Bills Digest No. 59, 2022–23

Housing Australia Future Fund Bill 2023 [and two associated Bills]

Finance Updated

Author

Laura Schatz, Adrian Makeham-Kirchner, Matthew Thomas, Philip Hamilton, Peter McDonald

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Key points

  • The Housing Australia Future Fund is created by the Housing Australia Future Fund Bill 2023 (HAFF Bill). It is proposed to be structured, governed, and administered in a similar way to other Investment Funds. The financing will be administered using two Special Accounts.
  • The National Housing Supply and Affordability Council is created by the National Housing Supply and Affordability Council Bill 2023 (Council Bill). The proposed structure, governance, and administrative arrangement are like other Australian Government Councils.
  • The National Housing Finance and Investment Corporation (NHIFC) is to be renamed Housing Australia by amendments proposed in the Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 (Amendment Bill). The Amendment Bill also extends a Commonwealth guarantee for the NHFIC from 1 July 2023 to 1 July 2028. In addition, a series of consequential amendments are made to reflect this name change across other Commonwealth Acts.
  • Issues with the Housing Australia Future Fund and associated Bills are likely to be few. However, there may be policy issues which need to be considered including: the proliferation of investment funds and alternative financing approaches, the potential effectiveness of the scale of the expenditures compared to the social housing challenge, the location of new housing investments, the selection of Council members, and the transparency of the Council in delivering its functions.
Introductory Info Date introduced: 9 February 2023
House: House of Representatives
Portfolio: Finance and Treasury
Commencement: The HAFF Bill commences on the earlier of Proclamation, or six months after Royal Assent. The Housing Council Bill commences on 1 July 2023. The TLAB (Housing) Bill commences over a range of dates, primarily on or shortly after Royal Assent.

The Bills Digest at a glance

This Bills Digest covers issues for:

These Bills are referred to collectively in this Bills Digest as the Housing Australia Future Fund (HAFF) and related Bills.

The digest first sets out the policy issues relating to all HAFF and related Bills.

For each of the separate Bills, specific background, key issues and proposed provisions are outlined and discussed.

The following is then considered for the HAFF and related Bills as a group: the policy positions of non-government parties and major interest groups; financial implications; committee matters; and human relations issues.

This Bills Digest builds on the preliminary Bills Digest published on 13 February 2023.

Purpose of the Bills

The purpose of the three Bills (referred to by the Government as the Housing Legislative Package) is to deliver commitments announced as part of the Safer and More Affordable Housing measure in the October 2022–23 budget.[1]

The Housing Australia Future Fund Bill 2023 (the HAFF Bill) aims to establish the Housing Australia Future Fund (HAFF) through the creation of a new Act. The National Housing Supply and Affordability Council Bill 2023 (the Council Bill) aims to establish the National Housing Supply and Affordability Council through the creation of a new Act. The Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 (the Amendment Bill) amends 12 existing Acts, primarily to rename the National Housing Finance and Investment Corporation (NHFIC) as Housing Australia (HA), expand the functions of HA, increase the size of the HA Board, and make amendments that are consequential to the HAFF Bill.

Background to all Bills

Housing affordability in Australia

Australia’s housing affordability problem has been well documented over many years.

While there are housing supply and affordability issues across the entire housing continuum —from crisis housing through to home ownership — these issues are particularly acute for low- to middle-income households in the private rental market.

These households are competing with people on higher incomes for a limited number of affordable rental properties in areas with greater employment opportunities and access to essential services.

According to Anglicare Australia’s most recent annual Rental Affordability Snapshot, of the 45,992 rental listings across Australia on 19 March 2022, only 7 were affordable for a single person living on jobseeker payment, and only 1 was affordable for a single person living on Youth Allowance. Households living on the minimum wage fare little better, with a single person working full time only able to afford 720 rental dwellings, Australia-wide (p. 7).

The Federal Government provides Commonwealth Rent Assistance (CRA) to low- to moderate-income households that have trouble meeting private market rental costs. Pensioners, recipients of working age payments and those receiving more than the base rate of Family Tax Benefit Part A may be eligible for CRA.

CRA is helping to reduce the number of low-income households experiencing housing stress, which is typically described as paying more than 30% of income on housing costs. As at June 2022, the Productivity Commission report that 72% of households that were in receipt of CRA would have been in housing stress if they hadn’t received the supplement, but CRA reduced the proportion in housing stress to 44% (Table GA.13).

However, CRA thresholds and rates have failed to keep pace with rental costs in many parts of Australia. This is partly because the thresholds and rates vary according to household composition but not by location, but also because the thresholds and maximum rates are indexed to the consumer price index (CPI) and in areas where rents have increased more than the CPI the real value of CRA has not kept up (p. 20).

For low-income households that are unable to afford or access suitable accommodation in the private rental market the federal, state and territory governments provide social housing. Social housing typically comprises public housing offered to eligible households with rents linked to income, and community housing offered to eligible households with rents set as a proportion of market rents.

As at 30 June 2022, there were 434,732 social housing dwellings (public housing, community housing, state-owned and managed Indigenous housing (SOMIH) and Indigenous community housing) across Australia (Table 18A.3).[2] This stock has increased in recent years, with much of the growth having been in the community housing sector.

However, based on several different measures, the overall supply of social housing has been falling in relative terms for some time and is neither keeping pace with household growth nor with demand. This is reflected in both homelessness and social housing waiting list figures.

According to Australian Bureau of Statistics (ABS) estimates, at the 2016 Census 116,427 people were classified as homeless (up from 102,439 since 2011, or 13.7%). This translates to a homeless rate of 50 persons for every 10,000 persons enumerated in the Census (up 5 per cent from 48 persons in 2011).

As at 30 June 2022, there were 174,624 applicants on waiting lists for public rental housing, over 39% (68,008) of which were new greatest need households—that is, households that were either homeless, in housing inappropriate to their needs, adversely affecting their health or placing their life and safety at risk, or that had very high rental costs (Table 18A.5). Just over 66% of the 41,906 applicants for mainstream community housing were in greatest need (27,679 households)(Table 18A.7) and over half of the 13,724 applicants awaiting allocation to SOMIH housing were in greatest need (7,111 households; 52%) (Table 18A.6).

These figures help to illustrate that social housing is increasingly being used for emergency housing needs. In effect, social housing has over time become welfare housing.

Waiting list data may overstate the level of need for social housing because some applicants may be on more than one wait list. Nevertheless, if the ‘evident need’ for social housing is considered, then waiting list data may be seen to significantly underestimate the real need for social housing.

Evident need typically refers to households that are on a low income (approximately the bottom quintile for the relevant household type) and in rental stress (in private rental and paying more than 30% of income on rent). Despite being eligible for social housing, these households may not apply for various reasons, such as being discouraged by lengthy waiting times.

According to one estimate of manifest need (households that were homeless) and evident need for social housing, as at 2016 there was a shortfall of over 430,000 dwellings.

If the proportion of households in need of social housing were to remain constant over the next 20 years, it was estimated that around 730,000 additional social housing dwellings would be required to eliminate unmet need by 2036 (p. 63). To eliminate the current backlog would require the construction of around 36,000 dwellings a year.

As at 2018 the annual social housing construction rate was estimated at just over 3,000 dwellings.

Based on its own calculations of current and projected unmet demand for social and affordable housing, the Statutory Review of the National Housing Finance and Investment Corporation (NHFIC) Act estimated the number of additional social housing dwellings required over the 20 years from 2020 to 2040 would be 614,000, plus 277,000 affordable housing dwellings (p. 98). It estimated the cost of closing this shortfall at $290 billion (p. 30).

Need for private investment

Given the scale of the need for increased social housing, some researchers have argued that it is only through increased private sector involvement that the need will be addressed.

While there are several barriers and risks that need to be overcome if the private sector is to become further involved in and support a significant increase in social and affordable housing, the main impediment to greater private sector involvement is the ‘financing gap’.[3]

The financing gap 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 [Rent Assistance])’ (p. 10).

It was largely with a view to helping to close the financing gap for community housing providers and encouraging private investment in social and affordable housing that the Morrison Government established the National Housing Finance and Investment Corporation, under the National Housing Finance and Investment Corporation Act 2018 (the NHFIC Act).[4]

Among other things, the NHFIC operates the Affordable Housing Bond Aggregator (AHBA) and the National Housing Infrastructure Facility (NHIF). The AHBA provides loans to registered community housing providers by aggregating their lending requirements and issuing bonds to institutional investors and the NHIF provides grants and finance to support the creation of housing-related infrastructure. Details of the NHFIC’s stated performance to date are available on the Corporation’s website.

The AHBA loan portfolio has contributed to a modest increase in social housing dwellings (some new and some existing), and some states’ post-COVID-19 housing construction programs will also result in additional growth in supply.[5] Nevertheless, this growth is manifestly insufficient to match the current unmet need or future projected need for social housing. Without a significant increase in investment capacity, the NHFIC is unlikely to make a significant contribution to addressing Australia’s social and affordable housing shortfall.

From 2020–2021, the federal government conducted a statutory review of the NHFIC Act (the NHFIC Review). This review was required by section 57 of the NHFIC Act. The report, which was tabled by the Assistant Treasurer on 28 October 2021, assessed and made recommendations on whether the NHFIC Act was achieving its objectives and whether any amendments to the NHFIC Act should be considered. Further information about the review, including the federal government’s response, can be accessed here.

Budget 2022–23

In the lead-up to the Federal election, the Australian Labor Party announced its intention, if elected, to establish a $10 billion Housing Australia Future Fund to build social and affordable housing. Funding for the administration of the newly-created HAFF, as well as to develop a new National Housing and Homelessness Plan, establish a National Housing Supply and Affordability Council, and Housing Australia, was provided as a part of the October 2022–23 Budget, under the measure ‘Safer and More Affordable Housing’.[6]

The October 2022–23 Budget also contained a range of measures specifically related to the social housing sector. These include:

The Government set out some of its expectations for the housing sector from these announcements in its Improving Housing Supply and Affordability, Budget Fact Sheet.

Consultations

Since the 2022 federal election, the Government has engaged in a range of consultations on housing issues.

The Housing Accord

In October 2022 in conjunction with the states and territories the Australian Government announced the National Housing Accord 2022. The Accord commits to immediate actions, including:

  • up to 20,000 additional new, affordable dwellings
  • collaborating to improve financing for new social and affordable housing projects
  • improving zoning, planning and land release
  • making sure the right skills are available and improving access to social and affordable housing.

Areas listed for further work include:

  • support for institutional investment
  • work with the community housing and not-for-profit sector
  • delivering on the commitments.

Also, the Accord achieved a set of high level commitments from the Australian Local Government Association (ALGA), institutional investors including superannuation funds, and residential development, building and construction industry representatives.

The Housing Accord will complement the Commonwealth government’s investment in the HAFF.[7]

Draft legislation

The Department of Treasury (the Treasury) consulted on the Housing Legislative Package – Housing Australia Future Fund Bill, National Housing Supply and Affordability Council Bill, and Amendment Bill between 19 December 2022 to 11 January 2023.[8]

The consultation package included:

At the time of writing the Treasury have published 44 submissions (excluding 1 confidential submission). These submissions have been reviewed as part of the development of this Bills Digest. The Treasury has not published a report that discusses how these consultations influenced the development of the HAFF and related Bills.

Housing Australia Future Fund Bill 2023

Purpose of the Bill

The Housing Australia Future Fund (HAFF) is created by Housing Australia Future Fund Bill 2023 (the HAFF Bill). The purpose of the HAFF is to create a dedicated investment vehicle to support and increase the funding of social and affordable housing, as well as other acute housing needs. These ‘acute needs’ include (but are not limited to) improving housing in Indigenous communities and providing housing services for women, children and veterans. The HAFF Bill sets out the governance of the HAFF, and the ‘architecture’ for how investments into and out of the HAFF will be managed and directed.

Structure of the Bill

The HAFF Bill would create a new Act, and comprises eight parts:

  • Part 1 includes a simplified outline, the object, definitions, and commencement provisions
  • Part 2 establishes the HAFF, the HAFF Special Account, and arrangements for credits and debits
  • Part 3 establishes the HAFF Payments Special Account and arrangements for grants, including the channelling of state and territory grants through the COAG Reform Fund
  • Part 4 comprises provisions relating to transfers from the HAFF Special Account to the HA Special Account
  • Part 5 provides for an annual limit on amounts debited from the HAFF Special Account
  • Part 6 outlines arrangements for investment of the HAFF, including the HAFF Investment Mandate
  • Part 7 sets out reporting arrangements
  • Part 8 comprises miscellaneous provisions, including in relation to delegations, and reviews of the operation of the Act.

Background

During the 2022 election campaign, the Australian Labor Party (ALP) announced its commitment to establishing a $10 billion HAFF, which would be managed by the Future Fund Board of Guardians. The fund would essentially have two purposes – building new social and affordable housing and responding to acute housing needs on an ongoing basis.

Through the HAFF the ALP committed to ‘build 30,000 new social and affordable housing properties in its first five years’ consisting of:

  • 20,000 social housing properties – 4,000 of which will be allocated for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness
  • 10,000 affordable homes for frontline workers like police, nurses and cleaners.

The commitment was for the HAFF to operate similarly to NSW’s Social and Affordable Housing Fund, where a proportion of investment returns would fund annual service payments to community housing providers over 25 years to bridge the gap between rental revenue and operating costs. Service payments would not commence until dwellings are completed and all the other contracted services are in place.

To address acute housing needs on an ongoing basis, in the first five years investment returns from the HAFF would be directed towards those ‘with the greatest need’ specifically:

  • $200 million for the repair, maintenance and improvement of housing in remote Indigenous communities
  • $100 million for crisis and transitional housing options for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness (In total, $1.7 billion dollars would be allocated to women – $1.6 billion for long term housing, and the $100 million for crisis and transitional housing options)
  • $30 million to build more housing and fund specialist services for veterans who are experiencing homelessness or at-risk homelessness.

According to the ALP announcement, the HAFF would result in significant job creation; would directly support ‘21,500 full-time jobs across the construction industry and broader economy, per year, over 5 years, nationwide –one in 10 direct workers on site will be apprentices.’

The measure was included in the 2022–23 October Budget as part of the Safer and More Affordable Housing measure.[9] On 10 December 2022, the federal government released an Exposure Draft of the HAFF and related Bills for consultation.

Key provisions and issues

The HAFF Bill establishes the Housing Australia Future Fund (HAFF). Clause 2A notes the HAFF Bill is aimed at addressing acute housing needs (including the acute housing needs of Indigenous persons, women, children and veterans) and enabling support to be provided to increase the availability of social and affordable housing.

Structure of the HAFF

Clause 9 specifies that the HAFF will consist of the HAFF Special Account and investments of the HAFF. Clause 10 establishes the HAFF Special Account. A special account is a limited form of special appropriation. A special account notionally sets aside an amount in the Consolidated Revenue Fund (CRF) and that amount can only be expended for listed purposes. The Chart of Special Accounts lists all special accounts managed by portfolio departments.

This is a usual structure used to transfer funds from the consolidated revenue fund to similar funds managed by the Commonwealth, with the Chart of Special Accounts illustrating a similar receipt mechanism for the Aboriginal and Torres Strait Islander Land and Sea Future Fund, the DisabilityCare Australia Fund, Emergency Response Fund, the Future Drought Fund, Medical Research Future Fund, and the Future Fund.

Flows of funds into and out of the HAFF

Initial credit to the HAFF and Financial Impact

Clause 11 establishes that $10 billion will be credited to the HAFF ‘as soon as is practicable’ after commencement of the clause. Future credits can be made by the ‘responsible Ministers’ who are stated in clause 4 to be the Treasurer and the Finance Minister. The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) expressed concern that the determination of future credits to the HAFF by the responsible Ministers will not be disallowable by the Parliament.[10] Noting a June 2021 Senate resolution that ‘delegated legislation should be subject to disallowance unless exceptional circumstances can be shown which would justify an exemption’, the Committee asked the Minister to provide detailed advice ‘in relation to the exceptional circumstances that are said to justify exempting an instrument made under subclause 11(2) from the usual parliamentary disallowance process’.[11] At the time of writing this Digest, the Minister’s response had not been received.[12]

The Explanatory Memorandum explains the financial impact of flows in and out of the HAFF (including the initial credit) as follows:

The initial credit to the HAFF would have no impact on the underlying cash and fiscal balances.

Positive interest earnings of the HAFF would have a positive impact on the underlying cash and fiscal balances. Costs incurred by the Future Fund Board would have a negative impact on the underlying cash and fiscal balances. Payments in relation to social housing, affordable housing or acute housing needs would have a negative impact on the underlying cash and fiscal balances.[13]

In February 2023 Senate Estimates hearings, Jenny Wilkinson (Secretary of the Department of Finance) clarified that the initial $10 billion will be borrowed by the federal government. Furthermore, Ms Wilkinson stated that:

The way in which the Housing Australia Future Fund is treated in the budget papers is that there is a $10 billion upfront liability which requires the issuance of government securities. There is a $10 billion asset which is created, because that asset sits on the Future Fund's balance sheet. And then the returns have been factored into the budget, I think starting from 2023-24, which is when the first return is expected to be provided, in order to generate the $500 million a year that can be disbursed from the fund (p. 100).

Financial impacts reporting in the Explanatory Memorandum are not clear on this point, and this is discussed later in this Digest.

Debits from the HAFF Special Account

Clause 12 sets out how funds can be debited from the HAFF Special Account by establishing its purpose, which is threefold:

  • to transfer amounts to the HAFF Payments Special Account for the purposes of making a grant under subsection 18(1) – that is, to a person or body other than a state or territory in relation to acute housing needs
  • to transfer amounts to the COAG Reform Fund for the purposes of making grants under subsection 18(3) to states and territories for acute housing needs, social housing and affordable housing
  • to transfer amounts to the HA Special Account under section 33 – that is, to enable Housing Australia to make grants and loans in relation to acute housing needs, social housing and affordable housing.
The nature and terms and conditions of grants

Subclauses 18(1) and (2) establish that grants may be made by a ‘designated Minister’, defined in clause 4 as the Housing Minister, the Indigenous Australians Minister, the Social Services Minister, or the Veterans’ Affairs Minister, to ‘a person or body’ other than a state or territory in relation to acute housing needs. According to the Explanatory Memorandum, grants could be made under this clause to individuals, incorporated or unincorporated bodies, not-for-profit organisations, and local government bodies (amongst others, as the list is not to be considered prescriptive). [14] Furthermore, grants would be subject to the Commonwealth grants policy framework, established through the Commonwealth Grants Rules and Guidelines 2017.[15]

Subclause 18(3) sets out that grants can be made by a designated Minister to states or territories in relation to acute housing needs, social housing or affordable housing. Note that ‘social housing’ and ‘affordable housing’ are not defined in the Bill but are explained in the Explanatory Memorandum.[16]

Clause 19 specifies that the terms and conditions of the grant of financial assistance must be set out in a written agreement between the Commonwealth and the grant recipient, and that the grant recipient must comply with those terms and conditions. The terms and conditions must provide details of the repayment of amounts.

Noting that section 96 of the Constitution confers the power to make such grants to states and to determine their terms and conditions on the Parliament rather than the Executive, the Scrutiny Committee expressed concern with subclause 18(3), including the lack of guidance in the Bill as to how the grants power is to be exercised, how criteria for the award of grants will be developed (and why the criteria cannot be set out in the Bill), and the absence of a requirement for grant agreements to be tabled in Parliament.[17] Accordingly, the Committee requested the Minister’s advice on:

  • how the criteria for the award of grants of financial assistance will be developed
  • whether the HAFF Bill can be amended to include at least high-level guidance as to the terms and conditions on which financial assistance may be granted and
  • whether the HAFF Bill can be amended to include a requirement that written agreements with the states and territories for grants of financial assistance made under subclause 18(3) are:
    • tabled in the Parliament within 15 sitting days after being made and
    • published on the internet within 30 days after being made.[18]

As set out above, as at the date of writing this Digest, the Minister’s response had not been received by the Committee.

The HAFF Bill anticipates that a grant of financial assistance to a state or territory may be made in relation to acute housing needs, social housing or affordable housing, categories which the Explanatory Memorandum explains. However, it is not clear that the categories constitute ‘high-level guidance as to the terms and conditions’ as envisaged by the Senate Scrutiny of Bills Committee.

For instance, while endorsing the federal government’s investment in social and affordable housing, the Planning Institute of Australia (PIA) (in its submission to the HAFF consultation) warned that funding social and affordable housing in an ad hoc manner without due regard to the location of that housing could lead to poor urban outcomes. PIA urged the federal government to consider making grants to states and territories contingent on certain outcomes or reforms being undertaken, including reforms to state and territory planning systems that help to promote the supply of well-placed social and affordable housing. According to PIA:

[t]his is the most effective way of aligning infrastructure and increasing diverse housing supply where it can have the greatest long-term value. Grants should not encourage ill-informed ad hoc rezonings in the wrong places (p. 4).

PIA urged the federal government to base incentives for grants on advice from the National Housing Supply and Affordability Council. Indeed, the Explanatory Memorandum notes that the Council will advise the Minister in relation to grants of financial assistance to be made under subclauses 18(1) and (3).[19]

After being proposed by Dr Helen Haines, an amendment to the National Housing Supply and Affordability Council Bill 2023 clarified that the Council may consider ‘geographic location’ in performing its function.[20] But the inclusion of this amendment arose in the context of Dr Haines’ concern that the Council explicitly consider the housing needs of rural, regional and remote Australia; the focus of the discussion was not on consideration of urban or peri-urban locations. The HAFF Bill currently falls short of ensuring that promoting well-located social and affordable housing within communities will be considered by the Minister or required by the terms they set.

Constitutional limits of HAFF grants

Clause 22 sets out the constitutional limits for grants to persons or bodies other than a state or territory. Designated Ministers may only make a grant under subclause 18(1) where ‘one of the enumerated Constitutional powers is enlivened.’[21] The relevant Constitutional powers are enumerated from paragraphs 22(a) to (h), and they include powers in relation to territories, the external affairs power, the corporations power, the power in respect of veterans and their families, the race power, the aliens power, the power in respect of unemployment, sickness and student benefits and Commonwealth employees and their families.

The federal government has the power to make laws with respect to the matters granted to it under the Constitution. Where the Constitution does not provide the Commonwealth with a head of power the states have jurisdiction. For example, with respect to paragraph 22(c) — power to grant financial assistance to constitutional corporations the ability to regulate constitutional corporations is a specific head of power provided under section 51(xx) of the Constitution. Since the High Court handed down its decision in the WorkChoices Case in November 2006,[22] the ‘corporations power’ under section 51(xx) 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.[23]

According to the Explanatory Memorandum, the constitutionality of granting funds to states and territories under subclause 18(3) is supported by sections 96 and 122 of the Constitution.[24] Section 96 provides Parliament with the power to make grants of financial assistance to states on such terms and conditions as it sees fit, whilst section 122 gives Parliament the power to make laws for the government of territories.

The HAFF Payments Special Account

Clause 25 establishes the HAFF Payments Special Account, for which the Secretary of the Treasury Department will be responsible. According to the Explanatory Memorandum:

A special account is an appropriation mechanism that sets aside an amount within the CRF to be expended for specific purposes. Any amounts credited to the HAFF Payments Special Account would be quarantined from the rest of the CRF and could only be debited from the HAFF Payments Special Account for the purposes set out in the HAFF Bill.[25]

The purpose of the HAFF Payments Special Account, as set out in clause 28, is to make grants under subclause 18(1) – that is, grants to a person or body other than a state or territory in relation to acute housing needs.

Channelling state and territory grants through the COAG Reform Fund

Clause 29 enables a designated Minister to request that the Finance Minister transfer an amount from the HAFF Special Account to the COAG Reform Fund. The COAG Reform Fund was established by the COAG Reform Fund Act 2008. The COAG Reform Fund exists for the purpose of making grants of financial assistance to the states with the amount subject to the limits prescribed in the appropriation acts for the relevant financial year.

Essentially, this clause enables the channelling of grants of financial assistance to states and territories under subclause 18(3). Under subclause 29(4), the Finance Minister must ensure that annual limits on debits from the HAFF Special Account are not breached. The annual limit is set at $500 million by clause 36, discussed below.

Transfers from the HAFF Special Account to the Housing Australia Special Account

Clause 33 provides the mechanism through which the Housing Minister can request that the Finance Minister transfer an amount from the HAFF Special Account to the Housing Australia Special Account. Under proposed subsection 47C(2A) of the Housing Australia Act 2018,[26] the purpose of such payments would be to enable Housing Australia to make grants and loans in relation to acute housing needs, social housing or affordable housing.

Annual limit on the amounts debited from the HAFF Special Account

Under clause 36, the annual limit on amounts debited from the HAFF Special Account, from the 2023–24 financial year onwards, is $500 million. This consists of transfers under clause 26 relating to grants to a person or body made under subclause 18(1); transfers under clause 29 relating to grants of financial assistance to a state or territory under subclause 18(3); and transfers under clause 33 relate to grants and loans to be made by Housing Australia.

Transparency and returns from funds

If approved by Parliament the HAFF will be the eighth investment fund currently operated by the Commonwealth, starting with the Future Fund in 2006 and assuming the National Reconstruction Fund Corporation Bill 2023 is passed too. The existing funds are the Future Fund (FF), Medical Research Future Fund (MRFF), DisabilityCare Australia Fund (DCAF), Future Drought Fund (FDF), Emergency Response Fund (ERF), and the Aboriginal and Torres Strait Islander Land and Sea Future Fund (ATSILSFF). The Parliamentary Library has extracted the asset values held as at 31 December 2022, or proposed in current legislation, and the image below shows how the $268.5 billion in these funds is distributed.

Source: Parliamentary Library calculations based on the ‘Financials since inception to 31 December 2022’ tables for the FF, MRFF, DCAF, FDF, ERF, and ATSILSFF published at the Department of Finance, Australian Government Investment Funds page; the National Reconstruction Fund Corporation Bill 2023 and the HAFF and related Bills.

In addition, based on the values published by the Department of Finance for Specialist Investment Vehicles (SIVs) the Commonwealth has made at least $17 billion in balance sheet investments into Clean Energy Finance Corporation (including the Sustainable Cities Investment Program and the Reef Funding Program), Northern Australia Infrastructure Facility, and the Regional Investment Corporation (for which a value is not published).

With $285 billion in assets under management budget transparency and parliament’s role in these funds and SIVs has attracted interest.

A recent publication by the Parliamentary Budget Office (PBO) notes that conventional Budget reporting makes it complicated to evaluate the fiscal risks and impacts of such equity investments.[27] The PBO observed:

Alternative financing arrangements usually involve the government providing the financial resources for a policy and receiving a financial asset in return. …

With an equity injection, the government uses cash to invest in a project, and it generally then has the entity undertaking the project as a financial asset on its balance sheet. The initial value of the equity is taken to be the amount that the government paid, so the initial transaction does not have any impact on the government’s net financial worth (or the fiscal or underlying cash balances). …

Policies implemented using alternative financing arrangements, however, generally have some costs that are characterised as transactions and others as revaluations. …

Revaluations can be substantial and affect the government’s balance sheet and net financial worth, but are not fully reflected in the fiscal or underlying cash balances. This means that the fiscal and underlying cash balance impacts of policies that use alternative financing arrangements are less likely to reflect the full cost to the government’s balance sheet. [Pages 2, 12–13; emphasis added]

The Explanatory Memorandum says there will be no  initial underlying cash balance impact from the HAFF,[28] suggesting instead ‘budget neutrality’ over time with revenues offsetting costs. This does not mean the investment is risk free, or that it will be budget neutral in terms of the Australian Government’s balance sheet position, alternative balances like the headline cash balance, or net worth in the long run. The impact will depend on the performance of the HAFF and the debt servicing cost to fund the HAFF.

By way of example, the Parliamentary Library has calculated the difference between the ‘nominal return’ and the ‘benchmark return’ published in the ‘Annual performance results’ tables for each of the investment funds reported by the Department of Finance. The results are summarised below:

FF MRFF DCAF FDF ERF ATSILSFF
2005–06 -2.5
2006–07 0.8
2007–08 -7.5
2008–09 -11.1
2009–10 2.7
2010–11 3.9
2011–12 -3.6
2012–13 8.5
2013–14 7.1
2014–15 9.4 -0.1
2015–16 -0.7 -0.4 0.1
2016–17 2.3 1.8 0.3
2017–18 3.2 1.7 0
2018–19 5.9 2.2 -0.1
2019–20 -4.6 -1.9 0.2 -1.9
2020–21 14.4 9.3 0 8.2 8.1 8.1
2021–22 -11.3 -1.5 -0.8 -8.3 -8.2 -8.3

The FF has 17 years of data and has reported a lower return than benchmark 41% of the time, the MRFF has 7 years of data and has reported a lower return than benchmark 43% of the time, and the DCAF has 8 years of data has reported a lower return than benchmark 38% of the time. The other funds have insufficient years to draw any meaningful conclusions. However, what this assessment suggests is that the HAFF could be expected to not meet or exceed its benchmark return up to 43% of the time, if history is a guide.

Further, as discussed during the 19 August 2021 hearing of the Joint Committee of Public Accounts and Audit (inquiry into alternative financing mechanisms), the threshold for classifying an equity‑backed Government entity as a ‘financial asset’ is quite low:

Senator SCARR: When is something a financial asset? My understanding is that it needs to be expected to deliver a positive real rate of return. … So if it delivers $1 of positive return on a real basis it can still be considered a financial asset. …

Dr Helgeby [Parliamentary Budget Officer]: … It is, as you say, a low threshold – it is simply that you have an expectation of a positive return; and there is a level of interpretation around that. …

Senator SCARR: … In paragraph 4.1.2 [of the 2020 PBO report], you quote from the business case for Inland Rail, … that Inland Rail ‘would not generate enough revenue to provide a return on its full construction cost’. … If there’s a large infrastructure project which, by its own business case, is not going to generate the return to pay for its construction … how should investment in such a project be treated? … Because if the project’s never going to make a positive real rate of return, I struggle with how you can treat investments into the project as equity as opposed to being grants.

Dr Helgeby: In that case, the investment is into the entity, the ARC [sic; the Australian Rail Track Corporation], and the test is being applied at that level rather than at the individual project level in that particular case … in essence, the reason why the payment that is associated with the construction of Inland Rail is treated that way is because it’s actually a payment to the entity. …

Senator SCARR: The entity has a number of different projects, a number of different cash-generating units, but we’re simply putting money into the entity, so we just don’t have the visibility or transparency around how that investment is being made on a project-by-project basis because it’s being made at an entity level. Is that correct?

Dr Helgeby: Yes, that’s right. [Pages 3–4; emphasis added]

The Joint Committee of Public Accounts and Audit (JCPAA) inquiry into alternative financing mechanisms explored the implications of the above complexities for Budget transparency. In discussing balance sheet financing the PBO’s Dr Helgeby noted:

In the case of balance sheet financing, the impact of the policies will be reflected in the balance sheet and the budget forecasts and actuals, but only as part of large totals, so the amounts [for specific entities or initiatives] can be obscured. Estimated costs of new policies are recorded in detail in the measures document, Budget Paper No. 2, but normally only in terms of cash flows rather than stocks.

This means that, unless further information is made available, parliament would find it difficult to fully assess the financial impact of policies such as loans, equity injections and guarantees. … In summary, while straightforward decisions may not need complicated information to explain them, complex arrangements such as those that involve equity, loans or guarantees need other information to make them readily understandable. …

At the moment, someone who is trying to get their head around that … would have to piece things together … from the relevant portfolio’s annual report, the portfolio budget statement and the budget papers themselves. Often in the case of a government business entity you also have to piece it together from the corporate plan or the other forward looking documents of that entity itself. That, to be honest, makes it pretty hard. It’s not that the information doesn’t exist; it’s that the information is not put together in a way that helps people trying to understand these things. [Pages 1–2, emphasis added]

In its first Budget, however, the Government suggests it may deal with describing nuances and risks associated with alternative financing mechanisms. The Budget Strategy and Outlook: Budget Paper No. 1 October 2022–23 elaborated:

Cashflows from the acquisition of financial assets, like equity or loans receivable, do not impact on the underlying cash balance (UCB) provided the Government is expected to recover its investments. The acquisition of financial assets for policy purposes does reduce the headline cash balance (HCB) and requires additional debt issuance (assuming no available cash reserves), increasing gross debt. …

Establishing investments expected to earn a market rate of return does not initially change net financial worth (as an increase in gross debt is offset by an equal increase in financial assets). The impact on net debt depends on the nature of the asset acquired. Debt-like financial assets are included as assets in net debt, offsetting debt issuance. For example, a (non-concessional) loan does not increase net debt as it is considered a debt-like asset, whereas equity investments do increase net debt.

Risk management is critical to balance sheet investment. Debt financed asset accumulation improves the budget when returns exceed borrowing costs, but also increases the Government’s risk exposure. Some risks are specific to the investment (such as borrower specific risks of defaults or delivering poor value for money by competing with the private sector for investment opportunities). Others are economy wide (such as changes in interest rates, economic activity, and business profitability). [Page 99; emphasis added]

The budget paper also stated that: ‘The Government is committed to improving transparency provided around the use of the balance sheet’ (page 98).

From a management perspective the International Monetary Fund (IMF) has cautioned the Australian Government about the use of these ‘below-the-line’ funds. In the 2022 Article IV Consultation-Press Release; and Staff Report for Australia, IMF Staff express a view that ‘strong aggregate demand and the tight labour market warrant continued focus on fiscal consolidation in the near term’, adding:

Implementation of below-the-line activity through newly created investment vehicles (National Reconstruction Fund, Rewiring the Nation, and Housing Australia Future Fund) should be phased appropriately, and, more broadly, a proliferation of such vehicles should be avoided. (p. 11)

However, at the time of writing, as for earlier legislation relating to new fund creation, the true nature of the fiscal risks being entered into are not transparent from the supporting material for the HAFF Bill. The Explanatory Memorandum claims there is the potential for a positive return.[29] This may not be the case, and the financial implications are discussed later in this Digest.

Investment of the HAFF by the Future Fund Board

Clause 39 specifies that investments of the HAFF by the Future Fund Board are to be made in the name of the Future Fund Board. This, the Explanatory Memorandum clarifies, is ‘to make it clear that the Future Fund Board would manage the HAFF at arm’s length from the Government. However, beneficial ownership of the HAFF assets would remain with the Commonwealth at all times.’[30]

The objectives of investments

Clause 38 ‘reinforces’ that investments of the Future Fund Board are to have the main objective of enhancing the Commonwealth’s ability to transfer amounts to various bodies under the Act in relation to acute housing needs, social housing and affordable housing. [31]

Put another way, in February 2023 Senate Estimates, Jenny Wilkinson (Secretary of the Department of Finance) stated that HAFF money will be invested ‘… in order to generate the return that the government, on average, wishes to get from that investment in order to support the housing disbursements through Housing Australia and the grants which are associated with that policy (p. 100).’

The investment powers of the Future Fund Board

Subclause 39(1) states that the Future Fund Board may invest amounts from the HAFF Special Account in any financial asset. According to the Explanatory Memorandum, this expands on the investment powers provided for under section 58 of the PGPA Act to provide for the investment of the HAFF in a broad range of financial assets.[32] This is an approach that has been taken in other Commonwealth investment funds, including the Future Fund and the Disaster Ready Fund.[33]

However, as per clause 47, the Future Fund Board must not borrow money, except for short-term borrowing associated with the settlement of transactions, or in other circumstances prescribed in the rules (intended, as per the Explanatory Memorandum, to ‘accommodate unforeseen events or changes in the investment environment’[34]). In addition, clause 49 states that the Future Fund Board may only acquire derivatives for specified purposes. As explained in the Parliamentary Library’s October 2022 research paper Financial derivatives and their regulation:

A derivative is a contract between two parties that derives its value from the performance of an underlying asset. The underlying asset can be almost anything of value (most commonly commodities, stocks and bonds). … Traditional forms of derivatives such as options and forward contracts … have existed for hundreds of years. Newer and more complex derivatives such as collateralised debt obligations or credit default swaps have grown enormously in recent decades, and now constitute a multi-trillion dollar worldwide market. …

Investors and firms use derivatives primarily for two reasons:

1.    to hedge against future price movements, reducing uncertainty; or

2.    to speculate on future price movements, accepting greater risk exposure in exchange for the chance of greater profit (p. 3).

As the research paper explains, financial derivatives have the potential to amplify risk and were implicated in the Global Financial Crisis (GFC) – hence the prudential restrictions in this Bill.

Clause 51 provides that the Future Fund Board may enter into securities lending arrangements for a purpose in connection with the HAFF; any money received under such arrangement is to be credited to the HAFF Special Account. According to the Explanatory Memorandum, ‘[l]ending of securities is commonplace among institutional investors.’[35]

The HAFF Investment Mandate and Investment Policies

Clause 41 states that the responsible Ministers may (subject to some limitations set out in clause 43) issue written directions to the Future Fund Board about the performance of the HAFF investment functions, and they must issue at least one such direction. Directions will collectively be known as the HAFF Investment Mandate. According to the Explanatory Memorandum, this clause:

…establishes a framework that enables the Government to give strategic guidance to the Future Fund Board while preserving the Board’s role in managing the investments of the HAFF at arm’s length from the Government. This approach is consistent with the arrangements in place for the other investment funds managed by the Future Fund Board.[36]      

Notably, the HAFF Investment Mandate would be a legislative instrument that would not be subject to disallowance or sunsetting.[37] The Scrutiny Committee expressed concern with this arrangement, and has asked the Minister to provide detailed advice in relation to the exceptional circumstances that are said to justify exempting an Investment Mandate from the usual parliamentary disallowance process.[38]

Clause 43 specifies that responsible Ministers must not direct the Future Fund Board to use the assets of the HAFF to invest in a particular financial asset (for example, shares in a particular company). As per clause 44, the responsible Ministers must consult with the Future Fund Board before giving a direction under clause 41, and once the HAFF Investment Mandate is in place clause 45 provides that the Future Fund Board must take all reasonable steps to comply with it and responsible Ministers must be notified in writing of a breach as soon as is practicable.

Clause 48 dictates that the Future Fund Board must formulate, publish and comply with written policies on its investment activities. According to the Explanatory Memorandum, ‘[t]he aim of this provision is to ensure rigour and transparency around how the Future Fund Board performs its investment function in relation to the HAFF, including risk management, performance assessment and benchmarks.’[39] These policies must be reviewed periodically, and when there are changes to the HAFF Investment Mandate.

The HAFF Bill does not specify a target rate of return for assets under management. Subclause 41(4) provides that policies in relation to matters of risk and return may be set out within the HAFF Investment Mandate. However, a Parliamentary Budget Office costing of the HAFF assumed a rate of return matching that of the Emergency Response Fund would be appropriate. According to the Department of Finance, the ERF benchmark return target is the rate of Consumer Price Index plus 2% to 3% per annum, net of investment fees. The ERF did not meet this target in 2021‑22 losing 0.1% compared to a benchmark of 8.1%. In Senate Estimates in February Department of Finance evidence confirmed that budgeted HAFF returns are based on ‘…CPI plus two to three per cent’ (p. 101), however the Minister for Finance observed that ‘I don’t believe I’ve signed off an investment mandate for the HAFF because the HAFF hasn’t passed the parliament either’ (p. 77).

Reporting Obligations

Clause 58 imposes an obligation on the Future Fund Board to keep the responsible Ministers informed of its operations under the Act. Clause 57 permits the Finance Minister to require the Board to provide reports or documents on any matter relating to the performance of its functions under the Act. The Explanatory Memorandum clarifies that ‘[s]uch a report could be requested, for example, in order to satisfy the Government that the Future Fund Board’s management of the HAFF complies with legislation and the HAFF Investment Mandate’.[40] The Finance Minister may give reports, documents and other information provided by the Board to other Ministers (Clause 59).

Miscellaneous provisions

Clauses 61 through 64 enable the Finance Minister, Treasurer and designated Ministers to delegate certain functions and powers under the HAFF Bill.

Clause 65 specifies that the Housing Minister must cause reviews of the operation of the Act to be conducted. The first review must be completed by 31 December 2028, and then subsequent reviews must be completed every five years thereafter. The report of the review is to be tabled in Parliament within 15 sitting days of that report being given to the Housing Minister.

According to the Explanatory Memorandum, the ‘review mechanism is intended to provide the opportunity to consider whether the HAFF Bill, as enacted, is providing the outcomes envisaged’.[41] Reviews must consider several aspects of the Act’s operation, including the extent to which grants under clause 18 or transfer payments under clause 33 have improved housing outcomes for Australians, and the extent to which the Act is meeting Australian’s acute housing, social housing and affordable housing needs as the housing market and economic parameters change.

Clause 66 provides that the Finance Minister may, by legislative instrument, make rules covering matters required or permitted to be prescribed in the Act, or matters that would be necessary or convenient to prescribe for the purposes of the Act. The rules would be disallowable by the Parliament.

National Housing Supply and Affordability Council Bill 2023

Purpose of the Bill

The National Housing Supply and Affordability Council (the Council) is created by the National Housing Supply and Affordability Council Bill 2023 (the Council Bill). The statutory Council will replace the Interim National Housing Supply and Affordability Council established in December 2022.[42]

Structure of the Bill

The Council Bill comprises five parts:

  • Part 1 includes a simplified outline, the object, definitions, and commencement provisions
  • Part 2 establishes the Council, including membership provisions, functions and powers
  • Part 3 sets out decision making arrangements, including requirements for a quorum and voting
  • Part 4 outlines arrangements for Council members, staff and consultants
  • Part 5 provides that a review must be undertaken as soon as possible after 1 July 2026.

Key provisions and issues

Main functions of the Council

The Explanatory Memorandum observes that, in the context of advising the Government on matters relating to housing supply and affordability, the functions of the Council fall into three categories: advice, research and reports.[43]

A comparable existing entity is the Australian Medical Research Advisory Board (AMRAB) established by Part 2A of the Medical Research Future Fund Act 2015. The Health Minister considers AMRAB’s advice in relation to financial assistance provided from the Medical Research Future Fund Special Account. Similarly, the proposed Council’s functions include advising in relation to financial assistance provided from the Housing Australia Future Fund.

Clause 14 establishes the Council’s independence, subject to legislation, granting it discretion in performing its functions or powers and ensuring that it will be free from any direction from anyone. The Explanatory Memorandum observes that, notwithstanding that the Minister may request the Council to research, report or provide advice on specific matters, the Minister cannot direct how the Council undertakes the research or provides the advice or report.[44]

Advice

The Council advises the Minister ‘as requested’ on ‘matters relating to housing supply and affordability being considered at intergovernmental forums involving the Commonwealth’ (subparagraph 9(1)(b)(i)), and ‘specific matters relating to housing supply and affordability’ (subparagraph 9(1)(b)(ii)).

The Council will also advise the Minister in relation to the total amount of:

  • grants of financial assistance to be made under subsections 18(1) and (3) of the Housing Australia Future Fund Act 2023[45] in a financial year (paragraph 9(1)(c)) and
  • payments to be made under paragraph 47C(1)(b) of the Housing Australia Act 2018 [46] to Housing Australia in a financial year (paragraph 9(1)(d)).
Research

Under paragraph 9(1)(e) the Council will undertake research into housing supply and affordability by monitoring conditions which impact housing supply and affordability. The Council will also collaborate with key stakeholders to collect and publish nationally consistent data. The Explanatory Memorandum observes that:

Due to the creation of the Council, which will now undertake the bulk of national research on housing supply and affordability matters necessary to advise the Government, Housing Australia’s research will be focussed on matters that assist in the performance of its functions …[47]

The discussion below provides further information about how the Amendment Bill proposes to clarify the role of the renamed Housing Australia.

Reports

Council reports may be produced at the Council’s initiative (subparagraph 9(1)(a)(i)), or in response to a request from the Minister on a specific matter (subparagraph 9(1)(a)(ii)). Reports produced under subparagraph 9(1)(a) may be published publicly (clause 12).

Clause 10 provides that an annual report on research into housing supply and affordability undertaken by the Council in the past financial year must be given to the Minister within 10 months after the end of the financial year. The report must provide an overview of the state of the housing system in the past financial year and must be published on the Council’s website.

Withdrawal of requests for research, reports, or advice

Clause 11 provides that, in addition to the above provisions, the Minister may also request the Council to:

  • undertake research and report on a specific matter relating to housing supply and affordability (paragraph 11(1)(a))
  • advise on a specific matter relating to housing supply and affordability((paragraph 11(1)(b)); and
  • advise on a matter relating to housing supply and affordability being considered at an intergovernmental forum involving the Commonwealth (paragraph 11(1)(c)).

Subclause 11(5) provides that ‘the Minister may withdraw or amend such a request at any time before the Council gives the report or advice to the Minister’.

Structure, governance, and administrative arrangements

The proposed structure, governance, and administrative arrangements are like other Australian Government Councils.

Members

Clause 8 states that the Council comprises the Chair, the Deputy Chair, the Department of the Treasury Deputy Secretary primarily responsible for housing policy matters (an ex-officio member); and at least 4 and no more than 7 other appointed members. Clause 7 establishes the Council and specifies that its members are officials of the portfolio department for the purposes of the PGPA Act.

Under subclause 22(1), all members are appointed by the Minister through a written instrument (except for the relevant Deputy Secretary, who is an ex officio member). The Minister must appoint one appointed member to be the Chair and one to be the Deputy Chair (subclause 22(4)). An appointed member’s term must not exceed four years and appointed members may be reappointed, but terms may not exceed eight years in total (clause 23).

To be eligible to be an appointed member the Minister must be satisfied that candidates have, individually, substantial experience, expertise or qualifications and significant standing in at least one of eleven listed fields (subclause 22(2)). The Minister must also ensure that, collectively, the appointed members comprise an appropriate balance of qualifications, skills or experience in the listed fields (subclause 22(3)).

Duty to disclose interests

Section 29 of the PGPA Act deals with the duty of an official of a Commonwealth entity to disclose interests. Under clause 28 appointed members must disclose to the Minister any material personal interests as required under the PGPA Act or as imposed by additional rules under that Act in relation to the Council.

Staff and consultants

Clause 31 provides that staff assisting the Council are to be APS employees in the Treasury Department whose services are made available to the Council, by the Secretary of the Treasury.

Clause 32 provides that the Secretary may, on behalf of the Commonwealth, engage consultants to assist in the performance of any of the Council’s functions or the exercise of any of the Council’s powers.

Review

Clause 34 provides that the Minister must cause a review of the effectiveness of the Act to be undertaken as soon as possible after 1 July 2026, and the written report of the review must be tabled in each House of the Parliament within 15 sitting days of that House after the report is given to the Minister.

Treasury Laws Amendment (Housing Measures No. 1) Bill 2023

Purpose of the Bill

The National Housing Finance and Investment Corporation (NHFIC) is to be renamed Housing Australia by amendments proposed in the Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 (the Amendment Bill). The Amendment Bill also extends the Commonwealth guarantee currently held for the NHFIC from 1 July 2023 to 1 July 2028. In addition, a series of consequential amendments are made to reflect this name change across 2 other Commonwealth Acts and to 8 further Acts to assist in the operation of the HAFF.

Structure of the Bill

The Amendment Bill comprises four schedules:

  • Schedule 1 renames the National Housing Finance and Investment Corporation Act 2018 (the NHFIC Act) as the Housing Australia Act 2018, and renames the National Housing Finance and Investment Corporation (NHFIC) as Housing Australia (HA), increases the size of the HA Board by two and adds ‘housing for Aboriginal or Torres Strait Islander people’ to the list of qualifications, skills or experience that potential Board members may possess.
  • Schedule 2 provides for financing, guarantee and capacity building functions and an annual review mechanism. It also clarifies the constitutional basis of the Act.
  • Schedule 3 extends the existing Commonwealth guarantee of the liabilities of NHFIC/HA to apply to contracts entered into until 30 June 2028 and provides that the Commonwealth guarantee cannot be revoked earlier than 1 July 2028.
  • Schedule 4 contains amendments to Acts that are consequential to the HAFF Bill and the functioning of the HAFF.

Key provisions and issues

The Amendment Bill renames the National Housing Finance and Investment Corporation (NHFIC) as Housing Australia (HA), expands the functions of HA, increases the size of the HA Board, and contains amendments to Acts that are consequential to the HAFF Bill. A Parliamentary Library quick guide outlines prior developments in relation to the NHFIC Act.[48]

Schedule 1
Renaming

The Amendment Bill Schedule 1 items 1 and 2 rename the NHFIC Act as the Housing Australia Act 2018. Most provisions in Schedule 1 omit occurrences of ‘National Housing Finance and Investment Corporation’ and ‘NHFIC’ and substitute ‘Housing Australia’ in the NHFIC Act.

Consequential substitutions are made in the Administrative Decisions (Judicial Review) Act 1977 and the Freedom of Information Act 1982 (Schedule 1 items 81 and 82, respectively).

Continuity and savings provisions

Schedule 1 item 16 repeals and replaces subsection 7(1) to provide that the body corporate that was the NHFIC continues in existence as Housing Australia. Schedule 1 item 34 provides similar continuity for the Board by repealing and replacing section 15. Schedule 1 item 83 ensures that the renaming does not affect appointments currently in force (specifically, the Chair of the Board, a member of the Board, or the Chief Executive Officer).

Board

Schedule 1 also increases the size of the Board of Housing Australia from at least four and no more than six members (plus the Chair) to a minimum of six and no more than eight members (plus the Chair) by repealing and replacing paragraph 17(b) (item 38). The Explanatory Memorandum notes that:

The increased membership of the Board reflects the expanded role of Housing Australia and its new functions relating to the use of returns distributed from the HAFF to increase the supply of social and affordable housing. [49]

Under subsection 18(2) of the NHFIC Act, the Minister must be satisfied, when appointing Board members, that they have appropriate qualifications, skills or experience in at least one of a number of fields. Item 39 adds ‘housing for Aboriginal or Torres Strait Islander people’ to that list as an additional field at proposed paragraph 18(2)(ca).

Observer

The Amendment Bill proposes no change to section 27 of the NHFIC Act,[50] which allows a Commonwealth officer to attend board meetings as an observer.[51] The statutory review of the NHFIC in 2021 suggested that the observer ‘should not be an ongoing role and it will be desirable to return to a standard governance model at the earliest opportunity’, but the review did not make a specific recommendation on this point.[52] The Parliamentary Library’s Bills Digest for the NHFIC Bill in 2018 noted that the practice of having an observer attend board meetings was likely to have been in place informally in a number of portfolios.[53] However, the NHFIC was likely to be the first time an observer role had been formalised in Commonwealth legislation.[54]

Functions

Schedule 2

Schedule 2 amends the newly renamed Housing Australia Act 2018.

Existing functions, prior to the Amendment Bill

Section 8 of the NHFIC Act sets out the functions of the NHFIC. The statutory review of the NHFIC summarised the NHFIC’s functions as at August 2021:

NHFIC was established to operate [1] the Affordable Housing Bond Aggregator (AHBA) and [2] the National Housing Infrastructure Facility (NHIF).

[1] With the explicit backing of the Commonwealth, the AHBA makes loans to eligible [Community Housing Providers] CHPs and finances those loans via the issuance of bonds in the wholesale capital market.

[2] The NHIF was created to help fund the provision of critical infrastructure underpinning the supply of affordable housing, including electricity, gas, sewerage and transportation.

NHFIC was also given a Capacity Building Program under which grants may be paid to community housing providers applying for AHBA or NHIF finance. The grants are intended to provide CHPs with consultancy advice on financing, business planning, property development and risk management.

In October 2019, NHFIC’s activities were expanded when the NHFIC Act and Investment Mandate were amended to establish the First Home Loan Deposit Scheme (FHLDS) and a new research function. The FHLDS was established with the aim of enabling first home buyers to access the housing market sooner. Under the FHLDS, eligible first home buyers require a minimum 5 per cent deposit to purchase a home – subject to meeting participating lenders’ loan assessment criteria –with NHFIC providing a guarantee of up to 15 per cent of the value of the property. NHFIC’s research function was established to conduct research into housing affordability in Australia, including on housing demand and supply.

In the 2020–21 Budget, the FHLDS was expanded to include the New Home Guarantee, which enables eligible first home buyers to build a new home or purchase a newly-built home with a minimum 5 per cent deposit. The New Home Guarantee aims to expand the supply of housing and stimulate the residential dwelling construction sector. In the 2021-22 Budget, NHFIC was also tasked with administering the Family Home Guarantee, which aims to provide a pathway to home ownership for single parents with dependants.[55] [emphasis added]

In November 2022, through amendments made to the Housing Australia Investment Mandate via the National Housing Finance and Investment Corporation Investment Mandate Amendment (Social and Affordable Housing) Direction 2022, the scope of the NHIF was expanded from the existing financing of eligible infrastructure projects to also include financing of social or affordable housing projects.[56]

Amendment Bill

The Amendment Bill leaves the above arrangements intact. The Explanatory Memorandum states that the amendments in Schedule 2 are aimed at:

  • improving readability, clarity and structure of the relevant functions and constitutional basis provisions in that Act; and
  • providing a review mechanism for the NHIF’s operation, allowing the Government to regularly review the NHIF’s performance in achieving its objectives.[57]
Improved clarity about Housing Australia’s functions

The Explanatory Memorandum observes that:

Prior to amendment, section 8 of the Housing Australia Act set out a range of functions and section 10 included the constitutional basis under which the Act was legislated. The interaction of the two sections was complex (p. 61).

Schedule 2 to the Amendment Bill amends sections 8 and 10 of the Housing Australia Act and inserts new provisions to streamline the functions and simplify the constitutional basis provisions of that Act, improving the clarity, readability, and operation of these provisions.

To achieve this, item 4 of Schedule 2 proposes the repeal of paragraphs 8(1)(a) to (cb), which list the functions of the NHFIC, and their replacement with simplified provisions that arrange matters in relation to three functions:

  • the financing function
  • the guarantee function and
  • the capacity building function.

In addition, item 5 inserts proposed subsections 8(1A) to (1C) containing simplified constitutional provisions relevant to each of these functions, replacing the previously enumerated list of constitutional heads of powers in section 10, which is repealed by item 8. Proposed subsection 8(1A) provides that the financing function of Housing Australia is to make loans and grants to:

  • constitutional corporations, states and territories for the purpose of improving, directly or indirectly, housing outcomes and assisting constitutional corporations in the performance or development of their activities, functions, relationships or business
  • other entities for the purpose of improving, directly or indirectly, housing outcomes in a territory, for Aboriginal and Torres Strait Islander people, for members of the Australian Defence Force (ADF) or for aliens.

The financing function, therefore, relies on the following Constitutional powers: corporations (s51(xx)), financial assistance to states (s96), territories (s122), race (s51(xxvi), defence (s51(vi), and aliens (s51(xix)).

Proposed subsection 8(1B) provides that the guarantee function of Housing Australia is to issue guarantees to constitutional corporations, for the purpose of improving housing outcomes and assisting the corporation in the performance or development of its activities, functions, relationships or business. Thus the guarantee function relies on the corporations power in section 51(xx) of the Constitution.

Proposed subsection 8(1C) provides that the capacity building function of Housing Australia is to provide business advisory services and other assistance in capacity building:

  • registered community housing providers that are constitutional corporations, for the purpose of improving housing outcomes and assisting the registered community housing provider in the performance or development of its activities, functions, relationships or business and
  • registered community housing providers, for the purpose of improving housing outcomes in a territory, for Aboriginal or Torres Strait Islander people, for members of the ADF, or for aliens.

The capacity building function, therefore, relies on the following Constitutional powers: corporations (s51(xx)), territories (s122), race (s51(xxvi), defence (s51(vi), and aliens (s51(xix)).

In relation to grants to a state or territory, in 2018 the Senate Scrutiny of Bills Committee expressed its concern at the limited Parliamentary scrutiny afforded to grants to the states and territories in the National Housing Finance and Investment Corporation Bill 2018 (NHFIC Bill). 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 such financial assistance may be granted to the states and territories,[58] though the NHFIC Bill was not amended in this fashion. The Scrutiny Committee referred to its previous comments in its review of the current Bills, stating ‘it does not appear that any of the committee's scrutiny concerns have been addressed in relation to the new form of the power’.[59]

Item 8 inserts proposed section 10 that more clearly outlines processes and responsibilities for the lodgement of applications, assessment of applications, compliance with terms and conditions, and payment arrangements.

National Housing Infrastructure Facility: Annual review

Schedule 2 item 16 inserts proposed section 57B to require an annual review of the National Housing Infrastructure Facility (NHIF), operated by Housing Australia. The Minister must cause a copy of the review to be tabled in each House of the Parliament within 15 sitting days from its receipt. The Explanatory Memorandum notes that this new provision recognises that, as outlined above, the remit of the NHIF was expanded in November 2022.[60]

Research role

The Explanatory Memorandum observes that Housing Australia’s research role will focus on ‘matters that assist in the performance of its own functions’ and that, as discussed above in relation to the Council Bill, ‘the Council … will now undertake the bulk of national research on housing supply and affordability matters necessary to advise the Government’.[61]

Schedule 3
Commonwealth Guarantee: Extension of minimum date

The Commonwealth guarantee underpins NHFIC bonds that enable a low-cost finance option for community housing providers. Under current subsection 51(2) of the NHFIC Act, the Commonwealth guarantee cannot be removed earlier than 1 July 2023. The Explanatory Memorandum notes that the NHFIC Review’s recommendation 6 sought an extension of the minimum date, without specifying a date.[62]

Schedule 3 item 1 provides for the extension of the earliest date for the removal of the Commonwealth guarantee by amending subsection 51(2) of the Housing Australia Act 2018 to omit ‘1 July 2023’ and substitute ‘1 July 2028’. Thereafter, the guarantee will remain in place until the Minister otherwise determines. The Explanatory Memorandum notes that:

The intent of the extended Commonwealth guarantee of the Bond Aggregator’s liabilities is to support market confidence and strengthen Housing Australia’s ability to improve housing outcomes.

The extension of the term of the guarantee recognises the Government’s commitment to the Bond Aggregator function and further developing the market for social and affordable housing.

The extended guarantee supports investor appetite to invest in affordable housing bonds issued by Housing Australia as part of its administration of the Bond Aggregator. The extended guarantee also recognises the importance of the Bond Aggregator and Housing Australia’s role in continuing to offer community housing providers low-cost finance.[63]

The NHFIC Review also recommended that ‘a review of the ongoing need for the Government guarantee should occur well in advance of [the extended date]’, but this is not required by the Amendment Bill.[64]

Schedule 4
Amendments consequential to passage of the HAFF Bill

Schedule 4 contains further consequential amendments to eight acts: the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018; COAG Reform Fund Act 2008; DisabilityCare Australia Fund Act 2013; Future Drought Fund Act 2019; Future Fund Act 2006; Medical Research Future Fund Act 2015; Housing Australia Act 2018 and the Disaster Ready Fund Act 2019 (this Act was renamed the Emergency Response Fund Act 2019 by the Emergency Response Fund Amendment (Disaster Ready Fund) Act 2022).

These amendments are consequential to the HAFF Bill and the functioning of the HAFF and will permit the Future Fund Board to manage the HAFF and for amounts to be transferred between the HAFF and the Future Fund.

The Explanatory Memorandum notes that the HAFF Bill will create a funding source for Housing Australia and that the amendments to the other Acts in Schedule 4:

allow for amounts to be transferred between the HAFF and the Future Fund to allow for proper apportioning of common expenses incurred by the Future Fund Board in managing the HAFF, the Future Fund, the FDF, the ATSILSFF, the MRFF, the DRF, and the DCAF.[65]

The amendments to the Housing Australia Act 2018 (items 40 to 43) amend section 47C of that Act to:

broaden the purpose of the Housing Australia Special Account to allow the payment of grants and loans in relation to acute housing needs, social housing and affordable housing.[66]

Policy position of non-government parties and Independents

The Opposition supports the Council Bill and the Amendment Bill (subject to a proposed amendment, which was not agreed to), but opposed the HAFF Bill in the House of Representatives (with the exception of Bridget Archer, who crossed the floor to vote in support of the HAFF Bill whilst indicating that she still has concerns about some aspects of the Bill, which she hopes will be addressed in the Senate). The main point of contention expressed by the Opposition appears to be the use of an off-budget future fund to address affordable housing in Australia, and in particular the inflationary pressure such a fund might produce. For instance:

  • Michael Sukkar (Shadow Minister for Social Services, Shadow Minister for NDIS, Shadow Minister for Housing and Homelessness) stated that ‘[t]here are a number of reasons… why the opposition will not be supporting this bill, but the first and foremost is that anything that will increase the inflationary environment in the economy and therefore increase the prospect of higher mortgage interest rates cannot in good conscience be supported in this House, and we will not be doing so, partly for that reason.’ Mr Sukkar went on to note the ‘absolute uncertainty of any funding that would arise from this proposal’ as well as to comment on the lack of ‘crucial detail’ included in the bill (including the lack of a released investment mandate and the failure to define key terms including ‘acute housing’). Mr Sukkar also raised the concern that in earmarking a majority of the money to be paid to states and territories, the role of Community Housing Providers might be sidelined.
  • Henry Pike stated that ‘[t]he coalition has in-principle concerns for the establishment of funds such as the Housing Australia Future Fund due to the increased debt burden on the Commonwealth.’ He further noted that ‘[t]he IMF has already warned the government that the proliferation of these sorts of funds is something that should be avoided. At latest count, this means $45 billion in off-budget spending from the Labor government—a staggering amount of money. And all this has inflationary pressure and will have an impact on the cost of living for Australian households.’
  • James Stevens commented that ‘[w]hat a breakthrough revelation moment we are having here: let's just borrow an indiscriminate amount of money and earn more on it than what it cost us to borrow and pay for all of government—it's completely farcical. But that is what the proposition is in this bill. And that is fundamentally why we, of course, as responsible economic managers in the coalition, don't support it.’

The Greens[67] abstained from the vote on the HAFF Bill in the House of Representatives, with Max Chandler-Mather (Greens spokesperson for housing and homelessness) stating that the Greens will be going in to the debate on the bill the Senate with a set of key negotiating aims. So far, the expressed aims are: setting a minimum annual investment and removing the annual investment cap; putting in place a national plan for renters including the Prime Minister putting a national freeze on rent increases on the national cabinet agenda and an immediate doubling of Commonwealth Rent Assistance in the Budget; investing $1 billion in remote Aboriginal Housing over 5 years; ensuring all housing funded through the Fund meets minimum inclusive design standards (Liveable Housing Australia Silver).[68]

Independent members of the House of Representatives have generally supported the Bills, while expressing a view that the HAFF Bill should be seen as a starting point for addressing Australia’s social and affordable housing crisis. Other concerns raised by Independent members include:

  • Zoe Daniel stated that there are still many questions to be resolved before the Bill passed both Houses: ‘What will be the lines of accountability to deliver the number of homes proposed? Why does the National Housing and Homelessness Plan not sit with one of the new bodies being created under this package? Will the fund capital be sufficient to fund delivery, and is it to be a permanent capital base? What happens after the first five years of the fund's operation? We need more detail.’
  • Zali Steggall stated that ‘[t]here are integrity concerns with this bill, regarding the independence of the Housing Australia board. There are also concerns about the funding model, which only provides for outright grants, leaving it subject to rorting. We need the governance of the fund to be truly independent and keep the grant money directed to where it's needed most.’
  • Kylea Tink noted her concern about the funding structure leading to the ‘potential for rorting’ and stated that ‘the oversight structure guiding Housing Australia must be above reproach’. She also commented that she would ‘encourage this government to actively consider how public policy might best balance differing needs between those who desire more high-density development in established suburbs, with the very real need to build more housing on greenfields sites.’
  • Allegra Spender raised concerns about the increasing use of off-budget vehicles in general, and stated that ‘[w]hile there may be legitimate policy reasons for an entity to sit outside the Commonwealth budget, it is also legitimate that there are appropriate standards of transparency, oversight and accountability in place. I believe that the existing standards are inadequate and it would be preferable if action were taken in this parliament to establish a joint committee which would oversee off-budget spending...'
  • Rebekha Sharkie similarly supported the Bills as a ‘good start’, but expressed that the HAFF ‘cannot be the endgame,’ particularly for people in the regions.

In the House of Representatives, whilst amendments were proposed to all of the Bills by various parties and Independents, only amendments moved by Dr Helen Haines to the National Housing Supply and Affordability Council Bill 2023 were agreed.[69] Dr Haines explained that these amendments to provide for a member of the Council to have relevant experience or expertise on housing needs in regional, rural and remote Australia ‘is crucial if we’re going to address this housing crisis’.[70]  

Ahead of the parliamentary sitting period in March 2023, it had been reported that the Greens, Independent Senator David Pocock and the Jacqui Lambie Network ‘are in talks about working as a bloc to encourage the government to go further.’ Independent Senator David Pocock has welcomed the Bills, but expressed concern that they ‘don't go anywhere near far enough.’ Jacqui Lambie Network Senator Tammy Tyrrell has reportedly indicated that she will ask that the government guarantee at least 1,200 social and affordable homes for Tasmania in the first five years of the HAFF, which doubles Tasmania’s eligibility under the current plans.

Position of major interest groups

There appears to be broad-based support for the Bills from major interest groups.

Planning peak bodies, community housing associations, not-for-profit housing providers, and property developer lobby groups have all expressed support for the measures, generally as a good ‘first step’ in addressing Australia’s social and affordable housing issues, but with some caveats. For instance:

  • The Property Council of Australia welcomed the introduction of the Bills, with the CEO stating that ‘[t]he legislation introduced today is an important first step to get government working together with industry to bridge the national housing deficit and stimulate new supply that Australia desperately needs.’
  • The Urban Development Institute of Australia (UDIA) stated in its submission to the consultation on the draft Bills that it ‘supports the Federal Government HAFF and Council initiatives, but we are concerned that unless the Bills are amended, the HAFF will not have the flexibility to respond to the economic environment and risk failing to provide the targeted 30,000 houses over 5 years.’ One of the amendments proposed by the UDIA was including a legislative definition of acute, social and affordable housing having regard to the regulatory regimes (including existing definitions and terminology) at Commonwealth, state and territory level, for consistency.
  • Evolve Housing, a not-for-profit community housing provider, welcomed the Bills, with the CEO stating that ‘[t]here has never been a more important time to develop social and affordable housing across Australia, and this project will deliver new homes for those most in need. We are looking forward to working with the State and Federal Governments in this exciting new initiative that will help improve the lives of vulnerable Aussies.’
  • The Community Housing Industry Association and PowerHousing Australia, in a joint statement, expressed their support as follows: ‘[t]he Housing Australia Future Fund is a permanent, structural response to Australia’s most difficult social and economic challenge.’ However, they also offered recommendations as to how the tendering process should be structured and suggested that state, territory and local governments could be encouraged to contribute land, property, grant and offer planning concessions to enhance outcomes from the fund.
  • The Planning Institute of Australia (the national body representing the planning profession) stated in its submission to the consultation on the draft Bills that it ‘strongly endorses the expansion of the Commonwealth’s investment in social and affordable housing – and broadly support the funding and institutional mechanisms in the legislative package.’ However, PIA noted that ‘[w]hile the package would enable the right actions – PIA are looking for measures that target social and affordable housing funding in the right place and enhance planned urban growth/renewal priorities aligned with a spatial strategy for land use and infrastructure.’ It then went on to propose a number of recommendations for improving the Bills, including locating housing measures within a National Settlement Strategy.

Conversely, some commentators have questioned the effectiveness of the initiatives. Examples of these critiques include:

  • An opinion piece from the Antipoverty Centre, Labor’s housing plan is a ‘turning point’ taking us in the wrong direction, which observes, for example ‘Prime Minister Anthony Albanese trumpets his modest beginnings in public housing, yet as rents soar, he seems uninterested in meaningful action to address the shortfall of 500,000 public homes. That number could blow out to 750,000 in a decade’, and ‘Labor’s claim of 30,000 houses by 2029 is implausible when the details of the scheme are scrutinised — especially when considering it barely covers what we’re set to lose over the next few years as the National Rental Affordability Scheme ends. The upshot is that if the fund loses money, as the Future Fund did last year, there’ll be zero dollars for new homes in that year — and no ability to make up for it, thanks to the $500 million yearly cap.’
  • In his submission to the HAFF Bills Senate Inquiry, Dr Cameron Murray (Research Fellow with the Henry Halloran Trust at the University of Sydney) states that ‘[t]he proposed Housing Australia Future Fund (HAFF) is a bad policy. Its main outcome is to unnecessarily pay millions each year in fees for financial management. If the objective is to make homes cheaper for Australians, it is not clear why the HAFF is better than doing nothing. The basic problem is that the HAFF does not produce new below-market housing of any sort. It instead uses money to buy non-housing assets.’ Dr Murray argues that given that the total returns on housing would likely exceed the returns on a future fund, ‘[t]he $10 billion could be spent on building or acquiring new public housing directly, or via state public housing agencies rather than on non‑housing assets.’ Dr Murray considers that this would be a more cost-efficient way of providing below-market housing.
  • Hal Pawson (Professor of Housing Research and Policy, and Associate Director, City Futures Research Centre, UNSW Sydney) is slightly less critical, but still sceptical of the Bills’ ability to address ‘Australia’s mounting and complex housing challenges.’ In his opinion, while the Bills are a good first step, ‘the proposed laws don’t give enough priority to the need for a coherent approach to a complex housing system. Multi-faceted problems such as homelessness, unaffordable rents, mortgage stress and a lack of social housing demand joined-up solutions. Housing knowledge and policy-making capacity within government have been badly eroded and must be restored.’

Financial implications

Each of the HAFF and related Bills will have an impact on the fiscal outcomes of the Commonwealth.

A HAFF Special Account will be credited with $10 billion ‘… as soon as practicable after the commencement of… ’, subclause 11(1) of the HAFF Bill. The Explanatory Memorandum states the initial credit of $10 billion will have ‘…no impact on the underlying cash and fiscal balances ‘noting:

Positive interest earnings of the HAFF would have a positive impact on the underlying cash and fiscal balances. Costs incurred by the Future Fund Board would have a negative impact on the underlying cash and fiscal balances. Payments in relation to social housing, affordable housing or acute housing needs would have a negative impact on the underlying cash and fiscal balances. [71]

The expected positive and negative flows are not reported in the Explanatory Memorandum. The October 2022–23 Budget measure ‘Safer and More Affordable Housing’ sets out the Government expects to provide the Department of the Treasury $2.1 billion in payments between 2022–23 and 2025–26 and collect $1.4 billion in related recipes through the Department of Finance over the same period. [72] This cannot be relied upon to indicate the impact of the HAFF Bill as it includes a range of other measures, including the Council and the establishment of Housing Australia (among others).

The Explanatory Memorandum states that the Council is expected to negatively impact on the underlying cash balance by $15.2 million over the years 2022–23 to 2025–26.[73] This is consistent with the October Budget estimate.[74]

According to the Explanatory Memorandum, the impact of the Amendment Bill is expected to be a reduction in receipts (increase in negative underlying cash balance, all else constant) by $0.5 million over the years 2022–23 to 2025–26. This is consistent with the October Budget estimate.[75]

A summary of the reported impact of the HAFF and related Bills is below. In the absence of an estimate of the impact of HAFF Bill the Explanatory Memorandum does not sufficiently explain the aggregate financial implications of the HAFF and related Bills.

Financial impacts reported in Explanatory Memorandum ($m, rounded to nearest $0.1m)
Component 2022–23 2023–24 2024–25 2025–26
HAFF Bill na na na na
Council Bill[76] -2.2 -4.3 -4.4 -4.4
Amendment Bill[77] -0.1 -0.1 -0.1 -0.1

Note: these costings refer to the impact on the underlying cash and fiscal balance.

HAFF and the budget balance

In July 2022 the Parliamentary Budget Office (PBO) published a costing of the ALP Housing Australia Future Fund policy commitment. The policy was similar to the announcement in the Budget. The parameters used by the PBO were based on information available at the time, including economic parameters in the Pre-election Fiscal and Economic Outlook, rates of return consistent with the party policy, and assumptions about the fund’s expected roll out. These were different to the policy as presented in the HAFF and related Bills, however there are important notes which illustrate some longer term impacts of the fund.

The PBO, in its costing, noted:

Consistent with Parliamentary Budget Office (PBO) Guidance 02/2015, PDI [Public Debt Interest] expense impacts have been included in this costing because the equity injections provided under this proposal involve financial asset transactions. (p. 1)

The proposal as costed is different to the Budget policy, with the Finance Minister observing in Senate Estimates in February 2023 that ‘we used them [PBO costings] in our election commitments, and then they were updated’, accepting that the proposal costed was a slightly different structure (p. 100).

However, in developing the election costing the PBO observed:

The proposal would be expected to decrease the fiscal balance by $28 million and the headline cash balance by $10 billion, and have no impact on the underlying cash balance over the 2022-23 Budget forward estimates period. The proposal would have an ongoing impact beyond the 2022-23 Budget forward estimates period. (p. 1)

The costing impact on the underlying cash balance, including the PBO 10 year estimate to 2032‑33, is summarised below. While the numbers are not directly comparable to the HAFF Bill, it is clear from this costing the impact of public debt interest turns the returns from a net positive to negative.

Housing Australia Future Fund – Underlying cash balance ($m)
2022–23 2023–24 2024–25 2025–26 Total to 2025–26 Total to 2032–33
Receipts
Investment earnings 221.0 422.0 589.0 574.0 1,806.0 5,573.0
Total – receipts 221.0 422.0 589.0 574.0 1,806.0 5,573.0
Administered Payments
Grants payments -175.0 -291.0 -366.0 -304.0 -1,136.0 -4,622.0
Total – administered -175.0 -291.0 -366.0 -304.0 -1,136.0 -4,623.0
Departmental Payments
Management Fees -13.3 -26.7 -40.0 -40.0 -120.0 -400.0
Total – payments -188.0 -317.0 -406.0 -345.0 -1,256.0 -5,023.0
Total (ex PDI) 33.0 105.0 183.0 229.0 550.0 550.0
PDI impacts -33.0 -105.0 -183.0 -229.0 -550.0 -2,403.0
Total (incl. PDI) - - - - - -1,853.0

Source: PBO, Housing Australia Future Fund, 2022 Election Commitments Report: ECR165, (Canberra: PBO,2022), 5.

There is no question the $10 billion will increase gross debt, with Jenny Wilkinson (Secretary of the Department of Finance) confirming in February 2023 Senate Estimates the initial $10 billion will be borrowed by the Commonwealth (p. 100). It is however, unclear why a public debt interest costing, or offsetting net investment return is excluded from the Explanatory Memorandum.

Some explanation of the annual impact was disclosed in Senate Estimates. Under questioning from Senator Hume, on 14 February 2023, Department of Finance officials observed information about the HAFF was available:

  • ‘On page 191 of Budget Paper No. 2. Related receipts for Department of Finance: 2022–23 $216.8 million; 2023–24, $440.3 million; 2024–25, $386.2 million; 2025–26, $385.1 million.’
  • ‘Then the other part to this equation is in Budget Paper No. 1, in statement 10, table 10.2, on page 323, which outlines the Australian government general government sector balance sheet. In investments, loans and placements is where the $10 billion that the secretary referred to before would come in as an asset, and under the liabilities is where the borrowing would take place in government securities’ (p. 101).

The October 2022–23 Budget measure ‘Safer and More Affordable Housing’ financial impact is set out below.[78] As observed earlier, this includes a range of other measures not included in the HAFF and related Bills’ scope. There is no mention of the related public debt interest. Parliament could not reasonably rely on the details provided for the Budget measure to understand the financial impact of the HAFF.

Safer and More Affordable Housing measure impact ($m)
2022–23 2023–24 2024–25 2025–26 4 year total
Payments: Department of Treasury 37.8 609.3 678.8 747.4 2,073.3
Related Receipts: Department of Finance 216.8 440.3 386.2 385.1 1,428.4
Net impact 179.0 -169.0 -292.6 -362.3 -644.9

Source: Parliamentary Library calculations based on Australian Government, Budget Measures: Budget Paper No.2: October 2022–23, 191‑192.

Some commentators have suggested that the approach of using  these types of funds is less than optimal for budget transparency. For example, economist Judith Sloane noted:

Notwithstanding the fact Labor announced its intention before the election to establish these off-budget funds, that doesn’t make them a good idea. By taking the spending away from the budget, the true state of the budget is hidden. These three funds [Rewiring the Nation fund, HAFF and the National Reconstruction Fund] are all based on shaky assumptions and their presumed success defies past experience. If the government wants to spend money on these activities, it would be better to be upfront about it without resorting to dubious funds.[79]

Alternative views about other financial impacts

In July 2022 the PBO also published a costing of the Australian Labor Party Housing Australia and the National Housing Supply and Affordability Council policy commitment. While the Government has set out these announcements are likely to have a negative impact on the underlying cash balance, the PBO noted:

… the proposal could be delivered within existing departmental resources. The role and responsibility of the National Housing Supply and Affordability Council largely overlaps with the current functions of NHFIC. As the council would be established within NHFIC, additional resources would not be required. Departmental funding to expand NHFIC’s responsibility to manage new housing programs including Help to Buy, Regional First Home Buyer Support Scheme and Housing Australia Future Fund are provisioned for under each respective program. (p. 1)

This may be an opportunity for the Government to make savings consistent with its fiscal responsibility agenda.

Special appropriations

The HAFF and related Bills create a HAFF Special Account and a HAFF Payments Special Account and re-name the NHFIC Special Account as the Housing Australia Special Account. A special account is a limited form of special appropriation. The payments transfer mechanisms are described in the context of the HAFF Bill earlier.

Committee consideration

Senate Economics Legislation Committee

The Bills have been referred to the Senate Economics Legislation Committee for inquiry and report by 22 March 2023. Details of the inquiry are at Housing Australia Future Fund Bill 2023 [Provisions] National Housing Supply and Affordability Council Bill 2023 [Provisions] and Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 [Provisions].

Senate Standing Committee for the Scrutiny of Bills

The Scrutiny Committee had no comment on the Council Bill.[80] The Committee raised a number of concerns in relation to the other Bills, which are discussed above in relation to the relevant provisions.

The Committee also drew the HAFF Bill to the attention of senators because clause 10 of the Bill provides for the establishment of a special account.[81] As a standard procedure the Committee draws such Bills to senators’ attention because:

Standing appropriations enable entities to spend money from the Consolidated Revenue Fund on an ongoing basis. Their significance from an accountability perspective is that, once they have been enacted, the expenditure they involve does not require regular parliamentary approval and therefore escapes parliamentary control.[82]

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 Bills’ 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 HAFF and related Bills are compatible, and positively engage a range of human rights.[83]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights has provided ‘no comment’ on any of the HAFF and related Bills.[84]

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