NHFIC now live!

Potential borrowers from the Affordable Housing Bond Aggregator (AHBA) can now complete the Expression of Interest forms online to start the process.

To help the National Housing Finance Investment Corporation (NHFIC) assess eligibility for AHBA loans, the EOI form asks for some basic information about your community housing organisation, and some details of the amount you may be interested in borrowing; how you plan to use the funds (eg refinance, construction), what security you are offering, and so on.

Note: the EOI form is NOT a formal application for a loan. Only if the EOI is assessed as suitable to proceed will you be asked to submit a loan application.

After the form has been submitted and assessed, the NHFIC will assign a relationship manager to shepherd each community housing organisation through the process. Pacific Capital Partners have been appointed to assist CHOs with the loan origination process, and the NHFIC also has its own in-house originator.

Head over to the NHFIC website to have a look at the EOI form, the Bond Aggregator Guidelines and the FAQs.

If you want more information, pick up the phone to Pacific Capital (02) 8222 8500 or email or call the NHFIC on 1800 549 767.

Job: NHFIC Transaction Management Team

The National Housing Finance and Investment Corporation (NHFIC) is Australia’s first independent, corporate Commonwealth entity dedicated to improving housing outcomes. The NHFIC will make loans, investments and grants to encourage investment in housing, particularly affordable housing. Modelled on similar schemes operating successfully overseas, NHFIC will revolutionise the way in which community housing projects are supported in this country.

We are assisting NHFIC to build a team of professionals to collaboratively support the efforts of deal originators.  Covering deal analysis, structuring, documentation and contract execution, the team plays a critical role in preparing credit papers and recommendations.  Given the nature of this market, innovative structures may be required to ensure that worthy transactions can be supported; the most senior members of this team will play a valuable role in working through and resolving any issues raised by the credit approval authority.

This small, specialised team currently has openings at Director, Associate Director and Senior Manager levels. While specific responsibilities vary with seniority, as a collective we are seeking:

  • Experience in financing transactions for infrastructure, commercial property and / or construction
  • Excellent credit risk assessment skills, with experience in underwriting loans to this sector
  • People who think creatively to mitigate risk, putting the client at the heart of the work

Senior team members should bring experience in complex negotiations.  They should be people of the character and credibility to build constructive relationships with a variety of stakeholders, including clients, deal originators and credit authorities.  The tenor of the Corporation is fresh and innovative and this team should reflect its purpose.

This is an exceptional opportunity to be a foundation executive in an organisation with deep market impact and social purpose.

Apply here.

Investment Mandate limit now $1b

In a new breakthrough, the Investment Mandate (IM) through which the Federal government will guide the activities of the National Housing Finance Investment Corporation (NHFIC) confirms that the NHFIC will be able to borrow up to $1 billion of Commonwealth funds to create a reserve pool from which it can lend to registered CHPs.

This ‘warehouse facility’ will provide bridging financing to CHPs until there are enough loans to warrant a bond issuance. While the final pricing of loans has not yet been revealed, this new development means that the NHFIC will be able to offer even cheaper finance than first thought, because it can source money through Commonwealth borrowing facilities, rather than just issuing bonds into the capital markets.

Accessing Commonwealth money up front also means that the NHFIC can process applications from CHPs for finance before it raises funds via a bond issuance. Over time, the NHFIC expects to be able to offer a range of different lending products as well. All of this is great news for CHPs and we look forward to seeing more details over the next few months.

There are a couple of other things worth noting. The Bond Aggregator has two aims – to provide cheaper finance to CHPs and to build institutional investor interest in a new asset class of affordable housing.

Over the longer term, the Bond Aggregator needs to be able to support itself. To meet all these objectives, the NHFIC will issue bonds to raise funds to repay the money that the Commonwealth initially tips into the NHFIC reserve pool and to raise more money for future CHP borrowing.

The IM is now published on the Federal Register of Legislation (search ‘investment mandate’).

 

New NHFIC Chair seeks shovel ready projects

Last week CHIA participated in an immersive day of briefing for the new National Housing Finance and Investment Corporation (NHFIC) Chair, Brendan Crotty.  In a wide-ranging conversation, Peta Winzar and Nicola Lemon (Powerhousing) filled the Chair in on the evolution of the community housing industry, its structure, property development record and its hopes for the NHFIC.

The basis for the discussion on industry capability was CHIA NSW’s insightful survey on the community housing industry’s property development record in that state, and its pipeline of planned developments over the next three years.

In response, Mr Crotty has asked for advice on what ‘shovel-ready projects might come before the NHFIC in the near future’.

Mr Crotty is also alive to the challenges of housing affordability outside our capital cities, and the challenges of construction costs in the north of Australia.

A significant part of the conversation revolved around the risks faced by community housing operators, and how these are managed.  Issues raised included the impact of uncertain/fluid government policy settings on the capacity of CHPs to plan for the future, and the difference a national housing strategy would make.

Establishing a solid pipeline of property development would enable CHPs to recruit – and keep – skilled staff and board members. While tight financial margins are a fact of life in the community housing industry, cash flows are high reliable and hedged against inflation. The extremely low levels of rental arrears are supported by Centrepay (which delivers over 90 per cent of CHPs rental income via direct deductions).

CHPs undertaking property development face similar risks to other developers but build-to-rent is a much lower risk prospect than build-to-sell products in the current housing market. It was pointed out that a number of CHPs are managing the financial risks around reliance on government contracts by diversifying into other business lines such as property management or body corporate services, or by operating across jurisdictions in different housing markets.

CHIA outlined some of its analysis of the board profiles of the 50 largest CHPs, which illustrate how CHPs have moved to recruit skills-based boards in response to the opportunities presented by NRAS and the Social housing Stimulus (over 40 per cent are graduates of the Australian Institute of Company Directors, for example).

One question that we were unable to answer is what the likely demand for Bond Aggregator loans will be from CHPs, since this depends so much on the price, the tenor and the conditions, applied. However, we do know that the 50 largest CHPs hold just under $1 billion in debt and assets of around $76 billion, which suggests that if the price is right then the demand to re-finance will be there!

You can search for the NHFIC Investment Mandate on the Federal Register of legislation.

The NHFIC website is up, but at the moment holds only press releases from the Treasurer and Minister Sukkar. We are promised a phone number soon.

 

 

 

CHIA congratulates new Chair of NHFIC

CHIA has welcomed the appointment of the National Housing Finance and Investment Corporation (NHFIC)’s inaugural chair.

The Treasurer, Scott Morrison, announced the three-year appointment of Brendan Crotty to the Chair’s role. A director of Brickworks Limited, General Property Trust and Dennis Family Holdings Pty Ltd, Mr Crotty will formally take up the role after Parliament passes the NHFIC’s enabling legislation.

CHIA Executive Director Peta Winzar says the appointment is an important step, with the community housing industry keen to see the NHFIC begin providing an affordable housing bond aggregator that will enable it to access cheaper and longer-term finance.

The NHFIC will also administer the $1 billion National Housing Infrastructure Facility which will invest in critical infrastructure with the aim of unlocking new housing supply.

Ms Winzar says she looks forward to further announcements on other NHFIC Board positions.

Community housing’s take on Budget 2018

The Commonwealth Government’s 2018 Budget has let the momentum slide on affordable housing.

While the 2017 Federal Budget laid the foundations for real improvements in affordable housing this year’s budget fails to follow through.

This budget focuses on tax reform, infrastructure investments, improving security, and the digital economy. The tax reforms are unlikely to impact on many community housing tenants but will provide some assistance to those in affordable housing: from 2018-19, an increase to the Low Income Tax Offset will deliver around $530 pa to 10 million low and moderate income earners. From July 2024, the 37 per cent tax scale will be abolished and only 6 per cent of the population with income over $200,000 will pay the highest marginal tax rate (45 per cent).

There is an additional $24.5 billion for infrastructure initiatives on top of the $75b announced in the last budget – no mention of housing, this is all roads, rail, ports and air infrastructure, and $1b to fix congestion in cities.

Major sector-specific measures:
The major measures focussed on the social and affordable housing sector in this year’s budget are:
• $550m over five years under a new Bilateral Agreement to improve Indigenous Housing in Northern Territory (already announced); and
• extra funding to improve the condition of public housing in the Northern Territory, including asbestos removal
• a related measure will provide $259.6m in 2017-18 to the NT government to offset GST reductions, so it can improve services in remote communities.

Minister Scullion’s Press Release advises that the government is in negotiations with the Queensland, South Australian and Western Australian governments ‘about future Commonwealth investment [in housing] in those jurisdictions’.

Minor sector-specific measures:
National Regulatory Scheme for Community Housing (NRSCH) will be funded $1.1m over 2017-18 and 2018-19 towards the evaluation of the NRSCH.
Australian Housing & Urban Research Institute (AHURI) will receive $5.5m/three years to continue the national housing research program.
The Australian Bureau of Statistics will receive $4.9m/four years to improve data collection of affordable housing stock estimates, planning and zoning activity, and dwelling construction cost. (This looks like the input to a National Housing Supply Council some time in the future.)
The Australian Institute of Health and Welfare (AIHW) will receive $0.2m in 2018-19 to improve its user interface for housing and homelessness data collections.

Broader housing-related measures:
The Australian Securities and Investments Commission (ASIC) will get an undisclosed amount to set up North Queensland Home Insurance Comparison website to help home owners compare premiums.

The Western Sydney City Deal will be funded $125m/five years to support infrastructure projects and liveability, including $15m for planning reforms to support housing supply in Western Sydney (this is redirected money from uncommitted funding, not new money).

Other matters:
Wage growth is expected to pick up in the broader economy to 3 per cent pa in 2019-20 (the increases under Social, Community, Home Care and Disability Services Award are phasing in until 2021). Inflation is projected to increase from 2.25 per cent in 2017-18 to 3.25 per cent in 2019-20. These movements may impact on Community Housing Providers operating costs.

There are some changes to income support arrangements that may have a minor impact on sector rental cash flows.

These include:
• the black economy taskforce response gets another $12.3m over four years – potentially impacting on some social housing tenants’ income declarations
• to encourage ‘lawful behaviour’ among income support recipients, the Commonwealth will be able to compulsorily deduct court-imposed fines and suspend/cancel welfare payments to people with outstanding warrants. How this will impact on tenants with Centrepay deductions is unknown. This may require renegotiation of rental payments for some tenants.
• pensioners will be able to earn up to $300pf (up from $250), without affecting their pension
• employment programs:
– jobs and skills for mature age Australians – $189.7m/five years
– transition to work – $80m/four years to support 40,000 young people aged 15-21 who are at risk of long-term unemployment
– the Community Development Program will ‘redirect $1.1b/five years to improve employment outcomes in remote areas’, including through 6,000 employment subsidies.

The following measures may impact on some CHPs:

Disability and Carers
• the National Disability Insurance Scheme (NDIS) is to be fully funded
• the NDIS Jobs and Market Fund – $64.3m/four years to help disability service providers take advantage of NDIS opportunities
• an additional $9.9m over two years will help Disability Employment Providers transition to the NDIS
• $92.1m/five years to ensure continuity of support for people who are not transitioning to the NDIS but are getting services under programs that are transitioning to the NDIS (programs not named)
• carer coordination – $113m/five years for Integrated Carer Support Services to help carers navigate the system through a new Carer gateway – an income test will be introduced for the Carer Allowance, with the carer and their partner required to have a combined income of less than $250,000 pa.

Older Australians
More Choices for a Longer Life – a package of measures for older Australians, including:
• 14,000 high-level care packages (on top of 6,000 already announced)
• 13,500 residential age care places
• $40m in capital grants for aged care facilities in regional and remote areas
• several measures focusing on quality of care, including an extra $8.8m to improve transparency of information on aged care provider quality
• more money for mental health services for older Australians
• $22.9m/two years to encourage older Australians to take part in physical activity.

Abstudy – $38.1m/five years will improve Abstudy payments, including providing boarding payments to kids under 16 getting Abstudy Living Allowance, more flexible travel arrangements and relaxed rules about which schools kids can attend.

Stronger Communities Round 4 – $25.9m/two years for small capital projects ($2,500-$25,000) that deliver benefits for local communities (redirected funds, not new money).

Building Better Regions Fund Round 3 – $206.5m/four years for investment in community infrastructure and capacity building projects in regional areas. [Note, some CHPs have accessed BBR funding from previous rounds to support mature age housing).

There are also some institutional reforms that may impact on how CHPs operate, for instance:

Australian Charities and Not for Profit Commission – $1m in 2018-19 to respond to ‘anticipated litigation’ as it pursues its role of regulating charities and charity registration
Consumer Data Rights – will allow people to share their data safely ‘with trusted and accredited service providers’.
The National Housing and Homelessness Agreement (NHHA) -Budget Paper No3 makes it clear that Commonwealth funding under the NHHA includes supplementation to the states and territories until 2021 to assist with wage cost increases under the Social, Community Services and Disability Industry Equal Remuneration order 2012. This was previously paid under a separate National Partnership Agreement for Housing and under the National Partnership Agreement on Homelessness for homelessness services. (There is no supplementation for CHPs unless states pass this on).
Rent Assistance – Rises from $4.4b to $4.53 mainly as a result of growth in age pensioner and carer pensioner populations.

What’s missing?
1. There is no National Housing Strategy in sight.
2. There are no measures to increase housing supply.
3. There is still no prospect of capital funding or additional subsidy to fill the gap between rental receipts and operating costs, to support the Bond Aggregator and Housing Infrastructure Funding announced in the last budget.
4. There is no reform of Capital Gains tax and negative gearing, which distort the housing market.
5. There is no reform of Commonwealth Rent Assistance (CRA) to alleviate housing stress among low income households.
6. The package of measures in this budget for older Australians, while welcome, is completely silent on housing stress among the 190,000 people over 70 who receive CRA.
7. There is no recognition that affordable, appropriate housing is essential to Closing the Gap for Aboriginal and Torres Strait Islanders, 79 per cent of whom live in non-remote areas.

In short, there is no National Housing Strategy.

Landscape shift for affordable housing

Landscape shift for affordable housing

Attendees of an affordable housing symposium, held at Griffith University, heard CHIA CEO Peta Winzar speak about the Federal Government’s September release of key reports, draft legislation and a consultation paper, which collectively signal a major shift in government thinking in relation to financing social and affordable housing.

Ms Winzar told the symposium that these four measures, together with some complementary budget measures announced by some state governments this year, have the potential to significantly alter the financing landscape for affordable housing.

  1. The Affordable Housing Working Group,

The Affordable Housing Working Group, which was set up by state and federal treasurers to investigate innovative ways to finance affordable housing has released its report with three recommendations.

Its prescription for closing the funding gap between rents and operating costs contain no surprises – targets, planning mechanisms, tax reform, contributions from affordable housing providers, and so on.  This is a list which could have been written a decade ago.

While it acknowledges the need to increase direct subsidies for affordable housing, the working group’s report stops short of suggesting how this might be done.

The report does contain some good examples of how to increase housing supply at no cost or low cost to government, for example, redevelopment of public housing properties, with the government getting a return either in cash or in replacement dwellings, or government taking a share of the profit from development of government land, in partnership with a developer or a CHO, or cross-subsidisation through a mix of market sale, affordable sale, affordable and social rent in a development

It also makes some valuable recommendations about strengthening the regulatory framework for community housing, and overhauling the national industry development framework for community housing.

  1. Bond Aggregator 

The aim of the bond aggregator (BA) is to raise institutional finance at scale from the wholesale bond market and then lend the money to Community Housing Providers (CHPs) for longer terms and at a cheaper rate than those offered by banks. The CHPs would apply for loans, pay a small fee towards the administrative costs of the BA and their borrowings would then be aggregated.

The government’s proposal is for the Bond Aggregator to sit under the new National Housing Finance and Investment Corporation (NHFIC), but there are still some design issues to be sorted out, for example:

  • Exactly how long the term of the bond would be – probably up to 10 years. This would give CHPs certainty about financing costs and remove the need for them to renegotiate with their bank every three to five years
  • How much cheaper the BA would be – this would depend on the credit-worthiness of the community housing sector and whether the government guarantees the bond
  • the proposal that the borrowing be secured against the title of properties held by the CHP, which raises interesting questions about the conditions under which state governments would allow properties under long-term management by CHPs to be used as security for a loan.

Treasury is seeking feedback on these questions and others as part of its broader consultation on the structure and operation of the NHFIC.

  1. NHIF report

The Commonwealth Government is currently running a consultation on the National Housing Infrastructure Facility (NHIF) and the NHFIC. What’s innovative about this in a housing context is that it is a legislated vehicle at the Commonwealth level but it will be able to invest in City Deals at the state and territory level.

It will also be able to invest in projects at the government’s direction and the aim is for its investment returns to enable it to be self-sustaining over the medium term.

Note that it is intended to prioritise development projects with an affordable housing component.

The consultation paper on the NHFIC and the NHIF is on the Treasury website, consultation closes on 20 October 2017.

You can download Ms Winzar’s presentation here.

 

 

 

 

image bonds

Affordable Housing Working Group report released

The Commonwealth Treasury has released the Affordable Housing Working Group’s final report on the complementary measures needed to support the bond aggregator.

The working group made three recommendations:

  1. That the Commonwealth and state and territory governments progress initiatives that close the funding gap, including direct subsidies for affordable low-income rental housing, the use of affordable housing targets, planning mechanisms, tax settings, value-adding contributions from affordable housing providers and innovative developments to create and retain stock.
  2. The Commonwealth and state and territory governments and the community housing sector develop and implement a uniform national regulatory framework to support the implementation of a bond aggregator and the growth of the sector nationally.
  3. The National Industry Development Framework for Community Housing be revised and updated in light of the Review of the National Regulatory System for Community Housing.

You can download the full report here.

image feedback sought

Commonwealth seeks NHFIC feedback

Community housing organisations have an opportunity to provide the Commonwealth Government with feedback on the National Housing Finance and Investment Corporation (NHFIC).

The Commonwealth Treasury has released a consultation paper on the potential structure and governance of the new corporate Commonwealth entity, which was announced as part of a series of measures in the 2017-18 Budget aimed at improving housing affordability.

The NHFIC is to have two functions:

1. A $1 billion National Housing Infrastructure Facility (NHIF), which will use tailored financing to partner with local governments to fund infrastructure.  The aim is to accelerate housing supply (the consultation paper proposes that priority be given to projects that include a certain amount of affordable housing).

2. An affordable housing bond aggregator, which will access the wholesale bond market to enable community housing providers to obtain cheaper finance on better terms, to expand supply. A report by consultants EY found the bond aggregator would be able to deliver interest savings of 0.9 to 1.4 per cent on a 10-year debt, depending on the level of government support.

EY estimated that the CHP sector will need to access around $1.4 billion of debt over the next five years, which should provide the necessary demand and scale needed to support affordable housing bond issuances.

The Treasury is now seeking feedback on the potential structure and governance of the NHFIC, and how the NHIF and bond aggregator will work.

CHIA and the state community housing peaks will be developing a joint submission and individual organisations that wish to develop their own submissions will need to do so by the Friday 20 October deadline.

You can download the consultation paper and the final report on the Bond Aggregator here 

Lunchtime briefing

Insiders’ briefing

Don’t miss your opportunity to hear about major issues impacting our sector, directly from those in the hot seat.

Book your seats now to hear from Assistant Minister to the Treasurer, the Hon Michael Sukkar, about the Federal Government’s housing initiatives such as the bond aggregator, and Productivity Commissioner Stephen King, who is presiding over the current investigation into ways to improve the delivery of Human Services – including affordable housing.