Money Federal Budget Budget 2017: Super funds could back affordable housing with the right deal

Budget 2017: Super funds could back affordable housing with the right deal

NHFC needs subsidy.
The NHFC will need a subsidy to help low income earners. Photo: Getty
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The industry superannuation sector could put as much as $6.8 billion into affordable residential housing under the National Housing Finance Corporation foreshadowed in the budget.

However, for that to happen in a way that would benefit low income earners, the government would have to provide some sort of subsidy to make the investment work. There appears to be no sign of that.

Treasurer Scott Morrison is relying on a “bond aggregator” arrangement that would see the NHFC borrow long term money, probably with a government guarantee, and lend this to housing associations at lower rates than they could obtain themselves.

“A bond aggregator is a good step, but without ongoing government subsidy for community housing, which they have not delivered in the budget, the chances of significantly increasing affordable housing stock is minimal,” opposition housing spokesman Senator Doug Cameron said.

Mr Morrison said the NHFC would be modelled on the Housing Finance Corporation (THFC) in the UK which administers £5 billion ($A8.8 billion) in loans to housing associations.

But THFC relies on a very generous government rental benefit, paid to low income renters, that boosts income for housing co-operatives and is far higher than rent assistance, the Australian equivalent benefit.

“If there is no additional subsidy, the NHFC would have to be targeted to [provide housing to] moderate income earners,” said Professor Nicole Gurran, an urban planning specialist at the University of Sydney.

Brett Himbury, CEO of IFM Investors, an umbrella investor for $82 billion in largely not-for-profit superannuation investments, said institutional investors were looking for long term investments in affordable housing.

“Residential housing remains untapped as an institutional asset class,” Mr Himbury said.

Industry funds would be attracted to investing in affordable housing through a vehicle like NHFC “as a component part of their property allocations,” he said.

Mr Himbury did not detail the likely size of any investment. But super funds tend to have around 10 per cent of their funds in property, which means the industry funds sector has at least $50 billion in the sector.

Building industry fund Cbus has $36 billion in investments, and a spokesman told The New Daily it would like to invest $50 million, or about 1.4 per cent of its funds, into residential property under the a structure like the NHFC – but only if conditions were right.

If that ratio were spread across the whole industry funds sector, which has $486 billion under management, then it could have an appetite for as much as $6.8 billion in residential investment housing.

The Treasurer revealed little about the NHFC plans beyond saying it would “provide long-term, low-cost finance to support more affordable rental housing”. Full details of the plans will be revealed after the Affordable Housing Implementation Taskforce, reports mid-year.

What the Treasurer means by “more affordable” will emerge then. Professor Michel Buxton, a planning specialist at RMIT University, said the government’s plans were “a limited measure that will lead to minor changes in the provision of affordable housing”.

“It won’t make up for many decades of governments failing to meet their obligations” by not keeping up with demand for affordable housing, Professor Buxton said.

“In Europe and many US cities there is an old tradition of providing stable rental housing with rent caps and long term leases. Here, rental housing is seen as a way to make money rather than provide a roof over peoples’ heads.

“Unless we deal with investor demand for negative gearing and the capital gains tax discount we are never going to deal with the problem of affordable housing.”

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