Housing Australia Future Fund legislation – is it a game-changer for the housing crisis?

In early February, the lower house passed a package of legislation designed to implement Labor’s federal election promise to establish a $10 billion investment fund to assist in building new social and affordable housing with a promising target of 30,000 new dwellings over five years.

The proposed legislation has now been referred to the Senate Economics Legislation Committee for review with submissions closing on 22 March 2023

So what does the legislation entail and is it a game-changer for Australia’s housing crisis?

What is the legislation?

The package consisted of:

1. Housing Australia Future Fund Bill 2023 (HAFFB)
2. National Housing Supply and Affordability Council Bill 2023
3. Treasury Laws Amendment (Housing Measures No. 1) Bill 2023.

What does the legislation do?

The Housing Australia Future Fund Bill 2023 establishes the Housing Australia Future Fund to be operated by the Future Fund (Australia’s de facto sovereign wealth fund). $10 billion is to be deposited into the Fund and invested by the Future Fund Board under an investment mandate to be determined. The returns on those investments will then be allocated to either Housing Australia or the states via the COAG Reform Fund mechanism to fund acute housing, social housing or affordable housing. The amount of returns to be given to Housing Australia is capped at $500 million per year. State funding has no such cap.

The National Housing Supply and Affordability Council Bill 2023 establishes the National Housing Supply and Affordability Council as an independent statutory advisory body to inform the Commonwealth about its approach to housing policy.

The Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 essentially renames the National Housing Finance and Investment Corporation as Housing Australia and tweaks the National Housing Finance and Investment Act (NHFIC Act) to allow for the investment of the proceeds received from the Housing Australia Future Fund.

Is Labor investing $10 billion in social and affordable housing?

No. Only the returns generated on the $10 billion will be invested. Historically, the Future Fund has performed well above seven per cent per annum on average, but the Fund made a loss last year so there are no guarantees of return.

Is there a minimum amount committed to Housing Australia for investment each year?

No. As there is no floor of investment funds available to Housing Australia each year, it will be interesting to see how investments are allocated, given funds are not guaranteed from one year to the next.

Are the 30,000 new dwellings guaranteed over the first five years?

No. This is a ‘target’ goal based on expected returns from the Fund and the types of projects that can be delivered to reach that target.

Are states or regions allocated specific funding?

The National Housing Supply Affordability Council will assist the Minister in determining how much goes to the states (read more below) but there are no specific allocations or express focus on delivering regional housing.

Did the legislation change the NHFIC mandate?

No. That has been done largely through a separate process following an external review. The new NHIF Guidelines released in February 2023 in particular provide promising avenues to funding new projects with Housing Australia (formerly NHFIC).

What does the National Housing Supply Affordability Council do?

In summary, the Council will undertake three key functions – firstly, advising the Minister on issues impacting housing supply and affordability across Australia. Secondly, undertaking research on housing supply and affordability to help develop policy that ensures proper and safe supply and thirdly, acting as an intergovernmental ‘broker’ to facilitate cooperation between state and federal government on housing.

The Council is also tasked with recommending how much grant funding the states receive from the Commonwealth through the COAG Reform Fund. It will be interesting to see how that plays out. The Council is already underway and has some excellent appointees from the housing sector so early signs are promising.

Is there anything new I should take from this?

Of interest, a new definition of ‘acute housing’ has been introduced as a distinct class to that of social and affordable housing for which Housing Australia can directly provide grants or invest. This is a welcome addition as this type of housing usually generates little to no income as an investment and is a critical part of the first step to alleviating homelessness issues in many cases:

“Acute housing refers to crisis housing offered to cohorts at risk of, or who are already experiencing, homelessness.  This includes short-term and emergency housing, medium-to-long-term transitional housing and specialist services in relation to housing. This should not be considered an exhaustive definition.”

Key takeaways

This legislation creates the framework for an exciting new chapter in Commonwealth-funded housing investment, however to achieve its goals, it leans heavily on two things:

1. the Future Fund making enough money in the Fund to deliver meaningful funding
2. the states, with their own programs and incentives, continuing to be the core source of funding to bolster social and affordable housing projects beyond what Housing Australia can do.

If you have any questions about this new legislation and how it may impact you, please get in touch with partner Shaun Whittaker.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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