AwareSuper, Australia’s second largest super fund, has highlighted the importance of providing affordable housing, a key ingredient in the ‘S’ of its ESG strategy.
But at the same time, housing campaigner Leilani Farha, UN special rapporteur on the right to housing until 2020, has warned of the social harm that investors are doing via fast-increasing multi-family property investments.
She has singled out Korea’s National Pension Service, which she accused of being unaware of the social impact of its property investments.
“We can make an important social contribution by providing affordable housing – especially in central city suburbs where many essential workers are employed – at the same time as investing for strong, long-term returns,” said Alek Misev, Aware Super’s senior portfolio manager for property told AsianInvestor.
SUPER FUND INTEREST
Aware Super’s affordable housing portfolio comprises 15 projects across Sydney, Melbourne, Perth and Canberra. On completion it will provide affordable homes for 1,800 essential workers, including teachers, nurses, emergency services and social worker, with a projected value of more than $1 billion. Most will be rented at a 20% discount to market rent. Currently the fund has several hundred apartments rented to essential workers; a number that will climb above 1,000 by the end of 2024.
The fund’s broader residential property portfolio – which also includes retirement villages in Australia along with multifamily and serviced apartment properties in the US and Europe – is worth $3 billion currently.
Aware Super was established in 1992 to provide for NSW public sector employees and their families, before opening to all Australians in 2006. In In 2011, the fund merged with Health Super, a fund for workers in the health and community services sector.
“We know this [programme] really resonates with our members,” said Misev.
“Frequently, essential workers can’t live close to their workplaces because of prohibitive housing costs. They’re often in high-pressure jobs, and long commute times can be a further source of stress and tension. For many of these workers, this program alleviates that stress and makes a very positive difference to their livelihoods,” Damien Webb, head of real assets and deputy chief investment officer at Aware Super, told AsianInvestor.
As the cost of housing grows across Australia, super funds have entered the affordable housing sector in recent years, wary of waning housing affordability for their members.
In October, Hesta, another super fund, entered a joint venture with Nuveen Real Estate and Eagle Street Partners, to develop more than A$500 million of housing in Dublin, Ireland, including a significant affordable housing component. It is the fund’s first multi-family investment in Europe.
In 2020, AustralianSuper took a 25% stake in Assemble Communities. At the time the fund’s head of property Bevan Towning said the key reason for choosing the investment – which is a "build to rent to sell" model over the more traditionally commercial build-to-rent model – was because of its affordable housing component.
The moves come as investors in private equity funds face criticism from the world’s leading campaigners for affordable housing. In 2019, Farha began a campaign against the purchase of affordable housing by private equity funds in the US and Europe. She singled out Blackstone, which she said was increasing rents on affordable homes it purchased to levels unaffordable to tenants, forcing them out as a result.
Farha, who founded her own non-profit called The Shift after leaving the UN in 2020 to advocate for people's right to housing, told AsianInvestor that when she approached NPS to explain how their investments in affordable housing - through stakes in funds managed by Blackstone - were being managed, they had no idea about the practice.
“When I spoke to them, they were surprised at how their money was being used. I was telling them about this and they didn’t know anything about it. They seemed shocked,” she said.
The NPS declined to comment for this story. A Blackstone spokesperson told AsianInvestor: “These accusations are categorically untrue. Housing prices are rising due to a significant shortage of housing across the globe, particularly in major urban centers where demand is high. Across the globe, we are committed to preserving and expanding the supply of affordable housing on a long-term basis."
Farha said the private equity model was particularly ill-suited to owning affordable housing. “[The problem is] the aggressiveness of the private equity model to drive down the cost of what they are purchasing, to provide good yields for their investors,” she said.
She has pointed to Blackstone’s active buying of affordable homes in the US over the last year as part of a rush into the sector by investors recently. In 2021, global investors allocated $350 billion to the US multi-family sector, according to Real Capital Analytics, up from $193 billion in 2019 and $147 billion in 2020.
In February, Blackstone announced the creation of a new company to oversee more than 90,000 affordable US housing units recently acquired by Blackstone Real Estate Income Trust (BREIT). BREIT was the largest buyer of multi-family housing in the US in 2021, with Blackstone the second largest, according to RCA. In 2020, Blackstone topped the list; in 2019 BREIT topped the list.
Farha said she feared the practice would result in low income residents being forced out of their homes. “Pension funds investing in this sector are shooting themselves in the foot. They may be getting a better return for their pensioners but the pensioners have to pay higher rents,” said Farha.