Chapter 2
Views on the bills
2.1
Overall, submitters to the inquiry acknowledged the difficulties faced
by the community housing sector, and welcomed the proposals in the National
Housing Finance and Investment Corporation Bill 2018 (NHFIC bill) and the National
Housing Finance and Investment Corporation (Consequential Amendments and
Transitional Provisions) Bill 2018 (NHFIC consequential amendments bill) to
establish the NHFIC as a corporate Commonwealth entity to improve housing
outcomes for Australians.
2.2
This chapter examines the evidence received in relation to the NHFIC and
NHFIC consequential amendments bills. It considers the views on the
establishment of the NHFIC, the Investment Mandate, and the Bond Aggregator. It
then looks at the consultation processes undertaken by the government in
relation to these initiatives, before considering the NHFIC consequential
amendments bill.
Support for the establishment of the NHFIC
2.3
The majority of submissions supported the establishment of the NHFIC,
with many urging the swift passage of the NHFIC and NHFIC consequential
amendments bills in order to provide certainty to the community housing sector.
2.4
Common Equity NSW, a not-for-profit Community Housing Provider (CHP),
submitted that:
Due to the significant level of unmet demand for affordable
housing, we are keen to see the establishment of NHFIC as soon as possible and
without delay.[1]
2.5
St George Community Housing (SGCH), a CHP in New South Wales, went so
far as to request that the committee 'ensure that the parliamentary process
does not delay the implementation of this much needed reform'. It stressed
that:
The ability for both the NHFIC and the CHP sector to work
through any operational details is constrained by the operational commencement
of the NHFIC. We look forward to ensuring the benefits of the NHFIC can be
utilised as soon as possible, to improve housing affordability for those in our
society with the greatest need.[2]
2.6
Indeed, Venture Housing Company Limited (Venture), a not-for-profit CHP
which operates in the Northern Territory, indicated that it would be
proactively seeking finance from the NHFIC for one of its Tennant Creek housing
initiatives immediately upon its establishment.[3]
2.7
Matilla Advisory Pty Ltd, a corporate advisory firm, and Green Fabric, a
cooperative housing facilitator in Western Australia, made a joint submission which
also emphasised the need for the NHFIC to be established without delay. They
observed:
We see no value in delaying the legislation and significant
detriment to the community who are predominantly the homeless and social
welfare recipients.[4]
2.8
Master Builders Australia emphasised that with:
...the growing number of households on the waiting list for
public housing, which is currently estimated at over 190,000, it is important
that the NHIFC is established as intended on 1 July 2018 and should aim to
issue its inaugural bond by the end of calendar year 2018.[5]
2.9
In addition, the Property Council of Australia stated that the NHFIC
'has the potential to address one of the key constraints on the supply of new
housing: the timely provision of enabling infrastructure'. They also commended
the suitability of the NHFIC for increasing the supply of affordable housing,
noting that:
The concept of an infrastructure fund has been introduced in
a number of states, which brings strong learnings when establishing a
successful Federal Government equivalent.[6]
Board of the NHFIC
2.10
As noted in Chapter 1, Part 3 of the NHFIC bill establishes the Board of
the NHFIC, and provides for its membership. Several submissions expressed a
preference for the Board of the NHFIC to contain representation from the CHP
sector.
2.11
SGCH considered that to improve housing outcomes, the primary focus of
the NHFIC should be on loans, investments and grants into social and affordable
housing. As such, SGCH argued that the NHFIC Board should have members with
experience and expertise related directly to social and affordable housing and
the economic and social benefits of related projects. SGCH noted that while the
current appointment framework in the NHFIC bill allows for such an appointment,
'this could be strengthened by requiring at least one Director with relevant
skills and experience in social and affordable housing gained from the CHP
sector'.[7]
2.12
In contrast, the Community Housing Industry Association (CHIA)
considered the appointment framework outlined in the NHFIC bill to be
sufficient to ensure the CHP sector would be represented on the Board.[8]
Investment Mandate
2.13
As noted in the previous chapter, the ministerial directions
constituting the Investment Mandate will not be made by disallowable
legislative instrument.
2.14
Common Equity NSW supported this decision as it considered this to be
the 'most administratively efficient and timely mechanism'. It stated:
We strongly recommend that Ministerial Direction (as opposed
to Regulation) be retained as the mechanism to make future changes to the
Investment Mandate. We base this view on the Community Housing Sector’s lived
experience of the National Rental Affordable Housing scheme which has operated
via Regulation and led to significant complications and delays in addressing
issues that have arisen from time to time. This will be particularly important
in the establishment phase of NHFIC as it will allow it to be more responsive
to the Community Housing Sector's needs.[9]
2.15
Mattila Advisory Pty Ltd and Green Fabric agreed, noting that an Investment
Mandate by ministerial direction, as proposed, would allow changes to be
readily made as new concepts and proposals emerge. They indicated that:
This will be particularly important in the establishment
phase of NHFIC as it will allow it to be more adaptable and responsive to the
Community Housing Sector's needs.[10]
2.16
CHIA considered the use of an Investment Mandate, rather than
regulations, to direct the Board about strategies, policies and decision-making
criteria would:
...[strike] an appropriate balance between protecting the
interests of government and ensuring the Board has sufficient autonomy to
properly discharge its responsibilities under this legislation.[11]
2.17
CHIA considered that, particularly in the first years of the NHFIC's
operation, an Investment Mandate will enable the government and the NHFIC to
make necessary adjustments as the NHFIC evolves. However, CHIA also noted that
the Investment Mandate will require further policy detail in relation to areas
such as project eligibility, conditions for grants and loans, compliance and reporting
requirements.[12] CHIA also acknowledged that there are some matters in the draft Investment Mandate
relating to the bond aggregator which require further clarification.[13]
Bond Aggregator
2.18
Some submitters argued that the Bond Aggregator alone would not be
sufficient to address the funding gap between the operating costs and the
rental income from social and affordable housing. CHIA explained that this
funding gap occurs because, by design, CHPs charge rents below market rates to
make housing more affordable for tenants.[14]
2.19
Compass Housing Services, an international social and affordable housing
provider, was supportive of the establishment of the NHFIC and in particular
the Bond Aggregator, but expressed concern 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'.[15] In particular, it noted that in order to make new construction projects viable,
there needs to be recurrent government funding:
As noted by the Council on Federal Financial Relations
Affordable Housing Working Group, establishing and maintaining a portfolio of
below market rental housing inevitably requires ongoing subsidies to bridge the
gap between the below market rental revenue and the operating costs (including
debt servicing).
Without recurrent funding, CHPs are unlikely to be able to
create the pipeline of work necessary to support the function of the
aggregator. The success of the bond aggregator and of the NHFIC to fulfil a
crucial part of its mandate therefore, will ultimately depend on the successful
resolution of this issue.[16]
2.20
Venture also observed that while the NHFIC was critical to the future of
its organisation, the bond aggregator 'does not solve the fundamental
affordable/social housing viability equation (which requires deeper capital and
recurrent subsidy)'.[17]
2.21
Compass Housing Services suggested a range of methods to address the
funding gap, including stock transfers, inclusionary zoning and planning
incentives, and developing the build-to-rent model.[18]
2.22
In order to improve social housing outcomes, Uniting Housing Victoria, a
registered CHP, proposed incorporating a legislated provision in the NHFIC bill
for 'a separate and distinct appropriation from the Commonwealth consolidated
revenue fund for the purpose of providing grants for the direct acquisition of
Social Housing dwellings'.[19]
2.23
SGCH likewise noted that whilst an important lever, the Bond Aggregator
alone will not sufficiently address the funding gap to generate substantial
increases in the level of affordable and social housing. SGCH considered that:
...generating a significant scale of new social and affordable
housing requires a range of policy levers and that all three tiers of
government in Australia (Federal, State, Local) have a role to play.[20]
2.24
The Treasury pointed out to the committee that the Affordable Housing
Working Group report, Supporting the implementation of an affordable housing
bond aggregator, noted that addressing the funding gap will require ongoing
support from all levels of government.[21]
Support for CHP capacity building
2.25
Some stakeholders raised concerns about whether all CHPs would benefit
equally from the bond aggregator. Uniting Housing Victoria expressed some
concern that the bond aggregator would primarily benefit the larger Tier One
CHPs, while smaller Tier Two and Tier Three CHPs will be 'largely ignored by
the Act'.[22]
2.26
PowerHousing Australia also raised this issue, noting smaller Tier Two
and Tier Three CHPs may require further support:
Non-Tier One CHPs, who may not have tenure of ongoing
development activities or only [have] one-off or small-scale development
activities, could benefit from accessing NHFIC funding, but may need some
initial capacity-building support.[23]
2.27
However, despite this, PowerHousing Australia further informed the
committee that its members were encouraged by Federal government investments
into CHP capacity. It noted:
Part 5 of the Investment Mandate direction covers Support for
capacity building, in which a cap of $1.5 million applies to the amount of
money the NHFIC can spend on capacity-building activities for registered CHPs.
The NHFIC would purchase these services for registered CHPs, which would assist
them to develop their financial, property development and management
capabilities.[24]
Warehousing facility
2.28
As noted in Chapter 1, the draft Investment Mandate provided
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.
2.29
The Housing Industry Association (HIA), who had no concerns with the
NHFIC bill as drafted, suggested that the $150 million restriction on the
warehousing function of the Bond Aggregator may be too low and could
potentially become a constraint on the NHFIC's infrastructure investments. It
considered that:
If the correct settings can be achieved in the Corporation's
operations both administratively and financially, HIA believes the future work
of the Corporation in supporting the supply of long term, clearly defined
affordable housing projects will be positive.[25]
Guarantee by the Commonwealth
2.30
CHIA welcomed the provision of a guarantee by the Commonwealth
government under clause 51 of the NHFIC bill, which will help reduce the cost
of finance from the bond aggregator.[26]
2.31
Australian Housing and Urban Research Institute (AHURI) informed the
committee that its research into international guarantee schemes suggested that
a government guarantee would reduce the borrowing rate and reduce uncertainty
for investors. It found that a government guarantee:
...overcomes many of the barriers to investment in affordable
housing by offering investment opportunities at an appropriate scale,
simplicity and risk weighted return. It is also attractive to housing providers
because of its lower cost. The government guarantee would help establish a
robust and competitive investment market.[27]
Consultation
2.32
Many of the submitters to the committee's inquiry had been involved in
the various consultation processes surrounding the establishment of the NHFIC
discussed in Chapter One. Indeed, SGCH commended the level of consultation that
the government had conducted since the establishment of the NHFIC was announced,
and indicated that it looked forward to continued participation in the
consultation process in the implementation phase for the NHFIC.[28]
2.33
The National Affordable Housing Consortium (NAHC) maintained that
ongoing and formalised engagement with the community housing sector was
essential to the success of the NHFIC. NAHC supported the establishment of an
Independent Advisory Committee representing the community housing sector,
finance sector and other relevant stakeholders. It also endorsed the
development of a formal engagement charter between the advisory committee and
the NHFIC.[29]
NHFIC consequential amendments bill
2.34
As outlined in Chapter 1, the NHFIC consequential amendments bill seeks
to amend the Freedom of Information Act 1982 (FOI Act) to exempt the
NHFIC from the operation of the FOI Act in relation to documents in respect of
its commercial activities, and amend the Administrative Decisions (Judicial
Review) Act 1977 to exempt the NHFIC from the requirement to provide
reasons for decisions under section 13 of that Act.
2.35
The Local Government Association of Queensland (LGAQ) expressed concern
that the proposed measures in the NHFIC consequential amendments bill could
undermine the transparency and accountability of the operation of the NHFIC.
While the LGAQ understood the need to protect commercial-in-confidence information,
in its view, 'the reasons for each investment decision by the NHFIC Board'
should 'be made public to the greatest extent practicable in some form, without
breaching commercial confidentiality'.[30]
2.36
In contrast, Master Builders Australia supported the NHFIC consequential
amendments bill as it considered the measures were 'important to protect the
commercial confidentiality of private sector actors who may enter into
financial arrangements with the NHFIC'.[31]
2.37
PowerHousing Australia also supported the NHFIC consequential amendments
bill, noting in particular:
...information in applications for funding will contain
commercially sensitive data and intellectual property (IP) that has been
developed to secure these projects; allowing this information to become public
could cause significant financial harm to businesses who have developed and/or
invested in this IP.[32]
2.38
The Office of the Australian Information Commissioner advised the
committee that it had considered the provisions relating to the FOI Act and
concluded that 'these 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'.[33]
Committee view
2.39
The committee believes that housing is fundamental to the wellbeing of
all Australians, and a driver of social and economic participation that
promotes better employment, education and health outcomes. The committee
considers that the establishment of the NHFIC will form an essential part of
the government's comprehensive and targeted plan to improve outcomes for
Australians across the housing spectrum.
2.40
The committee notes the broad support for the establishment of the NHFIC
and the accompanying calls for the two bills to be passed without delay so the
NHFIC can commence operations on 1 July 2018.
2.41
The committee agrees with stakeholders that the NHFIC Board should have
members with experience and expertise related directly to social and affordable
housing and the economics and social benefits of related projects. The
committee is of the view that the appointment framework outlined in the NHFIC
bill will ensure the CHP sector will be represented on the Board of the NHFIC.
2.42
The committee considers that the use of an Investment Mandate, rather
than regulations, to direct the Board of the NHFIC about strategies, policies
and
decision-making criteria strikes an appropriate balance between protecting the
interests of government and ensuring the Board has sufficient autonomy to properly
discharge its responsibilities under this legislation. The committee notes that
a draft Investment Mandate was released by Treasury for public consultation in
early 2018.
2.43
The committee acknowledges concerns that the Bond Aggregator alone would
not be sufficient to address the funding gap between the operating costs and
the rental income from social and affordable housing. The committee recognises
that addressing the funding gap will require ongoing support from all levels of
government.
2.44
The committee commends the level of consultation that the government has
conducted since the establishment of the NHFIC was announced. The committee
agrees with stakeholders that continuing and formalised engagement with the
community housing sector is essential to the success of the NHFIC and notes
that this is ongoing.
2.45
The committee acknowledges concerns raised by stakeholders that the
proposed measures in the NHFIC consequential amendments bill could undermine
the transparency and accountability of the operation of the NHFIC. However, the
committee notes 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.
Recommendation 1
2.46
The committee recommends that the bills be passed.
Senator Jane
Hume
Chair
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