NHFIC Review roadmap for affordable asset class

The Federal Government has tabled the NHFIC review parliament yesterday and is expected to respond to the report at the release of the Mid Year Economic and Financial Outlook in the final sitting period of the year.

The Review recognises that Australia is facing a structural undersupply of social and affordable housing, meeting the challenge will require not only a substantial upscaling of investment from both the private and public sectors, but also a greater level of innovation in financing models. The Review calls on all levels of Government to meet a $290b public and private shortfall in investment over the next 20 years which NHFIC can’t do alone. The supply gap is noted as facing a structural undersupply of social and affordable housing and sees CHPs, private sector collaborations and cross government collaborations through the National Housing and Homelessness Agreement (NHHA) and Local/State Governments as vital to tackling this challenge.

The NRSCH is critiqued for its lacking uniform regulation, a flaw of the system and is said to reduce regulatory confidence, but acknowledges the call for a nationally applied regulatory framework. Sensibly the Review recognises that a uniform national regulatory system is widely considered by stakeholders to be necessary for attracting private investors at scale to the sector, and thus growing the social and affordable housing market in Australia. Read the whole report in 10 years from now and the partnerships with the private sector is likely to make sense when considering the scale of the affordability problem and how these partnerships will be seen as the vital components of the affordable asset class that will be fully formed by then.

The review talks about crowding out other financiers and NHFIC to potentially be the lender of last resort. As reported in the next standard house report, one just needs to look to our Affiliates in ANZ who since NHFIC opened its doors has funded and facilitated over $A3.87 billion into the sector.

The Review quite rightly recognises some solid work of NHFIC over such a short time, It acknowledges the robustness of the Sector cashflows, with investors yet to fully appreciate this and that NHFIC can contribute to the development of this market by helping to recalibrate perceptions about the attractiveness of this asset class. NHFIC can champion investment and learn from the changing of perceptions about the infrastructure sector in the 1990s.

Amidst 25 recommendations there are many of the review recommendations picked up from PowerHousing’s consultations with Review Chair Chris Leptos. it recommends extension of the Government Guarantee and structured increase of the Liability Cap, but falls short of talking to the amount of the Guarantee of say $5b as is needed but this opens the possibility to an ongoing review of what could be needed which is positive. As a reflection of the CEOs August meeting with Minister Sukkar and the line of CHPs looking for finance, this increase is a non-negotiable. In the Review’s consultations, stakeholders overwhelmingly acknowledged that the AHBA has achieved one of its main objectives of providing CHPs with access to lower-cost, longer-term finance and has been a success.

As noted, there are recommendations for NHFIC to crowd in private investors to increase the supply of housing, particularly social and affordable housing,  Non CHPs are recommended to be extended NHFIC finance but acknowledges the added risk of lending to non regulated CHPs. It calls for a more focused and revised NHIF with potential for non social/affordable housing component developments to receive the facility- this is recommended with case studies that show why the current facility is not effective. This in part reflects the narrow terms for accessing NHIF and hurdles for receiving the facility. NHIF interest earnings used only as per the purposes of the Act and particularly making loans, investments and grants;

In other recommendations:

  • Increases to the capacity building program grants to $75,000, incentivising first time applicants and no win-no fee grants.
  • First Home Lending Deposit Scheme data, compiling data on the impacts on the LMI Sector and greater targeting to those first home buyers that really need it.
  • NHFIC research function be less broad and narrowed to focus on research aimed at helping to unlock and stimulate private finance in social and affordable housing, consistent with NHFIC’s core purpose and competencies. NHFIC should retain responsibility for research into housing demand and supply in Australia, including current and potential future gaps between housing supply and demand.
  • Consideration of the skills of the NHFIC board, updates on their performance and monitors its activities.
  • Government provide NHFIC with a Statement of Expectations to further support NHFIC’s responsibilities as set out in the Act and the Investment Mandate.