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 USA - Low income Housing Tax Credit Program Australia - National Rental Affordability Scheme Established as temporary program 1993 Made permanent 1995 Attempts to make program temporary again (vetoed) 2003 Proposed tax reforms threaten program 1989 Bush threatens to veto unless Congress agrees to end Capital Gains tax 2005 Key resource post Katrina Tax credit schemes under 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+) Setbacks Funding 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 compared LIHTCNRAS Affordability requirements 30+ years10 years TargetingLow-incomeLow-moderate income Main Investment incentives Tax credits + depreciation Tax credits + capital gain RegulationBy contract Transparency Scale1,800,000 dwellings 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)

(Source: 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 (2)

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.”

Source: Guthrie and MacQuarrie, 2005

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