repackaging the poor: the quest for institutional investment in social housing anita blessing,...
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Repackaging the poor: the quest for institutional investment in social housing
Anita Blessing, University of Amsterdam, the Netherlands Tony Gilmour, Elton Consulting, Australia
Overview • US and Australia: only tax credit cases: first
chance to compare the two, and consider international social housing implications
• Tax credits as a major driver of hybridity, and convergence of organisational forms
• Exploratory research: seeking feedback from a European perspective
• Marketing a dependable source of income to private investors: commodification of social housing finance?
• Implications of the switch to institutional from personal investment in social housing
“The Low-Income Housing Tax Credit (LIHTC) is the most important resource for creating affordable housing in the United States today”
US Department of Housing and Urban Development, 2011
Knowing your tax credit (1)
• Spending on affordable housing construction without increasing public expenditure
• Decreases public income• Benefits profit-making, tax-paying entities • Flows to not-for-profits, traded for upfront
development capital, or provided to NFPs as a grant
• Could be for individuals, but tailored to institutional investors
Knowing your tax credit (2)
• Competitive bidding (marketization): NFPs vs.
FPs
• New dynamics: risk / reward/ competition/
professionalisation
• High transaction costs flow to FP intermediaries
• Equity style product
• Leakage of public funds
The rise of the tax credit
1986 2009-11
USA - Low income Housing Tax Credit Program
Australia - National Rental Affordability Scheme
Established as temporary program
1993
Made permanent
1995
Attempts tomake program temporary again(vetoed)
2003
Proposed tax reforms threaten program
1989
Bush threatensto veto unless Congressagrees to endCapital Gains tax
2005
Key resourcepost Katrina
Tax creditschemesunder fire?Resurgence-Google invests
2007
National Affordable Housing Summit Group proposes tax credit scheme
2008
NRAS launched by Federal Government
2009
Round 3 tries harder to attract institutional investors(1000+)
2010-2011
SetbacksFunding diverted, targets reduced, then restored
“Although it's been done overseas quite successfully, it is a new asset class in Australia and it's a new arrangement that businesses will be entering into.”
Australian Housing Minister Tanya Plibersek, 2009
Housing policy transfer?
The NRAS “stands on the shoulders of other proposals and particularly the US scheme”
Prof. Julian Disney, 2011
LIHTC and NRAS comparedLIHTC NRAS
Affordability requirements
30+ years 10 years
Targeting Low-income Low-moderate income
Main Investment incentives
Tax credits + depreciation
Tax credits + capital gain
Regulation By contract By contract
Transparency
Scale 1,800,000dwellings
Target 50,000
Tax Credits and the “Social Housing Continuum”
Source: Housing NSW
“The importance of this policy (LIHTC) is that it is increasingly replacing direct expenditures for low-income housing” (Guthrie and MacQuarrie, 2005)
Privatization and marketization of social housing provision
state support
private capital
bureaucratic distribution
private entities
public authorities
market mechanisms
Implications for social housing outcomes (1)
• Tax credit schemes mobilize broad coalitions of support for affordable housing
• Combine diverse skills and political affiliations• Staying power (bi-partisan support)
Implications for social housing outcomes (3)
Charity: “trying to repair with your right hand what you ruin with your left”
Slavoj Zizek
US Department of Housing and Urban Development on the LIHTC:
“Syndication is a complex and expensive process.….. the market for housing tax credits is as complicated and sophisticated as the market for stocks and bonds.”
Conclusions
• Institutional investment leads to marketisation of social housing provision
• Systemic costs: weakened social outcomes, leakage of public funds, complexity (barriers to entry)
• Also systemic benefits: innovation, competition, professionalisation
• A challenge to govern• Stands to alter the nature of the social
housing product over the long term