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 Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions