Australia: The national housing finance and investment corporation: solid foundations or a house of cards?

Housing affordability is an issue faced by Australians across the Eastern Seaboard, from residents of public and community housing to private renters and first-home buyers.

And what happens in one sector of the market can have a domino effect across others. With house prices at record highs in urban areas of Sydney and Melbourne, many first-home buyers are delaying purchasing their own property and remaining in the rental market longer.1 This means an increase in both demand and price in the private rental market, which in turn increases demand for community housing – affordable rental housing owned and managed by non-profit organisations. Access to finance for the construction of this type of housing is challenging, not least because of the low rate of return on properties where below-market rents are charged.2 Government assistance, whether federal, State or local, only goes some of the way to addressing the problem.

As part of a suite of initiatives announced in the 2017 Federal Budget designed to increase the supply of affordable housing in Australia, the Government announced the creation of the National Housing Finance and Investment Corporation (NHFIC). To be established by 1 July 2018, the NHFIC will operate an affordable housing bond aggregator with the aim of encouraging greater private and institutional investment in affordable housing.


The NHFIC's housing bond aggregator will act as an intermediary between community housing providers (CHPs) and institutional debt capital markets. It will pool the debt requirements of CHPs and issue fixed-interest, long-term bonds on the wholesale markets. The increase in scale from pooling the debts (and selective government support) means that funds raised from bonds issuances can be loaned to CHPs at lower interest rates and with longer tenor than they could access individually through traditional bank finance.3 The NHFIC is also likely to be responsible for undertaking credit assessment of CHPs and proposed housing projects, managing security over assets and monitoring compliance of CHPs. 4 The use of the capital markets to finance social housing is increasing around the world, led by the UK where The Housing Finance Corporation (THFC) has been operating since 1987.


An Affordable Housing Implementation Taskforce, set up in March this year, will advise the Government on the structure of the NHFIC and its bond aggregator. We would advocate for the NHFIC to take the form of a not-for-profit company limited by guarantee, established under the Corporations Act 2001 (Cth). We do not see the need for the NHFIC to be a statutory corporation or equivalent. As an independent financial institution with no express funding from Federal or State governments, the NHFIC would mitigate the compliance burden of the regulatory regime which applies to statutory corporations. It would not be dissimilar to any other entity established as a financial institution for the purpose of raising funds and lending to third parties. This would require criteria as to the qualification of the entity's directors, as well as limitations on the NHFIC's ability to engage in activities beyond those contemplated for not-for-profit companies providing funding to community and social housing providers in Australia.


While the intent is for the NHFIC to operate without express government funding, some indirect support is desirable to enhance the credit rating of its capital market issuances. This could take the form of interest subsidies or taxation credits from the Federal Government, or access to standby credit facilities or subordinate debt from State governments.

Additional support could come in the form of step-in deeds between the NHFIC, the relevant CHP and governments. Pursuant to such deeds, on default by a CHP, governments agree to intervene and transfer housing stock to another CHP or to an active, national housing sector regulator with the ability to intervene in the event of defaults, for example by appointing a statutory manager or compelling a CHP in financial distress to restructure or merge with another CHP.

Another potential credit enhancement mechanism would be for government to guarantee the obligations of the borrowing CHPs. This was the model for the THFC in the UK during the global financial crisis. However, any such guarantee under the NHFIC should not be viewed in isolation from strong regulatory oversight of the social and affordable housing funding sector. In the UK, the regulatory framework is acknowledged by credit ratings agencies as a critical component of any ratings analysis of a housing association.5


The longer tenor of financing under the bond aggregator model means that the NHFIC will be best suited to facilitating refinancing of existing bank finance by lending against the ongoing operating cash flow of community housing, rather than providing the kind of short-term funding required in the initial (construction) phases of housing projects.6 However, greater funding of community housing by the capital markets means more opportunities for commercial banks to increase their already strong presence in financing these initial project stages,7 as arrangers and managers, and distribution agents. There will also likely be a role for banks to play in providing warehousing and interim facilities to cover the period between project approval and bond issuance.8

If the right mix of corporate structure, community housing sector regulation and government support can be achieved, the NHFIC has the potential to transform the affordable housing landscape in Australia while creating a new asset class in the capital markets and expanding the existing role of banks in supporting affordable housing construction on a national scale.


1 Australian Government, Budget overview: reducing pressure on housing affordability>.

2 Australian Government, Affordable Housing Working Group, Innovative Financing Models to Improve the Supply of Affordable Housing, report to Heads of Treasuries, October 2016, p 14

3 Ibid p 24

4 NSW Federation of Housing Associations, The Affordable Housing Intermediary, Proposition Paper, July 2016, p 4

5 Moody's Investor Service Rating Methodology – English Housing Associations, p 4

6 Australian Government, Affordable Housing Working Group, Innovative Financing Models to Improve the Supply of Affordable Housing, report to Heads of Treasuries, October 2016, p 36

7 NSW Federation of Housing Associations, The Affordable Housing Intermediary, Proposition Paper, July 2016, p 7

8 Ibid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.