Investing in scalable model to help address housing affordability

SVA Executive Director, Impact Investing Michael Lynch with HESTA CEO Debby Blakey.

HESTA has committed $20m to an innovative Melbourne apartment project that could be replicated at scale to help improve housing affordability and sustainability for first home buyers, Affordable Housing clients and those working in key community occupations.

‘Having a home is a fundamental element of financial security and societal connection and the lack of affordable homes close to major infrastructure is a huge issue for the community and our members,’ HESTA CEO Debby Blakey said.

‘We want to prove that you can invest to achieve returns for members and help address big social challenges like housing affordability. This investment provides a possible blueprint to help grow the supply of more affordable housing that could attract other large investors.’

Using a uniquely privately funded model focusing on financial and environmental sustainability, Nightingale Village is a 185-apartment, carbon-neutral residential project in Brunswick. It consists of six architecturally-designed buildings on former warehouse sites.

The project is a partnership between HESTA, the industry fund for the health and community services sector, housing organisation Nightingale Housing and Social Ventures Australia (SVA), a not-for-profit that works with partners to alleviate disadvantage.

More than 80% of HESTA members are women working in the health and community services sector.

Twenty per cent of apartments in the project were allocated to Key Contribution Workers such as nurses, aged care professionals, and those working in the not-for-profit sector.

A further 20% were pre-sold to Community Housing Providers, which eligible clients can rent at reduced rates. The remainder were sold to the general public, many of whom are first home-buyers.

Between 2011 and 2016, the number of older women experiencing homelessness in Australia increased by 31%. Today they represent the fastest-growing group of people experiencing homelessness in Australia. SVA is working on a series of initiatives that aim to change the system to dramatically improve outcomes for this group.

‘Our members deliver critical, life-changing services in their communities and we are looking for investment opportunities that improve their access to secure affordable housing near infrastructure and in proximity to where they work,’ Ms Blakey said.

‘The way we invest focuses on the much broader impact we can have for members by aligning investments with seven strategic UN Sustainable Development Goals (SDGs), including how we can help make cities and communities more sustainable and inclusive.’

This is the fourth Nightingale Housing project, which sees the organisation achieve greater affordability by selling apartments in the development ‘at cost’. More expensive, larger apartments help cross-subsidise the cost of smaller and less expensive apartments for first-home buyers and Key Community Contributors. To help create a pathway to home ownership, first-home buyers were able to purchase smaller studio apartments with a 5% deposit and at a comparatively lower cost per square meter.

An established waiting list of buyers and strong demand means Nightingale Housing does not engage a marketing consultant or agent, and savings on promotion costs are passed on directly to purchasers.

Further savings are achieved through the environmentally sustainable design and construction approach. The design is informed by the needs of residents, with architects focusing on creating a sense of community and long-term affordability for residents. Their considerations include the buildings’ energy efficiency and proximity to public transport.

Nightingale Housing Managing Director, Jeremy McLeod said, ‘We started with the idea that the answer to housing in our country was in design, in architecture, and what I discovered was that the answer was in an entirely new system.

‘Nightingale Housing exists to revolutionise the way we live together. Nightingale is a triple bottom line housing model, it’s designed to deliver housing at cost that is affordable, sustainable and delivers a sense of community.’

The Nightingale investment is the single biggest commitment HESTA has made through the Fund’s $70m Social Impact Investment Trust (SIIT). SVA manages the SIIT, with investments designed to provide both a risk-adjusted market-based return and a measurable social impact. The SIIT is investing alongside SVA’s managed impact fund, the Diversified Impact Fund.

The investment made by HESTA will help finance the apartment project and aims to earn an appropriate risk-adjusted return in line with similar types of investments. The financing will be provided alongside another social impact fund, the SVA managed Diversified Impact Fund.

‘This investment is a great example of how institutional investment can have a positive impact on the broader Australian community by making a meaningful contribution to the social and affordable housing market,’ SVA Executive Director, Impact Investing Michael Lynch said.

‘It speaks to the scale of opportunities available to investors looking to make both a social and financial return and grow the Australian impact investing market.

‘This is SVA’s second investment in a Nightingale development after the success of Nightingale 1 through the now-closed $9m Social Impact Fund.

‘We’re thrilled that, through our partnership with HESTA, we’re able to again support innovative projects like Nightingale Village that create more social and affordable housing and help build an Australia where all people and communities can thrive.’

Through the SIIT, HESTA also aims to continue to support the development of Australia’s impact investment market. Previous impact investments made by HESTA include Glenview, a cutting-edge Australia-first suburban village designed to recreate real-life experiences for those living with dementia in Tasmania.

Media contact:

Kye White, Marketing Associate, Digital & Content – Social Ventures Australia

*Australian Housing Research Institute, Modelling housing need in Australia 2025, August 2017.
Click here to view current Nightingale opportunities and ballot registration.

Baker McKenzie provided low bono legal support.