Bills Digest No. 132,
2017–18
PDF version [425KB]
Paula Pyburne
Law and Bills Digest Section
Matthew Thomas
Social Policy Section
25 June 2018
Contents
Glossary
Bills Digest
at a glance
Purpose of
the Bills
Structure of
the Bills
Background
Policy
development
Committee
consideration
Policy
position of non-government parties
Position of
major interest groups
Financial
implications
Statement of
Compatibility with Human Rights
Key issues
and provisions
NHFIC
Board
Observer
Chief
Executive Officer
Finance
Consequential
amendments
Concluding
comments
Date introduced: 15
February 2018
House: House of
Repesentatives
Portfolio: Treasury
Commencement: the day
after Royal Assent
Links: The links to the Bills,
their Explanatory Memoranda and second reading speeches can be found on the
Bills’ home pages for the National
Housing Finance and Investment Corporation Bill 2018 and the National
Housing Finance and Investment Corporation (Consequential Amendments and
Transitional Provisions) Bill 2018, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
June 2018.
Glossary
Bills Digest
at a glance
The National Housing Finance and
Investment Corporation Bill 2018 establishes the National Housing Finance and
Investment Corporation (NHFIC) as a Commonwealth commercial entity operating
with the aim of improving housing outcomes for Australians. The NHFIC will
engage in two core activities to support investment in Australian
housing:
- the
establishment and operation of an Affordable Housing Bond Aggregator (AHBA) 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
(NHIF) to provide grants and finance to support the creation of housing-related
infrastructure.
The NHFIC may also provide support for capacity building.
Affordable housing bond aggregator
The AHBA will provide loans to registered community
housing providers. The initial reserve for the AHBA is up to $150 million. The
NHFIC must repay to the Commonwealth an amount equal to the amount allocated to
the AHBA by 30 June 2023.
The NHFIC may only provide finance to registered community
housing providers in the form of secured loans. The NHFIC is
required to take security for its loans on commensurate terms to commercial
financiers such as banks and other lenders.
National Housing Infrastructure Facility
The NHFIC may use the NHIF to provide finance in the form
of loans, equity investments and grants to eligible infrastructure projects
which support housing development such as:
- new
or upgraded infrastructure for services such as water, sewerage, electricity or
transportation and
- site
remediation works including the removal of hazardous waste or contamination.
The NHIF will not finance housing projects directly nor
will it finance community infrastructure such as parks or libraries.
Investment mandate
The Minister may, by legislative instrument, give the
Board directions about the performance of the NHFIC’s functions—called the Investment
Mandate. This may include directions about:
- strategies
and policies to be followed for the effective performance of the NHFIC’s
functions
- decision‑making
criteria for making loans, investments and grants; granting financial
assistance to states and territories; and providing, to registered community
housing providers, business advisory services and other assistance in capacity
building
- limits
on making loans, investments and grants, and granting financial assistance to states
and territories
- risk
and return relating to NHFIC’s investments.
Purpose of
the Bills
The purpose of the National Housing and Finance Investment
Corporation Bill 2018 (the NHFIC Bill) is to establish the National Housing
Financial and Investment Corporation (NHFIC).
The National Housing Finance and Investment Corporation
(Consequential Amendments and Transitional Provisions) Bill 2018 (Consequential
Amendments Bill) is a companion Bill containing minor consequential amendments.
Structure
of the Bills
The NHFIC Bill comprises six Parts:
- Part
1 sets out preliminary matters including relevant definitions
- Part
2 establishes the NHFIC and sets out its powers and functions
- Part
3 establishes the NHFIC Board and contains provisions relevant to the
appointment of its members and the convening of meetings
- Part
4 relates to the role of the Chief Executive Officer of NHFIC, and the staffing
arrangements for NHFIC
- Part
5 contains provisions relating to finance and
- Part
6 sets out miscellaneous matters including the power to make rules and the
requirement for a review of the NHFIC Act three years after its
commencement.
The Consequential Amendments Bill comprises two
Schedules:
Background
There is ongoing debate as to whether or not Australia has
an overall housing surplus or deficit, and what the size of this surplus or
deficit might be.[1]
Nevertheless, the data clearly suggest that housing
affordability[2]
is lower than it has been in the past.[3]
This is especially so for low- to middle-income Australians who wish to buy a
house for the first time or rent in the private market in the cities where most
employment opportunities are concentrated. In these areas many low-income
households are experiencing housing stress—that is, spending more than 30 per
cent of their gross income on housing costs.
While the jury may still be out on the question of whether
overall housing supply is sufficient to meet demand, the data indicate that
there is a need for increased affordable housing.
Division of government
responsibilities
The causes of housing affordability problems are multiple
and complex, arising as a result of a combination of demand-side and
supply-side factors. While a number of these factors are beyond the immediate
control of governments—such as changing rates of household formation and
household size—governments nevertheless have responsibility for various policy
areas that impact more or less directly on housing markets and housing
affordability.[4]
Generally speaking, the Federal Government is responsible
for national housing and homelessness policy and for financial sector
regulations and taxation settings that have some influence on housing
affordability. The Federal Government provides Commonwealth Rent Assistance
(CRA) to low- to moderate-income households who experience difficulty in
meeting private market rental costs. The Federal Government also provides
financial assistance to the states and territories to support them in the
delivery of social housing through the National Affordable Housing Agreement
(NAHA). This Agreement is to be replaced by the National Housing and
Homelessness Agreement (NHHA) which will commence on 1 July 2018.[5]
Social housing is housing that is made available at below
market rates to people who are unable to access suitable accommodation in the
private rental market. It is comprised of public housing, community housing, state-owned
and managed Indigenous housing (SOMIH) and Indigenous community housing. While
public housing and SOMIH are owned or leased by state and territory housing
authorities, community housing and Indigenous community housing are managed by
community housing providers.[6]
In addition to the delivery of social housing, state and
territory governments are responsible for land use and supply policy, urban
planning and development policy, housing-related taxes and charges (such as
land taxes and stamp duties) and residential tenancy legislation and
regulation, each of which have more or less impact on housing affordability.
Local Governments are mostly responsible for building approval, urban planning
and development approval processes and rates and charges.
Decline in housing stocks
For some time, successive Federal Governments have placed
a greater emphasis on CRA to support eligible renters in the private rental
market than on providing support for social housing.[7]
This prioritisation of funding contributed to declining Commonwealth outlays on
social housing, and, by the mid-1990s, CRA expenditure surpassed Commonwealth-State
Housing Agreement (CSHA) expenditure.[8]
This has been the case ever since.
Faced with decreased funding for social housing, and
unable to charge market rents for public housing, state and territory
governments have been unable or unwilling to maintain existing public housing
stock or fund new dwellings.[9]
Over the past decade or so state and territory governments
have increasingly been either selling public housing stock or transferring the
stock itself or its management to community housing providers. Such transfers
are in line with a target to increase community housing stock to make up 35 per
cent of the social housing sector by 2020, set at the 2009 Housing Ministers
Conference.[10]
Part of the rationale behind this approach is that
community housing tenants are eligible for CRA whereas public housing tenants
are not, and this enables community housing providers to charge higher rents
without reducing tenant net incomes. Not-for-profit community housing providers
also have access to exemptions from council rates and tax concessions that can
help to reduce their costs. Where they have a sufficiently sized asset base,
community housing providers are able to use this to leverage financing and further
expand their housing stock.
The key to community housing providers being able to
expand their stock to cater to existing and future demand for affordable housing
would appear to be access to a pool of low-cost, long-term private funding.
However, as the Affordable Housing Working Group has observed:
... the community housing sector is not currently viewed as a
mature asset class, and as such private financing institutions offer finance at
unfavourable terms compared to other private sector businesses ... community
housing organisations continue to experience difficulties in building the
balance sheets and cash flows necessary to operate at the scale required to secure
finance for expansion, except by relying on the transfer of public housing
dwellings.[11]
It is this finance problem that the Government is seeking
to address with the establishment of the NHFIC and affordable housing bond
aggregator.
Policy
development
On 7 January 2016, the Government announced that the COAG
Council on Federal Financial Relations would form an Affordable Housing Working
Group (Working Group).[12]
The Working Group was charged with identifying ways of increasing the supply of
affordable housing for people on low incomes through innovative financing
models.
In an Issues Paper released in February 2016, the Working
Group sought input on four possible models, namely, a housing bond aggregator,
a housing trust, housing cooperatives, and social impact investing bonds.[13]
Following a consultation process the Working Group delivered its report, Innovative
Financing Models to Improve the Supply of Affordable Housing, to Heads of
Treasuries.[14]
Preferred model
On the basis of its research and consultation the Working
Group determined that a bond aggregator model offered ‘the best chance of
facilitating institutional investment into affordable housing at scale, subject
to the provision of additional government funding’.[15]
Essentially, an affordable housing bond aggregator is ‘designed to aggregate
and source large amounts of capital from the bond market so as to provide lower
interest, long-term loans to not-for-profit community housing providers (CHPs)
developing housing for lower income households’.[16]
The use of a housing loan or bond aggregator was the preferred model because it
‘provides a vehicle for affordable housing providers to aggregate their debt
financing requirements, assisting them to obtain funding from the wholesale
market at a better price and longer tenor than is available to them
individually’.[17]
The Working Group’s outline of how a bond aggregator model would
potentially operate is set out in the Box below.
Box 1: how a bond aggregator works
|
The establishment of a housing bond aggregator would
require the establishment of a specialist financing intermediary, whose
function would be to liaise with affordable housing providers to determine
the amount of debt they are seeking to raise.
The intermediary, or entity acting on its behalf, would
then source these funds in aggregate from wholesale markets by issuing bonds
to investors.
The funds generated would then be loaned to the relevant
housing providers in return for ongoing interest payments.
|
Source: Council on Federal Financial Relations, Innovative
financing models to improve the supply of affordable housing: affordable housing
working group: report to heads of treasuries, Treasury, Canberra,
October 2017, p. 24.
The Working Group did stress,
however, that establishing an aggregator would not be sufficient in itself to
result in substantial growth in affordable housing. Complementary reforms would
also be required, perhaps the most significant of which relate to closing the
financing gap.[18]
The financing gap, alluded to above, may be described as ‘the difference
between the costs of delivering new supply of affordable housing (such as the
costs associated with acquiring new stock, managing tenancies, dwelling
maintenance and depreciation) and the income received (from concessional rents
and [CRA])’.[19]
While the Working Group provided no indication as to the
size of the gap that would need to be closed by Australian governments, housing
experts Michael Perusco and Guy Johnson have suggested that this would be in
the order of $2.5 billion per year.[20]
In the view of the Working Group, any such government
support would need to be ongoing in order to send the signal to institutional
investors that affordable housing is an asset class worth investing in:
Creating and maintaining a rental housing portfolio targeted
to people on low incomes requires explicit ongoing subsidies to bridge the gap
between operating costs (including debt servicing) and rental incomes. This is
a feature of overseas models, supported by research to date in Australia and
evidence from actual projects. The size of this gap increases depending on
where user groups sit along the housing continuum, requiring more support (in
various forms) from governments, the lower the income profile and complexity of
need.[21]
In defending its decision to support a bond aggregator
model the Working Group cited broad support from stakeholders for an affordable
housing bond aggregator, and the success of the UK’s The Housing Finance Corporation (THFC).
THFC is an independent not-for-profit organisation that has since 1987 made
loans to housing associations that provide affordable housing throughout the
UK. THFC has raised long-term funding through the issue of bonds to private
investors and by borrowing from banks.[22]
Accordingly, the Working Group recommended the
establishment of an expert taskforce to design a proof of concept for a bond
aggregator model. The taskforce was to report its findings to Heads of
Treasuries by mid-2017.[23]
These findings are outlined in the report entitled Supporting the
implementation of an affordable housing bond aggregator.[24]
Budget commitment
Treasurers agreed to the Working Group’s recommendations
and in the 2017–18 Budget the Government provided $63.1 million over the
forward estimates period towards the establishment of a National Housing
Finance and Investment Corporation to operate an affordable housing bond
aggregator and a National Housing Infrastructure Facility (NHIF).[25]
It should be noted that the Australian Government is not the only jurisdiction
establishing a fund for social housing growth; both the NSW and Victorian
Governments are in the process of instituting government-supported funds that
would support growth in those jurisdictions’ stock of social and affordable
housing.[26]
Funding of $118.0 million over three years from 2018–19
has been allocated towards the NHIF.[27]
The NHIF is to provide financial assistance of up to $1 billion over five years
from 2018–19 to local government for infrastructure that supports the development
of new affordable housing.
Precursor funds
The NHIF bears some resemblance to the Housing
Affordability Fund which was introduced by the Rudd Government as part of a
package of housing affordability measures in 2008. Through the fund, the Rudd
Government intended to make available $500 million over the five year period
from 2008–09 to 2012–13 to support proposals that would improve the supply of
new housing and make housing more affordable for home buyers entering the
market.[28]
The focus of the fund was proposals that reduce holding costs incurred by
developers as a result of long planning and approval waiting times and
infrastructure costs related to water, sewerage and transport.
While a 2011–12 Australian National Audit Office (ANAO)
assessment of the fund found that it had delivered ‘positive early signs of
assistance to home buyers and their associated communities’ it also determined
that there had been ‘serious shortcomings in [the Department of Families,
Housing, Community Services and Indigenous Affairs’] administration of the
program’.[29]
The 2017–18 Budget also introduced other measures
specifically intended to increase the supply of affordable housing through
concessional tax treatment for investors in such housing.[30]
These incentive-based measures are similar in their essentials to the National
Rental Affordability Scheme (NRAS).
The NRAS was established by the Rudd-Gillard Government in
the context of the 2008–09 Budget as a part of its broader package to address
housing supply pressures and as part of the stimulus package in response to the
Global Financial Crisis (GFC). Under the scheme, the Australian Government provides
an annual incentive to investors for up to ten years as a refundable tax offset
or payment, augmented by a state or territory annual contribution. Properties
developed under the scheme are made available to low- to middle-income earners
at 20 per cent below market price for each of the ten years for which an NRAS
incentive is received.[31]
As at 31 December 2017, 34,413 dwellings had been built and were either
tenanted or available for rent under the scheme.[32]
The NRAS did not deliver the number of dwellings
originally anticipated and exhibited some problems.[33]
As a part of the 2014–15 Budget, the Government decided to discontinue the
scheme.[34]
Committee
consideration
Senate Standing Committee on
Economics
The Bills have been referred to the Senate Economics
Legislation Committee (Economics Committee) for inquiry and report by 7 May
2018.[35]
The Economics Committee received 16 submissions.
The Economics Committee recommended that the Bills be
passed.[36]
The Labor senators made additional comments to the report. They agreed that the
Bills should be passed subject to certain recommendations, including:
-
the Government develops, as a matter of urgency, a policy and funding
framework that bridges the funding gap that had been identified by numerous
submitters
-
the legislation be amended so that the scheduled review of the operation
of the NHFIC Act be conducted no later than two years after passage of
the legislation and that the review include specified terms of reference
-
the legislation be amended so that at least one director on the Board of
the NHFIC Corporation has relevant skills and experience in social and
affordable housing gained in the community housing provider sector and
-
the legislation be amended to remove the consideration of payment of
dividends to the government unless the significant unmet demand for community
housing for the vulnerable is adequately addressed.[37]
The Bills in their current form are the outcome of
extensive consultation. The comments of stakeholders are canvassed under the
heading ‘Key issues and provisions’ below.
Senate Standing Committee for the
Scrutiny of Bills
The Standing Committee for the Scrutiny of Bills (Scrutiny
of Bills Committee) published its comments in relation to the Bills on 21 March
2018.[38]
The various matters raised by the Scrutiny of Bills Committee are canvassed
under the heading ‘Key issues and provisions’ below.
Policy
position of non-government parties
The Bills passed in the House of Representatives on 1
March 2018 without amendment. The second reading speeches in relation to the
Bill give some insight into the views of the non‑government parties.
Greens
Australian Greens (the Greens) member, Adam Bandt, indicated
that he looked forward to the Bill being scrutinised by
the Senate ‘because there are a lot of questions to be answered as to whether
it's going to do anything useful or whether it has the appearance of doing
something useful’.[39] He expressed concern that the measure would be unlikely to
fully address Australia’s housing problems whilst ‘our tax system pushes up
house prices’.[40]
ALP
Speaking in relation to the Bills, Australian Labor Party
(ALP) member Matt Thistlethwaite acknowledged that they gave ‘effect to the government's announcement in the 2017–18 Budget that it would establish a national housing finance
and investment corporation and operate an affordable-housing bond aggregator
and administer the national housing infrastructure facility’.[41]
However, he concluded by saying
that ‘whilst this is a step in the right direction, we do have some misgivings
about whether or not it will fulfil those obligations’.[42] This view is reflected in the additional comments by Labor
Senators in the Economics Committee report on the Bills.
Position of
major interest groups
Submissions by community housing providers to the
Economics Committee broadly supported the Bills—although with some
qualifications.[43]
For instance, Compass Housing Services opined:
The creation of the NHFIC, and in particular the Bond
Aggregator, will represent a significant milestone in the evolution of the
social and affordable housing sector ... Compass remains concerned however, that
the potential impact of the NHFIC and the aggregator on the supply of social
and affordable housing will be negligible unless attention is given to
addressing the funding gap.[44]
Financial
implications
The measures have the financial impact shown in the table
below.
Table 1: establishment of NHFIC and National Housing
Infrastructure Facility
|
Financial impact
|
2017–18
|
2018–19
|
2019–20
|
2020–21
|
| Establishment of the NHFIC and NHIF |
-9.6 |
-53.6 |
-55.7 |
-55.0 |
Source: Explanatory
Memorandum, National Housing Finance and Investment Corporation Bill 2018, National
Housing Finance and Investment Corporation (Consequential Amendments and
Transitional Provisions) Bill 2018, p. 10.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[45]
Parliamentary Joint Committee on
Human Rights
In its scrutiny report of 27 March 2018, the Parliamentary
Joint Committee on Human Rights stated that the Bills did not raise human
rights concerns either: because the Bills either do not engage human rights; or
because they promote human rights, and/or permissibly limit human rights.[46]
Key issues
and provisions
NHFIC
Part 2 of the NHFIC Bill establishes the National Housing
Finance and Investment Corporation as a body corporate which has its own seal
and which may sue and be sued.[47]
The NHFIC is a Commonwealth entity to which the Pubic
Governance, Performance and Accountability Act 2013 (PGPA Act) applies.[48]
Functions of the NHFIC
The functions of the NHFIC are:
- to
make loans, investments and grants to improve, directly or indirectly, housing
outcomes
- to
determine terms and conditions for such loans, investments and grants
- to
provide, to registered community housing providers, business advisory services
and other assistance in capacity building
- any
other functions conferred on the NHFIC by the NHFIC Act (when enacted) or
any other Commonwealth law and
- to
do anything incidental or conducive to the performance of the above functions.[49]
In relation to the first of those functions—that is, to
make loans, investments and grants, the Bill makes clear that the functions of
the NHFIC include making grants of financial assistance to states and territories
for that purpose and to determine terms and conditions for the grants of
financial assistance.[50]
(Relevant comments by the Scrutiny of Bills are canvassed below.)
Powers of
the NHFIC
The NHFIC has the power to do all the things that are necessary
for it to perform its functions. In particular it may:
- enter
into arrangements and contracts with Commonwealth entities and Commonwealth
companies to obtain services to assist in the performance of its functions[51]
and
- enter
into arrangements known as swaps, foreign exchange agreements, forward rate
agreements, options or hedge agreements or arrangements which have a similar
purpose or effect.[52]
Although the NHFIC Bill gives the NHFIC the power to enter
into a range of financial agreements, it does not contain relevant definitions.
The nature of the financial arrangements in which NHFIC may engage are
explained in the Box below.
Box 2: explanation of financial
terms
|
Explanation of financial terms
Swaps are a financial derivative in which two
counterparties agree to exchange one stream of cash flows for another stream.
For example, in an interest rate swap a flow of payments at a fixed interest
rate is swapped for a flow at a variable interest rate.[53]
Foreign
exchange agreements are agreements between two parties to exchange a
specified amount of one currency for another currency at a specified foreign
exchange rate on a future date.
Forward
rate agreements are agreements between two parties who want to
protect themselves against future movements in interest rates. By entering into
a forward rate agreement, the parties lock in an interest rate for a stated
period of time starting on a future settlement date, based on a specified
notional principal amount.
Options are contracts giving the holder the right,
but not the obligation, to trade in a commodity, a share, or a currency on
some future date at a pre-agreed price. An option is contrasted with a
futures contract which carries the obligation as well as the right to trade.[54]
Hedge agreements are activities designed to reduce
the risks imposed by other activities. For example, if a business has to hold
stocks of a commodity, it runs the risk of making losses if the price falls.
This loss can be avoided by hedging, which involves selling the good forward,
that is, for delivery at an agreed price on a future date.[55]
|
Delegation
The NHFIC may, in writing under its seal, delegate to a
Board member or the CEO[56]
all or any of its powers or functions including:
- to
make loans, investments and grants to improve, directly or indirectly, housing
outcomes
- to
determine terms and conditions for such loans, investments and grants and
- to
provide, to registered community housing providers, business advisory services
and other assistance in capacity building.
In addition, the NHFIC may, in writing under its seal,
delegate to a Board member or the CEO its powers to enter into arrangements and
contracts to obtain services and to enter into those complex financial
arrangements set out in Box 2 above.
Legal basis for the programs to
date
The Constitution
divides the legislative authority in Australia between the federal and state
governments. The federal government is responsible for the matters allocated to
it in the Constitution—primarily in sections 51 and 52—although there
are other relevant sections. If the matter is not one which has been allocated
to the Commonwealth under the Constitution, then it is for the states to
legislate.
Neither section 51, nor 52, of the Constitution
provide the Commonwealth with a head of power which specifically allows it to
make of laws to provide housing. That being the case, the Commonwealth has
traditionally made loans to the states under section 96 of the Constitution
which deals with the provision of financial assistance, otherwise known as
‘grants’. Similarly, the Commonwealth has made loans to the Northern Territory and
the Australian Capital Territory based on the territories power of section 122
of the Constitution.
Constitutional
underpinning of the Bill
The NHFIC Bill establishes a body corporate to make loans,
investments and grants to improve, directly or indirectly, housing outcomes. In
order to do so it relies on a combination of heads of power. According to the Explanatory
Memorandum to the Bills:
The Bill ensures that it is not implied that the NHFIC can
perform functions that exceed the Commonwealth’s legislative power under the
Constitution. The Bill expressly enables the NHFIC to perform its functions only
for purposes related to specific constitutional powers.[57]
Corporations power
The key power is the corporations
power which is set out in section 51(xx) of the Constitution. That
section refers to foreign corporations and trading or financial corporations,
formed within Australia.
Essentially, to be considered a trading or financial
corporation, an entity must be first, incorporated and second, engaged in
‘substantial’[58]
trading[59]
or financial[60]
activities. Under the NHFIC Bill, the National Housing Finance and Investment
Corporation will be a corporation formed within Australia which will be engaged
in financial activities. Since the High Court handed down its decision in the WorkChoices
Case in November 2006,[61]
the corporations power has been interpreted broadly so that, as long as a law
is addressed to a ‘constitutional corporation’, the Commonwealth can regulate
any aspect of what that corporation does, including any relationship the
corporation may have with a third party or its employees[62]
Other powers
However, in the event that the corporations power is
insufficient, the NHFIC Bill sets out an extensive list of additional Constitutional
powers to support the functions of the NHFIC. For instance, the postal,
telegraphic, telephonic or other like service power in section 51(v) of
the Constitution[63]
and the railway construction or extension power in section 51(xxxiv) of the Constitution[64]
will underpin NHFIC’s function to improve, directly or indirectly,[65]
housing outcomes in its operation of the National Housing Infrastructure
Facility. (See the discussion of the Investment Mandate below.)
Investment Mandate
The Minister may, by legislative instrument, give the
Board directions about the performance of the NHFIC’s functions, and must give
at least one such direction. The directions together constitute the Investment
Mandate.[66]
The Legislation
Act 2003 establishes a comprehensive regime for the
registration, tabling and parliamentary scrutiny. Under the Legislation Act
most, but not all, legislative instruments are disallowable. In the case of the
proposed Investment Mandate, the NHFIC Bill operates so that the
Investment Mandate will not be a disallowable instrument.
The NHFIC must take all reasonable steps to comply with
the Investment Mandate.[67]
Under the NHFIC Bill the Investment Mandate
may include directions about a range of matters. These are:
- strategies
and policies to be followed for the effective performance of the NHFIC’s
functions
- decision‑making
criteria for making loans, investments and grants; granting financial
assistance to states and territories; and providing, to registered community
housing providers, business advisory services and other assistance in capacity
building
- limits
on making loans, investments and grants, and granting financial assistance to states
and territories
- risk
and return relating to NHFIC’s investments and
- any
other matters the Minister thinks appropriate.[68]
Scrutiny of Bills Committee comments
The inclusion of the decision‑making criteria for granting
financial assistance to states and territories[69]
drew the attention of the Scrutiny of Bills Committee which noted:
... the Bill contains no guidance on its face as to the terms
and conditions that will attach to financial assistance granted to the states
by the NHFIC. The Bill does, however, seek to allow the Minister to direct, by
legislative instrument, the Board of the NHFIC in relation to the performance
of its functions and provides that these directions may, among other matters,
set out decision-making criteria and limits for the granting of financial
assistance to states and territories.[70]
The Scrutiny of Bills Committee expressed its concern at
the limited Parliamentary scrutiny afforded to grants made by the NHFIC to the
states and territories. As section 96 of the Constitution confers the
power to make such grants and to determine their terms and conditions on the
Parliament rather than the executive, the Committee recommended that the
Bill be amended to include high level guidance as to the terms and conditions
under which financial assistance may be granted to the states and territories;
and to require that the Investment Mandate be a disallowable instrument.[71]
Draft Investment Mandate
In February 2018, Treasury issued a draft of the
Investment Mandate for consultation.[72]
Whilst the final form of the Investment Mandate has not been settled, an
examination of the terms of the exposure draft provides some insight as to what
is intended.
Box 3: key features of the draft
Investment Mandate
|
Activities and allocation of funds
The NHFIC is required to engage in two core activities
to support investment in Australian housing:
-
the establishment and operation of an Affordable Housing Bond
Aggregator (AHBA) to provide finance to registered community housing
providers by aggregating their lending requirements and issuing bonds to
institutional investors[73]
and
- the establishment and operation of the National Housing
Infrastructure Facility (NHIF) to provide grants and finance to support the
creation of housing-related infrastructure.[74]
The NHFIC may also provide support for capacity building.[75]
Affordable housing bond aggregator
The AHBA will provide loans to registered community
housing providers.[76]
The initial reserve for the AHBA is up to $150 million. The NHFIC must repay
to the Commonwealth an amount equal to the amount allocated to the AHBA by 30
June 2023.[77]
The NHFIC may only provide finance to registered
community housing providers[78]
in the form of secured loans. The NHFIC is required to take security
for its loans on commensurate terms to commercial financiers such as banks
and other lenders.[79]
National Housing Infrastructure Facility
The NHFIC may use the NHIF to provide finance in the form
of loans, equity investments and grants to eligible infrastructure projects
which support housing development.[80]
Examples of housing-related infrastructure include:
-
new or upgraded infrastructure for services such as water,
sewerage, electricity or transportation
-
site remediation works including the removal of hazardous waste
or contamination.
The NHIF will not finance housing projects directly nor
will it finance community infrastructure such as parks or libraries.[81]
Support for capacity building
The NHFIC may purchase capacity building services for
registered community housing providers. These services can assist registered
community housing providers to develop their financial capability and
undertake new developments.[82]
A cap of $1.5 million applies to the amount of money the NHFIC can spend on
capacity building activities.[83]
General governance matters
The draft Investment Mandate sets out a number of
governance matters including but not limited to:
-
the NHFIC must publish guidance on its website to assist
potential applicants to lodge NIHF financing proposals and to ensure the
NHFIC’s decision-making process is transparent[84]
-
the NHFIC must publish details of each of decision to make a
grant, loan or investment under the NHIF within six months of the decision—subject
to its obligation to maintain the confidentiality of commercial-in-confidence
information[85]
and
-
a cap of $2 billion applies to the amount of government-guaranteed
liabilities—however, the Treasurer and the Minister for Finance may approve a
higher cap.[86]
|
Source: Treasury, ‘National Housing
Finance and Investment Corporation—draft Investment Mandate’,
Treasury website.
Board
Establishment and composition
Part 3 of the NHFIC Bill establishes the Board of the
NHFIC (the Board)[87]
which is an accountable authority under subsection 12(2) of the PGPA
Act. The PGPA Act regulates certain aspects of the financial affairs
of Commonwealth entities. In particular, it has detailed rules about reporting
and accountability. It also deals with other matters such as banking and
investment and the conduct of officers. The Board’s functions are:
- to
decide, within the scope of the Investment Mandate, the strategies and policies
to be followed by the NHFIC
- to
ensure the proper, efficient and effective performance of the NHFIC’s functions
and
- any
other functions conferred on the Board by the NHFIC Act (when enacted).[88]
The Board comprises the Chair and at least four, and no
more than six, other members.[89]
Board members are appointed by the Minister by written instrument, on a part‑time
basis.[90]
In order to be eligible for appointment, a person must have appropriate
qualifications, skills or experience in one or more of the following:
- banking
and finance
- law
- housing
(including social or affordable housing)
- infrastructure
planning and financing
- local
government
- public
policy or
- an
area of expertise prescribed by the rules.[91]
The Board may, in writing,
delegate to a Board member or the CEO any of its powers or functions.[92]
Appointment and termination
A Board member holds office for the period (not exceeding
five years) specified in the instrument of appointment. However, there is no
legal bar to the person’s reappointment.[93]
Under the NHFIC Bill, the Minister may terminate the
appointment of a Board member for a range of reasons, including but not limited
to misbehaviour,[94]
an inability to perform the duties of his, or her, office because of physical
or mental incapacity,[95]
or if the Minister is satisfied that the performance of the Board member has
been unsatisfactory for a significant period.[96]
Committees
The Board may establish committees to advise or assist in
the performance of the Board’s or the NHFIC’s functions. In that case, a
committee may be constituted wholly by Board members, wholly by persons who are
not Board members or by a combination of each.[97]
Given the complexity of the financial arrangements into which the Board may
enter and its requirements under Part 5 of the NHFIC Bill (see discussion
below) it is likely that the most important committees for the NHFIC Board will
be the audit and risk committee and the finance committee. A general outline of
their respective roles is set out in Box 4, below.
Box 4: roles of committees
|
Audit and risk committee
An audit and risk committee is accountable to the Board
for its performance. The committee’s work is supported by the Chief Executive
Officer (CEO) and his or her nominees, principally the Chief Financial
Officer (CFO).
Generally speaking, the purpose of the audit and risk
committee is to assist the Board in the effective discharge of its
responsibilities in the areas of statutory reporting, internal control
systems, risk management systems, insurance and legal proceedings, and the
internal and external audit functions.[98]
Finance committee
A finance committee is accountable to the Board for its performance.
The committee’s work is supported by the Chief Executive Officer (CEO) and
his or her nominees, principally the Chief Financial Officer (CFO).
-
Generally speaking, the primary responsibility of the finance
committee is to provide the Board with advice and guidance on issues
affecting the financial strategy of the business including, amongst other
things:
-
review the operational and capital budgets as prepared by
management and recommend it to the Board for approval, including, but not
limited to preparation of pricing policy across major business units and
financial modelling
-
reviewing the investment guidelines and monitoring the
financial performance of funds invested by the organisation
-
monitoring foreign exchange guidelines and management of associated
risks
-
monitoring the taxation strategy and obligations
-
reviewing investment/divestment strategies (including financial
implication of business cases and material commercial contracts)
-
reviewing transaction or financial issues that management or the
Board requests that the Committee review.[99]
|
This is consistent with the requirements of section 16 of
the PGPA Act, that the accountable authority of a
Commonwealth entity (in this case, the Board) must establish and maintain an
appropriate system of risk oversight and management for the entity as well as
an appropriate system of internal control for the entity.
Observer
The Minister may, by written instrument, appoint a Commonwealth
officer to be an observer,[100]
being a person who:
- is
entitled to receive notice of meetings of the Board
- may
attend any meeting of the Board and take such part in the proceedings, not
including voting, as the observer thinks fit
- may
report to the Minister on any matter relating to the operations of the NHFIC or
the Board—including where the Minister has requested a report on a matter and
- is
entitled to access to such information held by, or under the control of, the
NHFIC as the observer requests for the purposes of taking part in proceedings
of the Board or reporting to the Minister.[101]
The period of the appointment must not exceed six months—although
there is no legal bar to the person’s reappointment.
The provisions relating to the observer are likely to be
the first time such arrangements have been formalised in Commonwealth
legislation. Similar arrangements between portfolio departments and corporate
Commonwealth entities are likely to have been in place on an informal basis in
a number of portfolios, so the practice is not without precedent. In the 1990s,
a similar arrangement was provided for in regulations
in South Australia.[102]
Curiously, none of the stakeholder comments to the
Economics Committee have referred to the role of the observer.
Nature of corporate governance
The term corporate governance describes:
... the framework of rules, relationships, systems and
processes within and by which authority is exercised and controlled within
corporations. It encompasses the mechanisms by which companies, and those in
control, are held to account.[103]
The NHFIC Bill provides that the Minister must not
give a direction which is part of the Investment Mandate that is inconsistent
with the NHFIC Act (when enacted) or that has the purpose, or has, or is
likely to have, the effect of directly or indirectly requiring the Board:
- to
make, or not to make, a particular loan, investment or grant
- to
grant, or not to grant, financial assistance to a state or territory for a
particular project
- to
take, or not to take, particular action relating to a particular loan,
investment or grant or
- to
take, or not to take, particular action relating to financial assistance
granted to a state territory for a particular project.[104]
The clause ensures that the Minister is at arms-length
from specific financial decisions that are to be made by the Board (or which
have been delegated by the Board to the CEO). The appointment of an observer by
the Minister may operate to undermine the Board’s independence.
According to the Explanatory
Memorandum to the Bills:
The capacity to appoint an
observer strikes a balance to support appropriate Government oversight of NHFIC
at critical times, while maintaining Board independence. It is particularly
important when the Commonwealth is guaranteeing the NHFIC’s liabilities, as a
way of providing oversight of the Commonwealth’s financial exposure. This position
is intended to support Government visibility of decision making, particularly
in exceptional circumstances such as the establishment phase of the NHFIC
and/or during periods of financial market uncertainty. The Board would however
remain the decision maker in all circumstances relating to the performance of
the NHFIC’s functions.[105]
These are sound reasons for the appointment of an observer,
especially given the reserve for the AHBA is up to $150 million.
However, as the observer can take part in all aspects of
the Board meeting except voting—without actually being a Board member—it is
foreseeable that he, or she, could exert influence over the Board to vote
favourably (or unfavourably as the case may be) on individual proposals, thereby
diminishing the perception that the Minister is arms-length from deliberations.
Chief Executive Officer
Appointment and termination
There is to
be a Chief Executive Officer (CEO) who is responsible for the day‑to‑day
administration of the NHFIC.[106]
The Board may give written directions to the CEO, consistent with the
Investment Mandate, about the performance of the CEO’s duties.[107]
The CEO must comply with such a direction.[108]
The CEO is to be appointed by the Board, by written instrument, for the period not
exceeding five years (although there is no legal bar to the CEO’s
reappointment).[109]
The Board may terminate the appointment of the CEO in the
following circumstances:
- for
misbehaviour
- if
the CEO is unable to perform the duties of his or her office because of
physical or mental incapacity
- if
the CEO becomes bankrupt, applies to take the benefit of any law for the relief
of bankrupt or insolvent debtors, compounds with his or her creditors or assigns
his, or her, remuneration for the benefit of creditors
- if
the CEO is absent, except on leave of absence, for 14 consecutive days or for
28 days in any 12 months
- if
the CEO engages, except with the Chair’s approval, in paid work outside the
duties of his, or her, office
- if
the CEO fails, without reasonable excuse, to comply with section 29 of the
PGPA Act (which deals with the duty to disclose interests) or
- if
the Board is satisfied that the performance of the CEO has been unsatisfactory
for a significant period.[110]
Staff and
consultants
The NHFIC may employ such persons as it considers
necessary for the performance of its functions and the exercise of its powers
under the terms and conditions which it determines. Those persons may be
officers or employees, the Commonwealth, a state or a territory, an authority
of the Commonwealth or of a state or territory or any other organisation or
body.[111]
Notably there is no requirement that staff be engaged under the Public Service Act 1999.
In addition, the NHFIC may engage consultants to assist in
the performance of its functions.[112]
Delegation
If the NHFIC or the Board
delegates a power or function as set out above to the CEO, the CEO may, in
writing, sub-delegate the power or function to a senior member of the staff.[113]
Comment
The NHFIC Bill creates an organisational structure in which
the CEO plays a pivotal role in the day to day activities of the NHFIC and
reports to the Board. The Board has the overarching responsibility to manage
the risks of the Corporation and to set its strategic direction. There is no
question that the skills and abilities of the Board members will have to be of
the highest level—particularly in relation to banking and finance.
The Observer will interact with the Board to ensure that
there is compliance with the Investment Mandate. The Observer will also act as
a conduit between the Board and the Minister should it emerge that the
Investment Mandate needs fine tuning or if there are concerns that the Board is
exercising its powers and undertaking its functions inadequately or
inappropriately.
Finance
The NHFIC Bill imposes stringent financial responsibilities
on the Board.
Maintain adequate capital reserves
The Board is required to exercise
sound commercial principles to ensure that the capital and reserves of the
NHFIC at any time are sufficient to meet NHFIC’s likely liabilities and, in
relation to loans, to make adequate provision for default in the repayment of
principal, in the payment of interest or other charges.
In the event that NHFIC’s the capital and reserves are not
sufficient to meet the likely liabilities or that there are reasonable grounds
for believing that, at a time in the future, the capital and reserves of the
NHFIC may not be sufficient to meet the likely liabilities, then the Board must
advise the Minister in writing to that effect, as soon as practicable.[114]
This is a critical feature as it mimics the duties of
directors under the Corporations
Act 2001 which provide that the corporation must not trade if it is
insolvent.[115]
Annual dividends to the
Commonwealth
Within four months after the end of
each financial year, the Board must give a written notice to the Minister,
recommending that the NHFIC pay a specified dividend, or not pay a dividend, to
the Commonwealth for that financial year.[116]
Within 30 days of receiving the notice the Minister must,
by written notice given to the NHFIC approve the recommendation. In the
alternative, the Minister must direct the payment of a different specified
dividend or, where the Board has recommended that no dividend be paid, it is
open to the Minister to direct the payment of a specified dividend.[117]
The NHFIC’s dividend for a financial year must not exceed
its profit for that year.[118]
As stated above, the Investment Mandate may
include directions about the risk of and return to the NHFIC from its
investments. If there were any doubt that the NHFIC was expected to operate on
a sound commercial basis, the responsibility of the Board to report to
Government about the potential to pay a dividend to the Commonwealth, should
dispel it.
According to Michael Sukkar, Assistant Minister to the
Treasurer:
The Housing Finance and Investment Corporation will be able
to reinvest the capital and earnings gained through the infrastructure
facility, allowing it to grow over time. It will be able to tailor its
provision of finance to best suit the needs of individual projects, with any
concessions calibrated to the particular circumstances
of the project, and will provide the minimum amount of assistance required to
enable a proposal to proceed.[119]
However, there is an internal tension between the
intention to reinvest capital and earnings and the need to pay a dividend which
may be equal to, or less than, any profit generated in a financial year. If not
closely monitored, this may unintentionally operate to stifle the Board’s capacity
to carry out its investment strategy. As stated above, the Labor Senators on
the Economics Committee inquiry into the Bills recommended that there should be
no consideration about the payment of dividends to the Government unless the
significant unmet demand for community housing for the vulnerable is adequately
addressed and the community housing sector has achieved the necessary scale and
capability to deliver on the unmet demand.[120]
Borrowings
There are a number of options available for NHFIC to
borrow being:
- the
Finance Minister may, out of money appropriated by the Parliament for the
purpose, lend money to the NHFIC[121]
- the
NHFIC may borrow money otherwise than from the Commonwealth or
- raise
money otherwise than by borrowing—for instance by dealing with securities.[122]
However, the NHFIC must not borrow or raise money except in
accordance with these approved methods.[123]
Commonwealth guarantee
An amount due and payable by the NHFIC to a person other
than the Commonwealth is guaranteed by the Commonwealth.[124]
In relation to the guarantee, it was stated:
Another important feature of the Bill is that it provides a
legislative guarantee for the Housing Finance and Investment Corporation's
liabilities. The Bill provides for the capacity for the guarantee to be
withdrawn in the future if it's no longer needed for new contracts. This of course
would be dependent on both the corporation achieving sufficient maturity and
scale and the community housing sector taking on a large-scale and more
prominent role in sub-market rental housing, including through partnerships
with the private sector and, again, institutional investors.
To provide certainty to investors it may only be withdrawn by
the government on a prospective basis after 1 July 2023 and with at least 60
days’ notice. The availability of the guarantee will strengthen market
confidence and thereby improve the Housing Finance and Investment Corporation's
ability to achieve its ultimate purposes.[125]
Miscellaneous
Review
The Bill requires the
Minister to cause a review of the operation of the Act to be undertaken as soon
as possible after the period of three years beginning when it commences. The
report of the review is to be tabled in each House of the Parliament within 15
sitting days of that House after the report is given to the Minister.[126]
As stated above, the Labor Senators on the Economics
Committee inquiry into the Bills recommended that the review should take place
within two years, rather than three and that the relevant provision should be
amended to include specified terms of reference.[127]
However, it is not certain that this would provide enough time in which to
demonstrate the NHFIC’s operations.
Rules
The Minister is empowered to make rules by legislative
instrument for the purposes of the NHFIC Act (when enacted).[128]
Consequential
amendments
Section 5 of the ADJR Act provides that a person
who is aggrieved by a decision to which that Act applies may apply to the
Federal Court or the Federal Circuit Court for an order of review of the
decision. In that case, section 13 of the ADJR Act authorises that
person to seek written reasons for the decision from the decision-maker.
However Schedule 2 of the ADJR Act sets out specified classes of
decision to which section 13 does not apply.
Item 1 of the Consequential
Amendments Bill amends Schedule 2 of the ADJR Act to insert a reference
to decisions relating to the activities of the NHFIC under the NHFIC Act.[129]
The object of the FOI Act is to give the Australian
community access to information held by the Government of the Commonwealth by
requiring agencies to publish the information and by providing for a right of
access to documents.[130]
However, there are some exceptions to that overarching rule. Subsection 7(2) of
the FOI Act provides that the persons, bodies and Departments which are
specified in Part II of Schedule 2 to the Act are exempt from its operation—but
only in relation to certain documents.
Item 2 of the Consequential Amendments Bill amends
the FOI Act to insert a reference to the NHFIC in relation to documents
in respect of its commercial activities into Part II of Schedule 2.[131]
According to the Explanatory Memorandum to the Bills ‘this
is a similar exemption that applies on the commercial activities of the Export
Finance Insurance Corporation, NBN Co and other entities such as Indigenous
Business Australia’.[132]
The Economic Committee acknowledged that some submitters had
raised concerns that the measures in the Consequential Amendments Bill could
undermine the transparency and accountability of the operation of the NHFIC.
However, the Economics Committee noted:
... the advice of the Office of the Australian Information
Commissioner, that it directly considered the provisions in the NHFIC
consequential Amendments Bill relating to the FOI Act, and concluded
that the proposed amendments are similar to and consistent with existing
provisions that operate to exempt particular agencies from the operation of the
FOI Act in relation to documents in respect of commercial activities.[133]
Concluding
comments
There is no doubt that housing affordability in Australia
is lower than it has been in the past; and that this is especially so for low-
to middle-income Australians who wish to buy a house for the first time, or
rent in the private market, in the cities where most employment opportunities
are concentrated. Accordingly the NHFIC Bill establishes the NHFIC as a
commercial entity operating with the aim of improving housing outcomes for
Australians.
It is intended that the NHFIC will engage in two core activities
to support investment in Australian housing:
- 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.
There is much at stake here—particularly since this is the
first occasion on which the Commonwealth, using a combination of Constitutional
powers, has been directly responsible for providing finance to registered
community housing providers.
Both the CEO and the Board will need high level skills in
banking and finance in order to ensure that the loans it makes, the investments
it enters into and the grants that it issues are made appropriately. They will
need to be conscious of the financial risks and manage them accordingly if the
NHFIC is to be effective in its objective of improving housing availability for
Australians.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. The
National Housing Supply Council (NHSC) estimated that in 2011 there was an
Australia-wide shortfall of 284,000 dwellings, when compared to the underlying
demand for housing. NHSC, 2013
State of supply report: changes in how we live, NHSC, 2014, p. 1.
Subsequently, the Reserve Bank of Australia (RBA) estimated a housing supply
shortage of between zero and 30,000 dwellings in 2015. M Kohler and M van der
Merwe, ‘Long-run
trends in housing price growth’, Reserve Bank of Australia Bulletin,
September Quarter 2015, p. 26. More recently, estimates from ANU researchers
have suggested that there is no housing shortfall in Australia as a whole, but
rather, a housing oversupply. Based on an analysis of housing supply and demand
in Australia at a regional level, Ben Phillips and Cukkoo Joseph have estimated
that between 2001 and 2017 the Australian housing market experienced an
oversupply of 164,000 dwellings. B Phillips and C Joseph, Regional
housing supply and demand in Australia, Working paper no. 1/2017,
Centre for Social Research and Methods (CSRM), Australian National University
College of Arts and Social Services, Canberra, 2017, p. 1. Grattan Institute
researchers John Daley and Brendan Coates have taken issue with such
assessments, arguing that estimates such as these ‘typically ignore how rising
prices and worsening affordability pushed people into larger households than
they otherwise would have chosen. Therefore, these estimates underplay the
number of dwellings needed to accommodate Australia’s growing population’. J
Daley and B Coates, Housing
affordability: re-imagining the Australian dream, Grattan Institute,
Victoria, 2018, p. 46.
[2]. A
number of different sources assess housing affordability in Australia, and many
of these sources use different measures to do so. Measures include, for example,
the dwelling price to income ratio (a higher number generally means it is
harder to purchase a house) and rental vacancy rates (a lower number indicates
a tighter rental market, which is likely to be less affordable). Generally
speaking, housing affordability refers to the relationship between expenditure
on housing (prices, mortgage payments or rents) and household incomes.
[3]. See
for example, Australian Bureau of Statistics (ABS), Housing
occupancy and costs, 2015–16, cat. no. 4130.0, ABS, Canberra, 2017;
Anglicare Australia, 2018
Rental affordability snapshot: Anglicare Australia, Anglicare
Australia, Canberra, 2018.
[4]. For
a detailed account of government responsibilities see Department of the Prime
Minister and Cabinet (PM&C), Reform
of the Federation: roles and responsibilities in housing and homelessness,
White paper, Issues paper no. 2, December 2014.
[5]. For
details see M Thomas, Treasury
Laws Amendment (National Housing and Homelessness Agreement) Bill 2017,
Bills digest, 83, 2017–18, Parliamentary Library, Canberra, 2018.
[6]. Productivity
Commission (PC), Report
on government services 2018: volume G: housing and homelessness, PC,
Canberra, 2018, p. 18.2.
[7]. J
Yates, ‘Evaluating social and affordable housing reform in Australia: lessons
to be learned from history’, International Journal of Housing Policy,
(13)2, 9 May 2013.
[8]. Australian
Institute of Health and Welfare (AIHW), Australia’s
welfare 2007: the eighth biennial welfare report of the Australian
Institute of Health and Welfare, AIHW, Canberra, 2007, p. 222.
[9]. Yates,
‘Evaluating social and affordable housing reform in Australia: lessons to be
learned from history’, op. cit.
[10]. See
H Pawson, C Martin, K Flanagan and R Phillips, Recent
housing transfer experience in Australia: implications for affordable housing
industry development, AHURI final report, 273, Australian Housing and
Urban Research Institute, Melbourne, 2016, p. 2.
[11]. Council
on Federal Financial Relations (CFFR), Affordable
housing working group, Issues paper, Treasury, Canberra,
January 2016, p. 6.
[12]. C
Porter (Minister for Social Services) and A Hawke (Assistant Minister to the
Treasurer), Strengthening
the Government’s Affordable Housing Agenda, media release, 7 January
2016.
[13]. CFFR,
Affordable
housing working group, op. cit.
[14]. CFFR,
Innovative
financing models to improve the supply of affordable housing: affordable
housing working group: report to heads of treasuries, Treasury,
Canberra, October 2016.
[15]. Ibid.,
p. 1. The Working Group also noted that the housing trust model had significant
stakeholder support.
[16]. Australian Housing and Urban Research Institute (AHURI), ‘What
is a bond aggregator and how does it help build affordable housing?’, AHURI website, 4 December 2017.
[17]. CFFR,
Innovative
financing models to improve the supply of affordable housing: affordable
housing working group: report to heads of treasuries, op. cit., p. 24.
[18]. Various
other means may be used to encourage institutional investment in affordable
housing. These could include lowering the perceived and actual investment risks
associated with affordable housing through changes to regulatory and taxation
arrangements. The Working Group noted that the Government had announced as a
part of the 2017–18 Budget a number of tax concessions for investors in
affordable housing that could help to promote such investment. However, it went
on to recommend that the Commonwealth and state and territory governments
should progress a range of further initiatives aimed at closing the funding gap
‘including through examining the levels of direct subsidy needed for affordable
low-income rental housing, along with 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’.
CFFR, Supporting
the implementation of an affordable housing bond aggregator: affordable housing
working group: report to heads of treasuries, op. cit., p. 2.
[19]. CFFR
Supporting
the implementation of an affordable housing bond aggregator: affordable housing
working group: report to heads of treasuries, op. cit., p. 10.
[20]. M Perusco and G Johnson, ‘What
the Federal Budget 2017 means for housing and homelessness’, ProBono Australia,
10 May 2017.
[21]. CFFR,
Supporting
the implementation of an affordable housing bond aggregator: affordable housing
working group report to heads of treasuries, op. cit., p. 2.
[22]. A
number of other countries have also established financing instruments to
support the supply of affordable and social housing. These have been considered
in a series of Australian Housing and Urban Research Institute (AHURI) research
projects that have examined international models for financing affordable and
social housing. See for example J Lawson, The use of
guarantees in affordable housing investment—a selective international review,
AHURI positioning paper, 156, AHURI, Melbourne, 2013; J Lawson, T Gilmour and V
Milligan, International
measures to channel investment towards affordable rental housing, AHURI
research paper, AHURI, Melbourne, 2010; V Milligan, J Yates, I Wiesel and H
Pawson, Financing
rental housing through institutional investment—volume 1: outcomes from an
investigative panel, AHURI final report, 202, AHURI, Melbourne, 2013; V
Milligan, J Yates, I Wiesel and H Pawson, Financing rental
housing through institutional investment—volume 2: supplementary papers,
AHURI final report, 202, AHURI, Melbourne, 2013.
[23]. CFFR,
Innovative
financing models to improve the supply of affordable housing: affordable
housing working group report to heads of treasuries, op. cit., p. 3.
[24]. CFFR,
Supporting
the implementation of an affordable housing bond aggregator, op. cit.
[25]. S Morrison (Treasurer), Turnbull
Government establishes affordable housing taskforce,
media release, 10 March 2017; Australian Government, Budget measures: budget paper no. 2: 2017–18, p. 169.
[26]. In
2016 then Premier Mike Baird announced that $1.1 billion in cash reserves would
be placed into a new Social
and Affordable Housing Fund. These funds are to be invested by NSW Treasury
Corporation and the returns used to encourage developers, infrastructure firms
and community groups to deliver housing projects over a period of up to 25
years. It is anticipated that Phase 1 of the fund will result in the delivery
of between 2,000 and 3,000 additional social and affordable housing dwellings.
S Nicholls, ‘Baird
unveils details of $1.1 billion affordable housing fund’, The Sydney
Morning Herald, 30 January 2016, p. 12. The Victorian
Government is to establish a Victorian Social Housing Growth Fund which is
intended to support partnerships between the Government and the community,
private, not-for-profit and local government sectors to deliver social and
affordable housing. The fund will be set up using seed capital provided
progressively by the Victorian Government over a period of four years, reaching
$1 billion in the 2019–20 financial year. The fund value is to be maintained
over time with the investment returns being used to fund the construction of
new social and affordable housing and the lease of existing residential
dwellings for people in need of short-term housing assistance. It is
anticipated that the fund could support around 2,200 households over the next
five years.
[27]. Australian
Government, Budget measures: budget paper no. 2: 2017–18, p. 170.
[28]. Department
of Social Services (DSS), ‘Housing
affordability fund’, DSS website, last updated 11 March 2016.
[29]. Australian
National Audit Office (ANAO), Implementation
and management of the housing affordability fund, Audit report, 11,
2011–12, ANAO, Barton, ACT, 3 November 2011.
[30]. Namely,
the affordable housing through Managed Investment Trusts and expanding tax
incentives for investments in affordable housing measures see Australian
Government, Budget measures: budget paper no. 2: 2017–18, pp. 26,
29.
[31]. For
further details see Department of Social Services (DSS), ‘National
Rental Affordability Scheme’, DSS website.
[32]. DSS,
National
Rental Affordability Scheme—quarterly performance report, DSS website,
31 December 2017.
[33]. PricewaterhouseCoopers
(PwC), Internal
audit review of affordable housing programs, report prepared for the
Department of Families, Housing, Community Services and Indigenous Affairs,
December 2009.
[34]. See
M Thomas, ‘Housing
and homelessness’, Budget review 2014–15, Research paper series,
2013–14, Parliamentary Library, Canberra, 2014, p. 147.
[35]. Details
of the terms of reference, submissions to the Economics Committee and the final
report of the Committee (when published) are available on the inquiry
homepage.
[36]. Senate
Economics Legislation Committee, National Housing Finance and Investment Corporation Bill 2018; National
Housing Finance and Investment Corporation (Consequential Amendments and
Transitional Provisions) Bill 2018, Final report, Senate,
Canberra, 7 May 2018, p. 18.
[37]. Ibid.,
pp. 19–23.
[38]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 3, 2018, 21 March 2018, pp. 28–31.
[39]. A
Bandt, ‘Second
reading speech: National Housing Finance and Investment Corporation Bill 2018
[and] National Housing Finance and Investment Corporation (Consequential
Amendments and Transitional Provisions) Bill 2018’, House of
Representatives, Debates, 28 February 2018, p. 2420.
[40]. Ibid.
[41]. M
Thistlethwaite, ‘Second
reading speech: National Housing Finance and Investment Corporation Bill 2018
[and] National Housing Finance and Investment Corporation (Consequential
Amendments and Transitional Provisions) Bill 2018’, House of
Representatives, Debates, 28 February 2018, p. 2406.
[42]. Ibid.
[43]. PowerHousing
Australia, Submission
to the Senate Standing Committee on Economics, Inquiry into the National
Housing Finance and Investment Corporation Bill 2018 [and] National
Housing Finance and Investment Corporation (Consequential Amendments and
Transitional Provisions) Bill 2018, April 2018; Venture Housing Company, Submission
to the Senate Standing Committee on Economics, Inquiry into the National
Housing Finance and Investment Corporation Bill 2018 [and] National Housing
Finance and Investment Corporation (Consequential Amendments and Transitional
Provisions) Bill 2018, 11 April 2018, p. 1
[44]. Compass
Housing Services, Submission
to the Senate Standing Committee on Economics, Inquiry into the National
Housing Finance and Investment Corporation Bill 2018 [and] National
Housing Finance and Investment Corporation (Consequential Amendments and
Transitional Provisions) Bill 2018, 13 April 2018.
[45]. The
Statement of Compatibility with Human Rights can be found at pages 43–5 of the Explanatory
Memorandum to the Bills.
[46]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 3, 27 March 2018, p. 137.
[47]. National
Housing Finance and Investment Corporation Bill 2018, subclauses 7(1)
and (2).
[48]. PGPA
Act, paragraph 10(1)(d).
[49]. National
Housing Finance and Investment Corporation Bill 2018, subclause 8(1).
[50]. National
Housing Finance and Investment Corporation Bill 2018, subclause 8(2).
[51]. Ibid.,
paragraph 9(2)(a).
[52]. Ibid.,
paragraph 9(2)(b).
[53]. J
Black, N Hashimzade and G Myles (eds.), Dictionary of Economics, 5th edn.,
Oxford University Press, United Kingdom, 2017, p. 507.
[54]. Ibid.,
p. 375.
[55]. Ibid.,
p. 239.
[56]. National
Housing Finance and Investment Corporation Bill 2018, subclause 53(1).
[57]. Explanatory
Memorandum, National Housing Finance and
Investment Corporation Bill 2018, National Housing Finance and Investment
Corporation (Consequential Amendments and Transitional Provisions) Bill 2018,
p. 18
[58]. See R v Federal
Court of Australia: Ex parte WA National Football League (1979) 143 CLR
190, [1979]
HCA 6.
[59]. Trading
refers to the business of buying, selling, exchanging or bartering goods or
services, or being engaged in the business of commerce.
[60]. Financial
dealings are acts such as borrowing, lending, banking or insurance and the
provision of management and advisory services in relation to financial matters.
[61]. NSW
v Commonwealth (2006) 231 ALR 1, [2006] HCA 52.
[62]. L
Roth and G Griffith, The
workplace relations case: implications for the states, NSW
Parliamentary Library Research Service, Briefing paper, 18/06, NSW Parliamentary
Library, Sydney, November 2006, p. 9.
[63]. National
Housing Finance and Investment Corporation Bill 2018, paragraph 10(1)(f).
[64]. Ibid.,
paragraph 10(1)(g).
[65]. Ibid.,
paragraph 8(1)(a).
[66]. Ibid.,
subclause 12(1).
[67]. Ibid.,
subclause 12(3).
[68]. Ibid.,
clause 13.
[69]. National
Housing Finance and Investment Corporation Bill 2018, subparagraph 13(b)(ii).
[70]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, op. cit., pp. 28–9.
[71]. Ibid.,
Scrutiny
digest, op. cit., pp. 28–9.
[72]. Treasury,
‘National Housing
Finance and Investment Corporation—draft Investment Mandate’,
Treasury website.
[73]. NHFIC—draft
Investment Mandate, clause 6.
[74]. Ibid.,
clause 7.
[75]. Ibid.,
clause 8.
[76]. Ibid.,
clause 16.
[77]. Ibid.,
clause 11.
[78]. National
Housing Finance and Investment Corporation Bill 2018, clause 5, defines
the term registered community housing provider as a community
housing provider (however described) that is registered under a law of, or under
a scheme administered by, a state or a territory.
[79]. NHFIC—draft
Investment Mandate, clause 17.
[80]. Ibid.,
clauses 23 and 24.
[81]. Ibid.,
clause 23.
[82]. Ibid.,
clause 29.
[83]. Ibid.,
clause 15.
[84]. Ibid.,
subclause 32(1).
[85]. Ibid.,
subclause 32(2).
[86]. Ibid.,
clause 34.
[87]. National
Housing Finance and Investment Corporation Bill 2018, clause 15.
[88]. Ibid.,
subclause 16(1).
[89]. Ibid.,
clause 17. Note that at a meeting of the Board, a quorum is constituted
by a majority of Board members, subclause 30(1).
[90]. Ibid.,
subclause 18(1).
[91]. Ibid.,
subclause 18(2).
[92]. Ibid.,
subclause 54(1).
[93]. Ibid.,
clause 20. However it should be noted that section 30 of the Public Governance,
Performance and Accountability Act 2013 also provides for the
termination of a Board member.
[94]. National
Housing Finance and Investment Corporation Bill 2018, paragraph 25(a).
[95]. Ibid.,
paragraph 25(b).
[96]. Ibid.,
paragraph 25(e).
[97]. Ibid.,
subclause 47(2).
[98]. CPA
Australia, Audit
and risk committee charter, CPA Australia, 1 December 2014, p. 1.
[99]. CPA
Australia, Finance
committee charter, CPA Australia, 1 December 2014, p. 1.
[100]. National
Housing Finance and Investment Corporation Bill 2018, subclause 27(2).
[101]. National
Housing Finance and Investment Corporation Bill 2018, subclause 27(1).
[102]. Public
Corporations (Seventh Australian Masters Games Corporation) Regulations 1998
(SA).
[103]. ASX
Corporate Governance Council, Corporate
governance principles and recommendations, 3rd edn, 2014, p. 3.
[104]. National
Housing Finance and Investment Corporation Bill 2018, clause 14.
[105]. Explanatory
Memorandum, National Housing Finance and Investment Corporation Bill 2018,
National Housing Finance and Investment Corporation (Consequential Amendments
and Transitional Provisions) Bill 2018, p. 27.
[106]. National
Housing Finance and Investment Corporation Bill 2018, subclause 36(1).
The CEO is an official in accordance with subsection 13(3) of the PGPA Act.
[107]. Ibid.,
subclause 36(4).
[108]. Ibid.,
subclause 36(5).
[109]. Ibid.,
clause 37.
[110]. Ibid.,
clause 44.
[111]. Ibid.,
clause 45.
[112]. Ibid.,
clause 46.
[113]. Ibid.,
clause 55.
[114]. Ibid.,
clause 48.
[115]. A
company is classified as being solvent if, and only if, it is able to pay all
of its debts as and when they become due and payable. Otherwise the company is
insolvent. Corporations Act, section 95A.
[116]. National
Housing Finance and Investment Corporation Bill 2018, subclause 49(1).
[117]. Ibid.,
subclause 49(2).
[118]. Ibid.,
subclause 49(4).
[119]. M
Sukkar (Assistant Minister to the Treasurer), ‘Second
reading speech: National Housing Finance and Investment Corporation Bill 2018’,
House of Representatives, Debates, 15 February 2018, p. 1621.
[120]. Standing
Committee on Economics, Inquiry into the National Housing Finance and Investment Corporation
Bill 2018; National Housing Finance and Investment Corporation (Consequential
Amendments and Transitional Provisions) Bill 2018,
op. cit., pp. 22–3.
[121]. National
Housing Finance and Investment Corporation Bill 2018, subclause 50(1).
[122]. Ibid.,
subclauses 50(2) and (3).
[123]. Ibid.,
subclause 50(5).
[124]. Ibid.,
subclause 51(1).
[125]. Sukkar,
‘Second
reading speech: National Housing Finance and Investment Corporation Bill 2018’,
op. cit.
[126]. National
Housing Finance and Investment Corporation Bill 2018, clause 57.
[127]. Standing
Committee on Economics, Inquiry into the National Housing Finance and Investment Corporation
Bill 2018; National Housing Finance and Investment Corporation (Consequential
Amendments and Transitional Provisions) Bill 2018, op. cit.,
pp. 22–3.
[128]. National
Housing Finance and Investment Corporation Bill 2018, clause 58.
[129]. ADJR
Act, Schedule 2, proposed paragraph (zd).
[130]. FOI
Act, subsection 3(1).
[131]. FOI
Act, Schedule 2, Division 1 of Part II.
[132]. Explanatory
Memorandum, National Housing Finance and Investment Corporation Bill 2018,
National Housing Finance and Investment Corporation (Consequential Amendments
and Transitional Provisions) Bill 2018, p. 41.
[133]. Standing
Committee on Economics, Inquiry into the National Housing Finance and Investment Corporation
Bill 2018; National Housing Finance and Investment Corporation (Consequential
Amendments and Transitional Provisions) Bill 2018, op. cit.,
p. 18.
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