Community housing’s growth potential

Market users say National Housing Finance and Investment Corporation (NHFIC) provides a benchmark for social use-of-proceeds (UOP) issuance in Australia. Mark Russell-Jones, NHFIC’s Sydney-based director, treasury and capital markets, explains the agency’s mission, its drive to increase reporting standards and the government’s plans to scale up the community housing sector.

Community housing in Australia is undergoing a rapid growth drive. In June 2021, community housing providers (CHPs) owned one-quarter of the dwellings in the public housing sector – up from less than one-tenth 15 years previously (see chart 3).

While the number of community housing dwellings more than tripled between 2006 and 2021, public housing stock reduced by more than 40,000 dwellings during the same period.

Russell-Jones says the shortfall of social and affordable housing in Australia is creating an opportunity for CHPs to play a larger role in the residential housing market. This is also the case in certain European countries, such as the UK and the Netherlands. Housing associations in the Netherlands manage approximately 2.3 million rental homes or around 29 per cent of Dutch housing stock.

NHFIC plays an important role. Its investment mandate from the Australian government allows it to access relatively cheap financing from the bond market. Through the Affordable Housing Bond Aggregator it then directly lends to CHPs, providing these organisations with access to long-term, concessional finance – as opposed to more expensive, shorter-term bank debt.

Since 2019, NHFIC has issued five social bonds and one sustainability bond. Maturities range from 2029 to 2036 and in total the agency has raised almost A$2.2 billion (US$1.4 billion). As the most regular issuer of debt with social UOP in Australia, Russell-Jones says NHFIC wants to further develop its social impact reporting in line with evolving investor expectations on environmental, social and governance (ESG) factors.

He comments: “Investors want to understand the social impact of their investment. Specifically, this means the tenant outcomes and what differentiates the community housing sector from public housing.”

NHFIC’s soon to be released 2021/22 social-bond report will build upon previous iterations to include profiles of CHPs funded by NHFIC, tenant case studies and, crucially, more quantitative data on the CHP sector.

MARK RUSSELL-JONES

“Investors want to understand the social impact of their investment. Specifically, this means the tenant outcomes and what differentiates the community housing sector from public housing.”

MARK RUSSELL-JONES NATIONAL HOUSING FINANCE AND INVESTMENT CORPORATION

Delivering the fullest possible picture has required the use of external data sources, such as Australia’s national census, the national “HILDA” – house, income and labour dynamics – survey and data from the Australian Institute of Health and Welfare.

In addition to its own bond issuance, NHFIC would like to attract more capital to the community housing sector and establish social and affordable housing as an investible asset class, Russell-Jones adds.

To support this, the agency is working with the Community Housing Industry Association and a consortium of private- and public-sector partners to develop industry-specific ESG reporting standards.

The government’s A$10 billion Housing Australia Future Fund announcement is also likely to expand the sector further. While full details have not been finalised, the fund would use the returns to build 30,000 social and affordable dwellings within the first five years. The government also plans to build an additional 20,000 affordable dwellings via the national Housing Accord and hopes a more secure pipeline of supply and support will help encourage institutional investment to the sector.