Budget incentives to encourage investment in affordable housing will do little to help overcome the shortage unless they are paired with a direct subsidy, according to experts.

Securing institutional investment is repeatedly flagged as a top priority for the affordable housing sector but experts say individual investors could also play a key role if the right incentives were put in place.

"Lots of mum and dad investors out there can have three, four, even five properties," said Sara Watts, the interim chief executive of affordable housing provider City West Housing. "That's a lot of property to provide to the market."

While in the budget the government announced incentives to encourage investment in affordable housing - allowing Managed Investment Trusts into the fold as investors and an additional 10 per cent Capital Gains Tax (CGT) discount to owners of affordable housing managed by community housing providers - experts, including Ms Watts, believe this will do little to help.

"The CGT discount would only come into play at the end when selling," Ms Watts said. "We'd like to have seen a more direct rental subsidy for landlords ... so investors would still be getting the expected return."

Bridge Housing chief executive John Nicolades said investment from individuals would only occur with the return of a subsidy like the National Rental Affordability Scheme (NRAS) incentive.

???"The tax measures in the budget may give a carrot, but it would be more effective if it was a direct subsidy."

NRAS, which was scrapped in 2014, gave annually indexed incentives to developers and investors who agreed to set their rent at 20 per cent below market rate, for up to 10 years.

???Of the 1912 affordable housing properties that make up Bridge Housing's portfolio, just 10 per cent are homes managed on behalf of other organisations and individuals.

One such property - a three-bedroom duplex at their Bunya estate in Bungarribee - is an investment owned by Pyrmont resident James Kelly, which is rented at 20 per cent below market rate.

While the home could be leased for about $540 a week, Mr Kelly receives just $432 from his tenants. However, the indexed NRAS incentive he is eligible to receive, more than makes up the difference.

"We very nearly bought two, in hindsight I wish we had," he said. "Unfortunately the government has since cut NRAS."

Mr Kelly wasn't concerned by the stigma around affordable housing, and said the rental security and chance to do some good were what drew him to it.

"There's a misconception it's for people who aren't working, who might not look after your place," he said. "But it's for people who are employed - key workers ... we've got a family with four kids, the dad works in smalls goods, the mum in childcare. We've had no problems.

"With rent set 20 per cent below market rate, you'd hope or expect, to always have a good pool of potential tenants," he added. "You're doing something positive too, so as long as the numbers add up it's good for both parties."

While Mr Kelly has no regrets about buying an affordable housing property, he's not sure he'd do it again under the recently announced incentives.

"I get reduced weekly rent, but on an annual basis [due to my NRAS payment] I don't see much difference," he said. "But I don't see anyone taking reduced rent on the basis of a CGT discount."

Neither does Hal Pawson, associate director of UNSW City Futures Research Centre, who said it was hard to see how investing in affordable housing would stack up.

"The CGT discount is pretty small and with some markets getting close to a plateau, if you're buying property now you may not get much of a capital gain to get a discount on.

"It looks like the government doesn't even expect it to work, with a grand loss of $15 million expected," he said.

While Mr Pawson would prefer to see institutional investment, he said mum and dad investors were "a perfectly good element to a wider strategy".

"The attraction for mum and dad investors with housing, is that it's tangible, and putting your savings into that form of asset is very low risk."

He said while there was no doubt NRAS had been administered poorly, a reshaped version of it would make affordable housing more appealing for investors big and small.

Mr Nicolades agreed, noting while the newly announced bond aggregator would give community housing providers access to cheaper funds, there would still be a gap between what tenants pay and what return bond holders wanted to get.

"The bond aggregator will only mean anything if there is co-financing, a subsidy like a capital grant or inclusionary zoning."