News from the front desk – Issue No 398: “Affordable, safe and sustainable” are three words we hear tossed about a lot in the housing discussion. But it’s hard not to sound like the kid in the backseat asking, “Are we there yet? How long till we get there?”
On the affordable front, this week the community housing sector rang the alarm bells on NRAS subsidies commencing their long slow sink into the sunset. Those on the ground warned of a possible exodus of investors no longer willing to retain properties as affordable rentals at below market rent when the subsidy runs out.
What next, then, to fill the gap left by NRAS?
Adrian Harrington, head of funds management at Folkestone, told The Fifth Estate that while NRAS saw a lot of take-up by individual “mum and dad” investors, as well as the community housing providers (CHPs), the government is now focused squarely on the CHPs.
Two measures in the federal budget stand out for him – the National Housing Investment Finance Corporation (NHIFC), which came into effect on 1 July, and the changes to the rules in relation to managed investment trusts to try to encourage global capital to invest in Australian affordable housing.
The NHIFC includes a bond aggregator to package up CHP debt and issue it as Commonwealth-backed bonds with a lower interest rate and longer tenor than a CHP would generally be able to obtain from regular bank finance. The NHIFC also includes the $1 billion housing infrastructure fund “that makes loans investments and grants for enabling projects that provide critical infrastructure to support new housing, particularly new affordable housing,” the NHIFC website says.
Harrington says the revised tax rules aim to encourage global capital to invest into social and affordable sectors.
What these two measures might do that NRAS couldn’t is be scalable and sustainable, he says.
One of the things offshore capital will be looking for is properties delivered by developers with a good reputation for quality outcomes, and organisations like the tier one CHPs that have long-term asset management plans and strong governance.
Environmental sustainability will also matter. The long-term view in terms of asset maintenance and capex funds is crucial.
Harrington points out that in commercial, retail and industrial property, there is a big difference between the assets owned by the big investment trusts and the assets owned by small investors.
The big players invest in the ongoing performance and quality of their assets, whereas something like a small retail centre might “run on the smell of an oily rag”.
Harrington questions how many of the current towers going up in Sydney and Melbourne that have a large number of individual investors will have the right systems in place.
Where they are in a situation of having 400 owners or more, even if the owners corporation has good plans, who will be able to “herd the cats” to get sufficient owners to agree to tip in money to maintain building systems long term?
“Is a [residential] body corporate up to doing what a DEXUS or a GPT is doing with their office and retail assets?”
Overall, though, he is optimistic that with government, the community housing sector and the private sector working together that it’s possible to make a big indent into the affordability issue.
Here’s why affordable housing is important
The need for housing to be safe has been highlighted on a few fronts recently.
This week, Mission Australia released the results of a youth homelessness survey that broadened the definition of homelessness to include the “hidden homeless” – like those couch-surfing.
It’s another symptom of how urgent increasing the supply of appropriate, sustainable and affordable housing is.
Safety is also about security. Mission Australia’s youth homelessness report said affordable housing was a key plank in addressing what is nothing less than a national crisis, affecting the potential of a huge percentage of our next generation.
We believe that the provision of affordable housing, like with NRAS, should not be allowed to revert to market housing after 10 years, leaving us chasing our tails.
There is reason to be concerned that in NSW developers are trying to influence the government to put a time limit on the Greater Sydney Commission’s proposed inclusionary zoning targets for affordable housing on rezoned land (of 5-10 per cent).
While the Greater Sydney Commission told The Fifth Estate it had in mind that the targets would be in perpetuity, there’s scant mention of timeframes in its region or district plans.
With Landcom recently placing a 10-year minimum on affordable housing on its new development – on government land, no less – it doesn’t look promising.
Urban Taskforce’s Chris Johnson also made the disquieting statement that Landcom’s move signalled “government support for a 10-year rental approach”.
With places such as the UK expecting 20-40 per cent of new housing developments to be affordable– in perpetuity – we know we can be more ambitious. If we’re not, there’s only one direction that shocking homelessness – in any age group –can go.
Affordable housing has slipped off government agendas at both state and federal levels in the past year. We must remain vocal to give it the prominence it deserves.