This report investigates the role of philanthropy in addressing the affordable housing crisis, contributing insights from research and case studies, and financial modelling. The report identifies both financial and non-financial barriers to affordable housing and underscores the potential for philanthropic funds to support the availability of appropriate, affordable, safe, secure, healthy, well-located, stable housing for everyone. There is a keen interest among philanthropists to understand the relative effectiveness of various financing pathways, and an assessment framework has been developed to enable objective and consistent consideration of financing options.

The report highlights cost of land, revenue gap in renting units to 60% very low and 40% low-income earners, funding difficulty for smaller community housing providers, negative social stigma for social housing, and inadequacy of early-stage and innovation-focused financing options as major financial barriers to affordable housing. Low levels of co-mingled funding, high levels of operational expenses, lack of incentives, and the perplexing regulatory environment, are the key non-financial barriers identified.

An assessment framework-based approach has been developed to enable objective and consistent assessment of financing options. This framework helps narrow down options through the consideration of different funding pathways and highlights the outcomes and risks associated with each. This results in an evidence-based approach for decision-making for philanthropists in for-profit models, social enterprise housing models, cooperative housing, and community land trusts.

The report suggests that philanthropy can complement market-driven investment activities through the use of ‘patient capital’ through non-traditional investment conditions such as sequence of repayment, unrestricted use, no security requirement, timing of repayment, and acceptance of uncertain and/or alternative exits. The report also recommends philanthropists consider catalytic capital because it can mitigate real and perceived risks by blending capital from investors with different risk-return expectations. Grants, guarantees, and/or first-loss capital in the form of subordinated debt or equity are common instruments for leveraging capital from more conventional investors. The report also highlights that philanthropy has a key role in addressing the issue of return on investment and can finance and structure arrangements to account for risks that stem from the notion of time.

The report highlights the relevance of ESG in philanthropic investment decision-making and a growing interest in aligning activities with ESG objectives. Institutional investors are increasingly adopting ESG strategies, and there is rising demand for social impact investing. The report recommends considering how being able to demonstrate social impact can drive investment suitability and how outcomes-based contracts allow providers flexibility in how they deliver their services, effectively and efficiently. The report explains that a reputable investor can increase the credibility and visibility of an investment by signalising impact potential.