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.