Commonwealth Government Bill to Improve National Housing Finance

“This bill establishes the National Housing Finance and Investment Corporation (the NHFIC), a new independent corporate Commonwealth entity which will improve housing outcomes for Australians, particularly vulnerable Australians who need social and affordable housing.

The finance corporation, which is modelled on successful initiatives in the United Kingdom, will strengthen efforts to increase the supply of housing by encouraging investment in housing, particularly in social and affordable housing. It will contribute to developing the scale, efficiency and effectiveness of the community housing sector and, importantly, will provide loans, grants and investments that complement, leverage and support Commonwealth, state and territory activities relating to housing.

Housing is critical to the social and economic wellbeing of Australians and the economy as a whole. It can impact on employment, education and health outcomes, and it is a significant driver of investment, productivity and economic growth. It's also the main savings vehicle for the majority of Australians.

While housing is primarily a state responsibility, the Commonwealth government nonetheless has an important role to play when it comes to addressing housing affordability and securing better outcomes for Australians, particularly the most vulnerable.”

“On 7 January 2016, the Australian Government announced the establishment of an Affordable Housing Working Group (‘the Working Group’) following a request from Treasurers at the CFFR meeting in October 2015 for further work on housing affordability.

The Working Group focused primarily on investigating ways to boost the supply of affordable rental housing through innovative financing models. The Working Group comprised members of the Commonwealth Treasury and Department of Social Services as well as members from the New South Wales, Victorian and Western Australian governments.

The Working Group’s report, Innovative Financing Models to Improve the Supply of Affordable Housing, recommended the establishment of a bond aggregator taskforce to design a proof of concept for a bond aggregator model to provide for greater private and institutional investment in affordable housing. The Treasurers at the CFFR meeting agreed to the recommendations of the report, including the establishment of an expert taskforce to design a proof of concept for an affordable bond aggregator to report their findings to Heads of Treasuries by mid-2017.

In the 2017-18 Budget, the Australian Government announced the establishment of the NHFIC to operate a bond aggregator and the NHIF. The Government released a Consultation Paper on the establishment of the NHFIC in September 2017 and feedback from that process has been incorporated into the Bill.

This Bill gives effect to elements of the Government’s Reducing Pressure on Housing Affordability plan announced at the 2017-2018 Budget to establish the NHFIC. The NHFIC is a new independent corporate Commonwealth entity dedicated to improving housing outcomes, with broad functions to enable it to administer the NHIF and Bond Aggregator.”

1. strengthening efforts to increase the supply of housing; and
2. encouraging investment in housing (particularly in the social or affordable housing sector); and
3. providing finance, grants or investments that complement, leverage or support Commonwealth, State or Territory activities relating to housing; and
4. contributing to the development of the scale, efficiency and effectiveness of the community housing sector in Australia.

• It provides directions about the two core functions of the NHFIC which will support investment in Australian housing. The NHFIC’s core functions are:
• the establishment and operation of an Affordable Housing Bond Aggregator to provide finance to registered community housing providers by aggregating their lending requirements and issuing bonds to institutional investors; and
• the establishment and operation of the National Housing Infrastructure Facility to provide grants and finance to support the creation of housing-related infrastructure.
• The IM provides detail on the NHFIC, specifically eligible projects and project proponents, the financing mechanisms and lending criteria related to its activities.
• It authorises the NHFIC to provide support to registered community housing providers to develop their financial and management capabilities.
• It states that, of the $1 billion allocated to the NHFIC’s Infrastructure Facility function for loans, investments and grants, a combined cap of $175 million applies to the infrastructure grants and capability building activities.
• The IM provides that up to $150 million of NHFIC’s funding may be allocated to provide an interim ‘warehouse facility’ that extends bridging finance to registered community housing providers until a bond issuance can be made through the Bond Aggregator function.
• It also outlines various general governance matters and sets requirements in relation to the maintenance of funds, benchmark rates of return and risk management.