Ethical investing offers social and financial returns
Ethical investment is a trillion dollar industry, but property investors have been nowhere to be seen in this rising market — until now.
Ethical investment is a financial movement that is growing exponentially, with managed and superannuation fund options becoming mainstream and corporate social responsibility an obligatory part of any major business’ profile.
But for those looking at making ethical property investments, it remains an obscure and scarcely offered investment option.
This nascent investment vehicle is almost non-existent in Australia and even overseas is largely limited to design and architecture centring on green buildings and appliances.
With its own beginnings in providing environmentally sustainable and affordable workspaces for tenants, Melbourne-based ethical investment company Ethical Property Investments (EPI) is filling the void.
It has recently launched an investment model to ease homelessness among older women and women fleeing domestic violence, while also helping small-scale investors to achieve financial security and independence.
For investments as small as $100,000, investors can buy into premises designed specifically for communal living by as many as nine women, while still generating rental incomes the equivalent of an average investment property.
EPI Director Goro Gupta said the end result was a win-win for both ends of the housing market.
“This unique, and critically required, investment opportunity will enable Australian property investors to put their money into a growth oriented property market, while also providing appropriate, affordable housing to people at risk of homelessness, including women escaping domestic violence,” he said.
“Our goal is to construct 30 houses within the next 12 months, with most in the range of $700,000 to $950,000.
“We work with community service providers and domestic violence service providers to find tenants and modify each property to suit the tenant.
“In some cases, this might mean designing a house with separate ensuite bathrooms for everyone as well as custom accessibility modifications for long term tenants as they age.”
With its first property now built and tenanted in Werribee in Melbourne’s outer west, and another in Doreen in the city’s north due for completion by December 2021, Mr Gupta said these co-living properties provide housing for vulnerable Australians.
“It’s about doing good while you’re making money,” Mr Gupta said.
Appetite for social investment
There is clearly a global appetite for ethical investment that the property market is yet to tap into.
A 2020 global analysis from Morningstar indicated that assets in sustainable funds reached nearly $1.7 trillion.
The Global Sustainable Investment Review collates results from the market studies of regional sustainable investment forums in Europe, the United States, Japan, Canada, and Australia and New Zealand.
The most recent edition of the biennial report showed that globally, sustainable investing assets in the five major markets stood at US$30.7 trillion at the start of 2018, a 34 per cent increase in two years.
Tellingly, the fastest growing region has been Japan, followed closely by Australia and New Zealand.
Sadly, the appetite for social investment options is more than met by the dire need for them.
According to the most recent census, older women are the fastest growing sector in Australia to face homelessness, due to such issues as lower wages and superannuation, family violence, age and gender discrimination and a lack of affordable housing for those on low incomes.
It is estimated that without urgent policy reform, more than 400,000 women over the age of 45 are at risk of homelessness.
One prospective investor is Joseph Phillipos, who was seeking an investment that offered returns with social responsibility as he neared retirement age.
He initially researched NDIS disability housing investment options but found the regulatory complexities and limitations a deterrent.
Mr Phillipos (62) and wife Lucy are volunteers at their local parish and came across EPI’s investment model during their research into NDIS housing.
The couple are now poised to invest in the Doreen development, 28 km north-east of central Melbourne.
“The real estate band wagon felt like it had moved on and 15 per cent annual gains just don’t feel like they can go on forever, so we thought we’d look at options that also delivered some social good,” Mr Phillipos said.
The Doreen property is specially designed to accommodate six women living in a communal setting.
There are six bedrooms, with bespoke common kitchen and laundry facilities that encourage interaction while also offering privacy.
“The rent is divided and therefore more affordable for the tenants, but still offers the investor returns comparable with any property investment.
“I also see it as low risk, as it is designed to be readily converted to a regular home in the unlikely event it doesn’t work out as envisaged.”
Mr Phillipos said the planning process was relatively simple, with the property being registered as a rooming house.
Once the tenant numbers exceeded nine, it became a more complicated process, he said.
Real Estate Institute of Australia President Adrian Kelly said a recent REIA survey found that 57 per cent of property managers have experienced domestic violence in tenancies in the past 12 months.
The REIA is now calling on governments to introduce strategies in a bid to protect property managers ‘on the job’ as well as support those dealing with domestic violence.
“We are urging governments to address how property managers can gain support from local law enforcement and departments," Mr Kelly said.
“Resources such as increased coaching and mentoring on how to deal with situations as they arise will be instrumental in keeping these workers safe.
“We all have a role to play in stamping out this deplorable activity and we are keen to support our hardworking property managers to do exactly that in a safe way."