Compelling Reasons to Invest in Affordable Housing

The Affordable Housing Initiative is primarily aimed at people on lower incomes who are currently locked out of the housing market, but it is also much bigger than that. This could potentially give rise to a viral movement away from traditional housing developments. There is already a growing number of people for whom more affordable housing options have great appeal and even young and fully employed professionals are now questioning the wisdom of entering in to heavy debt in pursuit of the increasingly unattainable dream of home ownership. The emerging ‘tiny house movement’ is evidence that lifestyle choice, beyond the more obvious problem of house prices, is driving a growing interest in alternative approaches to building and home ownership – especially when mobile data connections means that it is no longer necessary for many jobs to be located in high density urban environments.

Discussions around the need for affordable housing are making online news headlines nearly every day and this actually presents a new opportunity for smart investors to compete with the big banks. It may also offer more secure and reliable returns. In fact, the Affordable Housing Movement may present very real opportunities for a disruptive new business model in lending.

Smaller loans equate to diversified risk.
The old adage about not having all of your eggs in one basket applies here. By extending finance to multiple borrowers, with smaller manageable loans, there is far less risk of default. And given that the nature of these homes are modular, there is a reasonable likelihood that borrowers will return to finance the next stage of their comfortable home aspirations.

Security of Investment:
The average Australian mortgage is currently around $300,000. An increasing number of Australians with these large loans are facing the fact that they will probably never be able to repay their loans until they sell their homes. Many rationalise these loans on the basis that in a low interest rate environment it’s still cheaper to pay the interest on a loan than to rent. And they are gambling that property values will continue to increase so that when they do sell their homes they will make a profit on the sale. But more and more economists are beginning to voice the concern that this is unsustainable and that it is more likely and that property prices will fall in the future, with potentially serious consequences for both the borrower and the lending institutions. It’s happened before... remember the Global Financial Crisis? With household debt currently at what banks have called ‘the maximum pain threshold’ many economists believe that continued increases in the housing sector are unlikely to be widespread. The Affordable Housing Initiative therefore offers investors an alternative, and arguably more secure, opportunity for investment.

Repayments on the manageable loans that are envisaged by The Affordable Housing Initiative ($30,000 – $50,000) never exceed the borrower’s ability to repay, providing that they are eligible to receive government welfare payments. Consequently these smaller loans are far more secure and are not as exposed to the adverse circumstances that commonly impact upon a borrower’s ability to repay a loan. Eg: Sickness, marital breakdown and loss of employment.

Recoverable Assets:
Because the kinds of houses proposed by the Affordable Housing Initiative are relocatable, the building itself becomes the surety for the loan. It is a recoverable asset that can be removed from site in the extremely unlikely event that the borrower defaults on payments. This significantly reduces the risk to the lender.

Ethical Investment:
Housing is vital human need and access to adequate housing and home ownership should be considered as a basic human right. In a society such as Australia, which was federated and founded on democratic and egalitarian ideals, everyone should be have access to at least a basic standard of accommodation that offers warmth, shelter, security and adequate living, sleeping, working and recreational space. Any political or economic forces that hinder or oppose that are effectively complicit in the worst kind of social injustice – depriving people of a place to live.

The Affordable Housing Initiative is one response to the problems highlighted in the recent report by ACOSS – “The Affordable Housing Reform Agenda”. See: and the “Rental Affordability Snapshot”, published by Anglicare. See:

There is a clearly established link between growing poverty and the decline in home ownership in Australia. Both of these reports highlight the alarming state of housing affordability in Australia and offer many practical solutions to the problem. Among the many recommendations is a call for investment in new affordable housing stock. The Affordable Housing Initiative is concerned primarily with that recommendation – the call for the provision of new affordable homes. This offers ethical investors a unique opportunity to put their resources to work in a venture that can return both social and economic dividends.

For further information about The Affordable Housing Initiative, go to:
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