Private capital the answer to housing crises
LongView and PEXA research identifies new solutions to help home buyers and renters
The third instalment of LongView and PEXA’s housing affordability Whitepaper series – Mobilising Private Capital for New Housing Solutions – was released today and concludes that the size of the A$10 trillion residential market and the growing scale of the crisis mean governments alone will never be able to make a meaningful difference to bridge the widening purchase and rental affordability gap for Australians, nor the rental experience.
The paper calls for private capital from traditional sources like superannuation funds, banks, family offices and high net worth individuals, but also from the $2.1Tn already invested in housing by Australia’s suburban landlords – the largest capital pool of all where private capital is plentiful and agile enough to help deliver immediate and large-scale solutions to an urgent national problem.
The Whitepaper evaluates four key private investment models – shared equity, institutional ownership of rental properties, build-to-rent (BTR) developments and rent-to-buy schemes – to determine which ones will make the biggest difference, which ones can work at scale and, crucially, which ones provide sufficient returns to attract private capital in the first place. Each of these models has been trialled extensively internationally and are already attracting investment in Australian markets.
The analysis concludes that shared equity schemes and institutional ownership offer the greatest potential to improve housing affordability and the rental experience, while the jury remains out on the longer-term impact of BTR developments on affordability.
Whitepaper 3 builds on Longview and PEXA’s two earlier Whitepapers released this year, which found the current system is broken and is failing Australians – particularly those locked out of home ownership. The first examined the house purchase affordability crisis and explained the real drivers of increasing prices, while the second considered Australia’s broken private rental system, which does not work for either renters or landlords. Together, the series brings together quantitative analysis and decades of data, drawing on LongView and PEXA’s deep property market experience.
“Australia’s housing affordability crises has been decades in the making and despite well-meaning attempts to solve it, it is only getting worse,” PEXA Chief Executive Glenn King said. “These crises fundamentally threaten the Australian way of life, and underpin some of our most pernicious challenges, from homelessness to health and wellbeing, and employment and economic growth.
“Yet the simple truth is that our housing crises have just grown too big for governments to handle alone. For example, the average total change in property prices each year amounts to a third of Australia’s GDP, more than the Australian Federal Government’s entire budget. Even if the government spent every dollar they have giving grants to homebuyers, the purchase affordability problem would still worsen.
“The size of Australia’s housing market, and the seeming impossibility of government intervention at the scale required to significantly address these problems, requires the involvement of private capital, and Corporate Australia, to find new solutions that work.”
https://www.pexa.com.au/staticly-media/2023/05/LongView-PEXA-Whitepaper-3-Mobilising-Private-Capital-for-New-Housing-Solutions-sm-1684212151.pdf
