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’).

 

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.

NSW Cost of Living Budget leaves out housing costs for renters

Additional funding to support Aboriginal housing and people who are homeless is good news
but the NSW Budget does not include new investment in more social and affordable housing for
NSW renters in housing stress, the state’s peak not-for-profit housing body said today.

The Budget announced today includes an additional $61 million over four years for homelessness
programs, and $33.1 million over four years to support Aboriginal housing.

However, CHIA NSW CEO, Wendy Hayhurst, said the NSW Government had missed the
opportunity to reinvest the $18.25 billion it has reaped in stamp duty windfalls since 2011 in
providing the 12,500 social and affordable homes NSW will need each year to keep up with population growth.

‘Homelessness support services aren’t effective if people don’t also have secure permanent
homes to go to,’ Ms Hayhurst said.

‘And extra funding for childcare, education and health will only go so far if children don’t have a
safe, secure home to go to at the end of the day, or people leaving hospital can’t recover safely
at home.

‘This Budget had a chance to future-proof our housing system by encouraging investment in the
social and affordable housing we’ll need in the future as Sydney’s population continues to grow.’

Ms Hayhurst recognised the NSW Government could not solve the problem on its own – after
the Federal Government’s Budget failed to deliver funding to kick start greater investment in
social and affordable housing from bodies such as superannuation funds.

‘State Government housing programs such as the Social and Affordable Housing Fund (SAHF),
Communities Plus, and Future Directions are good programs but will not deliver the scale of
new housing needed,’ she said.

‘We need all levels of government to work together on solutions –and a strategy that includes a
suite of measures, from planning reforms, to access to government land, and direct subsidies to
close the funding gap for community housing providers.’

Key facts

NSW needs 12,500 social and affordable homes a year for people on low and middle incomes.
Homelessness has increased by 48% in Sydney and 37% in NSW over five years (Census).
The number of social housing properties has not kept up with population growth – over the last 20 years there has been a 4% increase in properties against a 30% increase in households in need (AHURI).
60,000 people are on waiting lists for social housing in NSW.
In April, there was not a single property affordable for a young family on a minimum wage to rent within 20km of Sydney’s CBD – and the situation as almost as bad in most regional centres (Anglicare 2018 Rental Affordability Snapshot).
In Sydney average house prices are still roughly 12 times average incomes.

  • content courtesy of CHIA NSW

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.

Federal Budget silent on National Housing Strategy

This year’s Federal Budget shows exactly why Australia needs a National Housing Strategy, according to the Community Housing Industry Association (CHIA).

The $110m for five years to continue work on remote housing in the Northern Territory is very welcome, as is the added funding for the Australian Housing and Urban Research Institute and the Australian Bureau of Statistics to improve housing data. Spending on infrastructure to reduce urban congestion and improve transport networks to support our growing population is welcome. The $15m to encourage planning reforms in Western Sydney is a good start.

But this Budget is silent on one of the biggest pressures facing Australian households: housing affordability, says CHIA Executive Director Peta Winzar.

‘House prices at the top of the East coast capital city markets may be coming off the boil, but home ownership remains a challenge for many families on low and moderate incomes and more than 40 per cent of low income renters are in housing stress,’ Ms Winzar says.

‘Unless we have a National Housing Strategy and the programs to support it, housing will still be on the front pages of the paper in 12 months’ time, when tonight’s tax cuts promised tonight hit people’s bank accounts. And it will still be a problem in 2024 when the 37 per cent tax bracket is eliminated.’

In 2017, the Treasurer laid the groundwork for a coherent, sustained effort to improve housing affordability, raising the hopes of a growing number of Australians who are finding themselves it increasingly difficult to afford a secure, affordable and appropriate place to call home.

‘We now need a National Housing Strategy to follow through,’ Ms Winzar says.

‘We need a National Strategy that commits to more fundamental tax reform to remove the distortions in the housing market. A Strategy that includes reform of Commonwealth Rent Assistance to reduce rental stress for private renters.  A Strategy that sets housing as a core component of infrastructure investment. A Strategy that commits to delivering 200,000 social and affordable dwellings over the next decade.

‘We need a National Housing Strategy which guides a sustained effort of all levels of government to fix housing affordability, especially for those on low and moderate incomes. Because being able to afford somewhere to live is more important than a generic tax cut,’ Ms Winzar says.

 

Victorian budget ignores housing crisis

Victoria is set to retain its unenviable record of having the lowest percentage of social housing in Australia, with the budget lacking the type of investment needed to provide safe, secure and affordable housing for those on low incomes.

Chief Executive Officer of Community Housing Industry Association Victoria (CHIA Vic) Lesley Dredge says whilst the Victorian Government is to be commended on implementing the Homes for Victorians strategy, and putting in place the architecture needed for growth in social housing, Victoria’s level of social housing will continue to go backwards.

The latest statistics show there are currently 36,742 households on the Victorian Housing Register, awaiting social housing, including 17,848 on the priority list.

‘Those figures represents only some of the Victorian households experiencing extreme housing stress – impacting on all aspects of their lives and the communities in which they live, Ms Dredge says.

‘We must address the urgent backlog of social and affordable housing in Victoria. With Melbourne growing by 125,000 people last year and housing stress increasing in our regional centres, doing nothing is just not an option,’ Ms Dredge says.

‘We need 1800 properties just to stand still and remain the worst in the country – whilst the Budget target is a drop of 45 social housing dwellings.’

Ms Dredge says there were positives to come out of the Budget, including
– rebuilding the TAFE system and aligning the training system with industry
– big investments in mental health and addiction
– further investment in health and education
– continuation of the large focus on infrastructure.

‘But without an affordable, well-located home it is hard for those on low incomes to make use of these initiatives.’

Property tax reform the answer to housing affordability

Last financial year, the Commonwealth Government spent less than $6 billion on assisting low income renters and over $70 billion on providing housing assistance to property owners.

In a country that prides itself on giving everyone a fair go, the balance needs to change, according to a pre-budget submission to the Commonwealth Government by the Community Housing Industry Association (CHIA).

CHIA’s Executive Director, Peta Winzar, says owner occupiers received capital gains tax exemptions worth $61.5 billion last year, and property investors and trusts reaped a further $9.6 billion via capital gains tax concessions. [1] A total of $76 billion of tax breaks for property owners.

Meanwhile, the Commonwealth spent just $4.53 billion on Commonwealth Rent Assistance for low income renters, with 40 per cent of CRA recipients still being in rental stress after receiving the payment (defined as spending more than 30 per cent of household income on rent).

‘At the moment, the taxation system is heavily weighted in favour of those who own property against those who are unlikely to ever be in the position to buy their own home,’ Ms Winzar says.

‘Reforming Capital Gains Tax and negative gearing could deliver savings of up to $30 billion a year – more than enough to alleviate rental stress among one million low-income renters and to build 200,000 more social and affordable housing units which are desperately needed,’ she says.

‘We propose removing the Capital Gains Tax exemption from home-owners and progressively reducing the CGT discount on residential property from 50 per cent to 25 per cent.

‘The 50 per cent CGT discount rule is intended to adjust a capital gain by reference to inflation, but the current rules over-compensate sellers, particularly where properties are held for just a few years,’ Ms Winzar says.

‘To discourage unhealthy property speculation, we are also proposing that the CGT discount be reduced to 15 per cent where residential property is re-sold within five years of acquisition.’

‘And negative gearing could be better used to stimulate additional housing supply if it was restricted to new homes,’ Ms Winzar says.

Ms Winzar says it’s time for the Commonwealth to find a better balance between assisting home owners and renters.  These reforms of taxation policies can reduce the incentive for speculative investment that drives prices higher, ensure profits from selling into rising markets are shared more fairly between property owners and the wider community, and deliver more affordable rental housing.

The taxation reforms were just part of CHIA’s pre-budget submission to the Commonwealth. Click here to view the submission in its entirety.

[1] The Treasury. 2016 Tax Expenditures Statement. Table 1.1 p9. The value of exempting home owners from CGT ($34 billion), the value of the 50% CGT discount for home owners ($27.5 billion), CGT discount for individuals and trusts ($9.6m). Negative gearing is not reported as a tax expenditure, but is estimated at between $0 and $5 billion; See Dale, T. Budget impacts of negative gearing, in Parliamentary Library Flagpost Blog August 2015.

 

Ideas needed

Your input needed for 2018 Federal Budget

CHIA has started work on what we want to see in the 2018 Federal Budget to improve housing affordability and we want your ideas. However, time is short, so you’ll need to get them to us fast!

In an unusually early start to the Budget process this year, the Treasurer has asked for Budget submissions to be lodged by mid-December.  This means we will need to get your policy proposals by December 1, 2017, so we can finalise our submission by the deadline.

If you have ideas to improve housing affordability for renters or for home buyers, ideas to increase housing supply, or ideas to help people who are homeless or at risk of homelessness, then we want to hear them.

We are particularly interested in your proposals for reforming taxes – not just the well-rehearsed suggestions like changes to negative gearing and the Capital Gains Tax, but ideas for the other quirky bits of the tax system that make it difficult to do business, create inconsistent outcomes, or could create big opportunities for change.  (For example: enabling developers to claim gift deductibility on their tax if they donate housing stock to charities could encourage developers to increase the amount of affordable housing in developments. Currently, donated stock can’t be regarded as a gift if it has been transferred as a condition of a planning permit that requires the provision of affordable housing.)

So send us your ideas – anything from a couple of sentences to a page is fine. Here are a few questions that will help us pull all the ideas together: What is the problem that needs to be fixed? What are good arguments in support of this proposal? Will it benefit any particular group (for example, older renters, people living in regional areas, Indigenous Australians, first home buyers)? Would it affect many people? How much is it likely to cost or save?  Is the wider community likely to support or oppose it?

Email your ideas through to peta.winzar@communityhousing.com.au

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.