Federal Government Establishes Housing Affordability Taskforce

The Turnbull Government announced on Friday the creation of an Affordable Housing Implementation Taskforce, which aims to develop an affordable and social housing proposal for Australia.

The taskforce aims to create a bond aggregator model to attract greater private sector investment and create more affordable housing across the nation – a similar model to the one successfully implemented in the UK.

According to a press release from Treasurer Scott Morrison’s office, the establishment of the taskforce was based on conclusions reached by the Affordable Housing Working Group in 2016.

The Group’s recommendations were endorsed by state and territory treasurers at the Council on Federal Financial Relations at the end of last year.

 What is a bond aggregator?

A bond aggregator refers to a government-owned corporation which raises large amounts of capital from the bond market (this refers to corporate bonds, not rental bonds for housing).

The bond aggregator can then provide low-interest, long-term loans to not-for-profit community housing organisations, enabling them to build social housing with much lower interest costs than your typical bank loan.

Once built, properties would then be rented at 80% or less of market rental rates, or sold under a co-operative model – both of which make them more affordable for struggling households.

The taskforce will be led by an expert three-person panel that will continue to consult with international and domestic experts.

The panel will be chaired by former NSW Treasury Corporation CEO Mr Stephen Knight, along with Community Housing Industry Association CEO Ms Peta Winzar, and Secretary to the Treasury Mr John Fraser.

“The Turnbull Government recognises that housing affordability remains a concern for many hard-working Australians, including the 30% of Australians who live in rented homes, and those who rely on affordable and social housing,” Mr Morrison’s office stated.

“An affordable housing bond aggregator would allow a financial intermediary to attract greater private sector investment into affordable housing.

“This would give community housing providers access to cheaper and longer-term debt, freeing up capital for the construction of new affordable housing.”

A welcome move for priced-out households

The taskforce announcement was greeted warmly by the NSW Federation of Housing Associations, which had provided a detailed model for a bond aggregator agency back in July 2016 – the model the taskforce is now adopting.

According to the Federation, a bond aggregator model holds widespread support from Australia’s major banks and superannuation funds, which view it as a cost-effective way to finance low-rent housing.

“Attracting large scale institutional investment is critical to establishing the community housing sector as a third tier of the Australian housing market – between the private property development industry and public housing,” said Federation CEO Wendy Hayhurst.

“Australian superfunds alone have $1.5 trillion tied up in capital. The not-for-profit superannuation sector alone can provide access to $200 billion in investment.”

While the Federation welcomed the Government’s next step towards financing affordable housing, Hayhurst warned that the Government also needed to assist both private and not-for-profit organisations in creating a pipeline of housing construction.

“The Treasurer’s Working Group report made it clear that additional support from the Commonwealth or the States will be essential to make the sums add up – otherwise the aggregator plan will fall flat,” said Hayhurst.

“We are keenly awaiting Mr Morrison’s next announcement on how the gap [between funding and construction] will be bridged.”

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