This underscores an important truth. Housing is not just about putting a roof over our heads, nor is it only a personal or financial issue. Assuring housing stability helps ensure that households can meet other basic needs and establish roots that build stronger communities. The challenges facing affordable housing are also complex and call for multiple stakeholders to work together to find solutions that will deliver desirable outcomes over the long term. It therefore has much broader socio-economic dimensions that concerns all of us. It is firstly crucial to frame the issue of affordable housing correctly. Fundamentally, the issue is one of a large and growing mismatch between demand and supply, owing to significant changes in our housing markets and demographic shifts. Prior to 2012, investor purchases of multiple homes increased very sharply, crowding out first-time homebuyers and pushing up prices of homes across the board in preferred locations. At its peak, the growth in housing loans taken out to buy second and third homes exceeded 15%. This excludes cash purchases. This in turn drove a higher concentration of new supply in higher priced segments, further widening the demand-supply gap for affordable homes. By 2012, annual house price growth had risen above 11%, almost four times the 10-year average house price growth between 2000 and 2009. Demand for affordable homes has also increased rapidly from the higher rate of net new household formation.

2/4  BIS central bankers' speeches  Second, innovative financing models to fund affordable housing projects should be further developed. Current intervention measures largely focus on subsidising home-buyers or the direct provision of housing. Over the longer term, these need to be complemented by new, more sustainable alternatives that combine public and private funding for affordable housing development and investment. In other parts of the world, public-private partnerships through joint ventures have replaced traditional methods of financing for the supply of public housing. Public funding could also be deployed more efficiently to crowd in private capital for affordable housing developments – for example, by providing cost-efficient funding to institutions that finance affordable housing projects. Regardless of the measure, it will be crucial to build in mechanisms that promote programme efficiency and effectiveness. These include business models that are based on sound commercial principles, good governance and appropriate risk management strategies. Schemes introduced could specify minimum technical standards, execution guarantees and other conditionalities for financing or payment. ‘Social impact bonds’ – which have gained interest in some countries such as the United Kingdom, United States, and Australia – are a useful example. These investment structures operate on a “pay-for-success” model, where the Government repays the costs of a programme plus a return, only if pre-defined social outcomes are achieved. Third, there is a need to foster more diverse collaborative partnerships to deliver affordable housing. This includes a vibrant community of social housing enterprises, private foundations and non-profit organisations that support or complement the Government’s affordable housing agenda.