Advocates say subsidies needed to grow affordable housing stock
22 July 2019 at 4:11 pm
Community housing advocates have welcomed a $45.7 million low-interest construction loan from the Commonwealth housing funder but say the government must do more to fix a persistent funding gap in low-income housing delivery.
The National Housing Finance and Investment Corporation (NHFIC) last week announced its first ever construction loan to a community housing provider (CHP) – BlueCHP – to build 93 new affordable homes in Sydney.
This two-year loan comes with an interest rate of less than 4 per cent, which BlueCHP expects will deliver savings of more than $600,000 a year.
BlueCHP CEO Charles Northcote said the loan was an important milestone for BlueCHP and NHFIC, as the provider has previously needed to borrow from commercial banks for construction.
“This is the first time any CHP has been able to access concessional finance for new builds,” Northcote said.
NHFIC is an independent Commonwealth entity that provides cheaper and longer-term secured finance for CHPs by issuing bonds in Australia’s debt capital markets.
Housing advocates say while the creation of NHFIC has been great for the sector, it is not enough to address a persistent funding gap in housing delivery – the disparity between the cost of providing affordable properties and the returns which can be generated.
“Affordable housing is for low-income people who are quite rightly paying lower amounts in rent. So there’s a gap between what we raise in income and what it costs us to provide the accommodation,” Community Housing Industry Association CEO Wendy Hayhurst said.
“NHFIC shave off a reasonable amount, but nowhere near the amount that’s required to get a lot more social and affordable housing coming along.
“So in addition to the construction loans, we need investment by governments – not just at a federal level – and a subsidy so we can actually use NHFIC to its full potential.”
These comments echo recommendations from the federal government’s Affordable Housing Working Group, which said the Commonwealth should directly subsidise the funding gap.
The working group’s report warned NHFIC by itself would not lead to substantial growth in affordable housing.
“Without measures to reduce (or even eliminate) this funding gap, the provision of affordable housing by the non-government sector will most likely remain restrained, even with the advent of [NHFIC],” the report said.
“Reforms that address the funding gap… will help providers to increase the scale of their activities and create [the] expansion of the community housing sector as a pathway beyond public housing.”
Hayhurst told Pro Bono News governments could help by providing land, capital grants or some form of operating subsidy.
But she said the creation of NHFIC was a significant first step to improving Australia’s affordable housing stocks.
“It’s a signal that the federal government knows that more social and affordable housing is needed,” she said.
“Now the government needs to go back to the working group [report] and start working through those recommendations with the states and territories.”
Minister for Housing Michael Sukkar said this NHFIC loan showed the Morrison government was accelerating and adding to the supply of social and affordable housing in Australia.
“Improved access to lower-cost, longer tenor finance through NHFIC is enabling community housing providers to scale up and save on costs. Savings that can be reinvested into things like tenant services and the supply of more affordable rental housing,” Sukkar said.