannuation funds sat at $2.32 trillion, with $545 billion of that in industry funds; industry funds which are run to benefit their members, many of whom would be struggling with issues of housing affordability and the threat of homelessness.

While the Federal government who, instead of handing out additional funding to the States to help them deal with issues around housing affordability and homelessness hands out threats to cut funding if States don’t magically improve those areas, it’s pretty clear we need a new solution.

Superannuation funds nationally and globally have been giving these issues more attention, and discussions around implementing triple-bottom-line approaches (factoring in the environmental and social returns along with the economic) have been happening since the mid 1990’s.  However the issue remains that the overruling responsibility of Superannuation boards is to make decisions that maximise the retirement balances for their members.

In other words, until investing in environmental and/or social projects, such as community and public housing, can provide equivalent or greater financial returns for their members, those funds have an obligation to invest elsewhere in projects that give them the best ‘bang for their buck’.

The ripples of the growing housing and homelessness crisis cannot be viewed at a micro level, and must be seen as far wider-reaching.

With an economy coming to the end of a mining boom, a housing crisis threatening to undermine macroeconomic stability, a scary cycle of price inflation in the property sector, and a government seemingly not interested in meeting their obligations to invest adequately to make any real difference, is there an economic imperative as well as a moral one for private investors to step in and play a greater role in diffusing this hotbed of risk?

A recent discussion paper compiled by Industry Super Australia (ISA) looks at exactly this, and identifies many of the issues that ASU members working in the sector have known about for a long time around: the risks of ignoring this growing issue, the inadequacy of “build more houses” being the answer, the loss of social housing as a safety net due to obscene waitlists, and importantly that this crisis has grown beyond the capacity of Australian governments alone to manage.

The paper calls for a number of policy and structural changes at a governmental level which would open the door for Superannuation funds (along with other private investors) to invest more heavily in social housing to try and turn the tide, and to try and reverse the upward spiral of property prices more broadly, which would see flow-on improvements to the affordability of social housing.

It is no panacea, but it’s a discussion worth having!

You can download a copy of the ISA discussion paper here

 


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