There’s an opportunity for tailored financial products and services that respond to the specific needs of collaborative housing projects. There’s also an opportunity to harness the collective expertise of the sector to find new ways to address existing financial hurdles and come up with innovative new financial models.
What would it take?
Accessing finance is by far the greatest barrier for collaborative housing projects, so this is a question that needs to be put to experts in the finance sector! Are there innovative solutions out there that meet the needs of financial institutions and collaborative housing customers alike?
Valuing the differences
Collaborative housing is a relatively new model for Australia. Currently from a financing perspective, it’s treated in a very similar way to speculative development. There’s opportunity to value its unique benefits and recognise how it’s different, which may lead to creative ways of enabling it financially within a responsible lending framework.
The greatest hurdle for households tends to be the sizeable equity contribution (typically 30-40% of development costs) that’s required early in the project, often at land acquisition stage. Many households don’t have this level of equity or find it prohibitively risky. Other issues include loan security and profit margin requirements.
Financing projects for lower income households
Overseas, innovative financial models such as the Mutual Home Ownership Society allow households on lower incomes to enter into home ownership, or part ownership, in collaborative housing projects. There is opportunity to explore innovative financial models that make collaborative housing available to Australians on middle to lower incomes, including full ownership, mixed equity and long term rental models.
At the smallest end of the collaborative housing scale, there is a gap in the market for home loans that are tailored for co-borrowers. As demand grows, lending institutions will benefit by offering a tailored product that meets the unique needs of co-borrowers.
With opportunity for solid financial return and measurable positive social and environmental impact, we know that impact investors are already helping to fund collaborative housing projects. There are plenty of engaged communities looking for support for their collaborative housing projects - the more investment, the more the movement will grow.