Institutional Investment

What is an institutional investor?

According to the National Housing Supply and Affordability Council “Institutional investors are, broadly, entities through which investors collectively invest. They have large quantities of capital to deploy, invest for the long term, and spread their funds across a diverse range of investments¹.”

Institutional investors may include:

• Pension and superannuation funds
• Banks
• Investment funds
• Insurance companies.

_{¹National Housing Supply and Affordability Council, Barriers to Institutional Investment, Finance and Innovation in Housing, 2023, p.2}

How does institutional investment improve housing outcomes?

Housing Australia’s Statement of Expectations outlines that Housing Australia should proactively engage with institutional investors, all levels of government and the community housing sector.

According to the National Housing Supply and Affordability Council, institutional capital is needed to increase the “quality and diversity of, Australia’s stock of private and not-for-profit (community) rental housing.²”  

In 2021 the Statutory Review of the Operation of the National Housing Finance and Investment Corporation Act 2018 – Final Report³  was issued. This report estimated an investment of around “$290 billion will be required over the next two decades to meet the shortfall in social and affordable housing dwellings.” It also noted that “…meeting this shortfall will require active private sector participation and high levels of collaboration across all levels of government.”

Subsequent Government responses and policy directions have directed Housing Australia to work with the private sector, and institutional investors in particular, to mobilise the investment likely to be needed in the decades ahead.

_{²National Housing Supply and Affordability Council, Barriers to Institutional Investment, Finance and Innovation in Housing, 2023, p.2
³The Australian Government The Treasury, Statutory Review of the Operation of the National Housing Finance and Investment Corporation Act 2018 – Final Report, 2021, p.3}

How does Housing Australia work with institutional investment to improve housing outcomes?

Since Housing Australia was formed in 2018 (initially called the National Housing Finance and Investment Corporation), we have worked with instituional investors.

A lot of our work with institutional investors has been undertaken through our Affordable Housing Bond Aggregator (AHBA) program.

The Affordable Housing Bond Aggregator

The AHBA is designed to meet funding requirements from Community Housing Providers (CHPs) by the issue by Housing Australia of long-term social and sustainability bonds in Australian wholesale debt capital markets.

As at December 2024, we have issued over $2.8 billion of bonds to institutional investors.

More information about our bond investors' involvement is available in our Media Centre.

Find out more about the AHBA here.

The Housing Australia Future Fund Facility and National Housing Accord Facillity

In 2023, the Housing Australia Investment Mandate was updated to authorise Housing Australia to administer the Housing Australia Future Fund Facility (HAFFF) and the National Housing Accord Facility (NHAF). The purpose of these programs is to:

• increase the availability of social housing and affordable housing, and address acute housing needs
• deliver the Government's commitment to support 40,000 dwellings available as social and affordable housing (20,0000 social and 20,0000 affordable) over five years
• encourage private sector investment in projects that deal with these matters.

To deliver on these outcomes, it is likely that institutional investment will be required.

Advisory work

In anticipation of the HAFFF, Housing Australia established an Advisory Panel to provide strategic guidance and insights from a range of stakeholder interests relevant to the design and implementation of the Australian Government’s housing policy.

Ensuring the HAFFF’s design was informed by market and stakeholder insights is a core principle for ensuring the program is efficient and well designed. This feedback assisted Housing Australia with preparatory work.

Market and stakeholder insights obtained through the Advisory Panel and broad stakeholder engagement activities included market observations and experiences on considerations such as construction costs, State and Territory and CHP sector collaboration and potential options for funding model design. The Advisory Panel had no decision-making role and concluded on 3 November 2023.  

Housing Australia also undertook work with a broader range of institutional investors, including by engaging advisors to undertake market sounding and provide advice on how the HAFFF and NHAF could be designed to deliver the housing outcomes outlined above by efficiently accessing institutional investment.

Institutional investors in HAFFF and NHAF

It is likely that institutional investors will participate in the HAFFF and NHAF by providing capital to eligible project proponents.

This may be in the form of:

• Senior debt, including through the AHBA where institutional investors may buy bonds issued by Housing Australia
• Suburdinated debt
• Other forms of capital.

Housing Australia opened the First Round of the HAFFF and NHAF programs on 15 January 2024. On 16 September 2024 we announced 185 Preferred Projects to deliver up to 13,700 dwellings. These projects are now progressing through the contracting phase to financial close.  

Housing Australia will be reporting and publishing project-specific information in relation to the First Round of the HAFFF and the NHAF in accordance with our obligations under the Housing Australia Investment Mandate. 

Housing Australia looks forward to ongoing engagement with institutional investors to support delivery of improved housing outcomes for Australians.