EXPLANATORY STATEMENT

Issued by authority of the Minister for Housing, Minister for Homelessness and Minister for Small Business

Housing Australia Act 2018

Housing Australia Investment Mandate Amendment (2024 Measures No. 1) Direction 2024

Subsection 12(1) of the Housing Australia Act 2018 (the Act) provides that the Minister may, by legislative instrument, give the Board of Housing Australia (the Board) directions about the performance of Housing Australia’s functions. The Board is subject to the requirements of the Act and the Housing Australia Investment Mandate Direction

2018 (the Investment Mandate).

The Act established Housing Australia to improve housing outcomes for Australians. Housing Australia is a corporate Commonwealth entity in the Treasury portfolio and is governed by an independent board. Housing Australia (previously, the National Housing Finance and Investment Corporation) commenced operation on 30 June 2018 and is dedicated to improving housing outcomes. It performs this role through its financing, guarantee and capacity building functions.

The purpose of the Housing Australia Investment Mandate Amendment (2024 Measures No. 1) Direction 2024 (the Instrument) is to amend the Investment Mandate to establish the financing arrangements for the Housing Australia Future Fund Facility (HAFFF) and the National Housing Accord Facility (NHAF). Specifically, Housing Australia can provide availability payments, which are recurring grants made over a period of 25 years, to finance HAFFF projects and NHAF projects. Housing Australia can also issue concessional loans, which will be no interest, to support the delivery of HAFFF projects and NHAF projects. In relation to HAFFF projects only, Housing Australia can provide upfront grants, which are one-off grants, to finance HAFFF projects that increase available social housing.

The Instrument also amends the Investment Mandate to:

•                 increase the maximum limit on capacity building contracts from $1.5 million to

$3 million, supporting further expansion of capacity building assistance provided to eligible registered community housing providers (CHPs);

•                 increase the maximum amount that can be allocated to the Affordable Housing Bond Aggregator (AHBA) reserve from $1 billion to $4 billion, supporting further expansion of the AHBA; and

•                 increase the cap of Housing Australia’s total liabilities (Liability Cap) by

$2.5 billion, from $7.5 billion to $10 billion.

Established on 8 December 2023, the HAFFF and the NHAF are the mechanisms by which Housing Australia administers the Government’s commitment to support the delivery of 40,000 new social and affordable dwellings. These dwellings are delivered under two programs – the Housing Australia Future Fund (HAFF) and the National Housing Accord (Accord). Of the 30,000 dwellings committed under the HAFF, 10,000 dwellings will be

affordable homes and 20,000 dwellings will be social homes. The 10,000 dwellings committed under the Accord are to be affordable homes only.

Housing Australia has a capacity building function that enables it to provide business advisory services and other assistance in capacity building to eligible registered CHPs, including to further develop their financial and management capabilities. Previously, the total value of amounts payable by Housing Australia under capacity building contracts was limited to $1.5 million. The increase in the limit to $3 million supports further expansion of capacity building assistance provided to eligible registered CHPs. In addition to providing support for general capability building, the expansion can also support eligible registered CHPs engage with Housing Australia and assist them to bring forward proposals for funding under Housing Australia’s programs, including the HAFF and Accord.

Housing Australia also operates the AHBA, which is a financial intermediary that operates by making loans to eligible registered CHPs and financing those loans by issuing bonds on the commercial market. The AHBA builds the capacity of CHP sector and encourages investment to improve housing outcomes by providing eligible registered CHPs with a more efficient source of funds, reducing the refinancing risk faced by them, and reducing their borrowing cost. The operation of the AHBA is supported by the AHBA reserve, a reserve for the AHBA amounts that Housing Australia borrows from the Commonwealth. The Board may allocate up to $4 billion to the AHBA reserve. Previously, the Board could only allocate up to $1 billion. The increase in the allocation limit for the AHBA reserve supports the expansion of Housing Australia’s financing activities to the CHP sector.

Under the Investment Mandate, the Liability Cap further sets the maximum value of liabilities that Housing Australia can incur under its Commonwealth guarantee. Housing Australia cannot incur liabilities exceeding the Liability Cap without prior agreement of the Minister for Housing and the Minister for Finance. The Liability Cap was previously increased from $5.5 billion to $7.5 billion in July 2023. The further increase of

$2.5 billion, taking the Liability Cap to $10 billion, ensures that Housing Australia can continue to expand its financing activities to the CHP sector.

No public consultation was undertaken on the Instrument as the changes are targeted and machinery in nature.

The Instrument is exempt from the sunsetting regime set out in Part 4 of Chapter 3 of the Legislation Act 2003 as a result of regulations made for the purposes of paragraph 54(2)(b) of that Act. Item 3 of the table under section 11 of the Legislation

(Exemptions and Other Matters) Regulation 2015 provides for class exemptions from sunsetting if the instrument is a direction by the Minister to any person or body. The Instrument is a direction from the Minister to Housing Australia, and therefore is exempt from sunsetting.

The Instrument is subject to the automatic repeal process under section 48A of

the Legislation Act 2003. This section provides that where a legislative instrument only repeals or amends another instrument, without making any application, saving or transitional provisions relating to the amendment or repeal, that instrument is automatically repealed. By virtue of subparagraph 48A(2)(a)(i), the Instrument automatically repeals on the day after the commencement of the Instrument which results in the amendment of the Investment Mandate. Once repealed, the sunsetting regime set out in Part 4 of Chapter 3 of the Legislation Act 2003 is no longer relevant to the Instrument.

As a direction from the Minister to Housing Australia, the Instrument is also exempt from disallowance under section 42 of the Legislation Act 2003 as a result of regulations made for the purposes of paragraph 44(2)(b) of that Act. Item 2 of the table under section 9 of the Legislation (Exemptions and Other Matters) Regulation 2015, provides for class exemptions from disallowance if the instrument is a direction by the Minister to any person or body. The Government considers it appropriate that the Instrument is not subject to disallowance. The exemption recognises that executive control is intended in this instance where a ministerial direction is made to Housing Australia. Accordingly, no statement of compatibility with human rights is required under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011.

The Instrument is a legislative instrument for the purposes of the Legislation Act 2003.

The Instrument commenced on 1 July 2024 or the day after registration (whichever occurred later).

Details of the Instrument are set out in Attachment A.

The Office of Impact Analysis (OIA) has been consulted on the financial arrangements for the HAFFF and the NHAF (OIA ref: OBPR22-02931) and agreed that an Impact Analysis is required. The full text of the Impact Analysis has been included at Attachment B.

The OIA has also been consulted on increasing the limit on grants and capacity building contracts (OIA ref: OIA24-07105), increasing the AHBA reserve, and increasing the liability cap of Housing Australia (OIA ref: OIA24-07190) and agreed that an Impact Analysis is not required.

These measures are estimated to have a low impact on compliance costs.

ATTACHMENT A

Details of the Housing Australia Investment Mandate Amendment (2024 Measures No. 1) Direction 2024

Section 1 – Name

This section provides that the name of the Instrument is the Housing Australia Investment Mandate Amendment (2024 Measures No. 1) Direction 2024 (the Instrument).

Section 2 – Commencement

This section provides the Instrument commenced on 1 July 2024 (or the day after registration, if registration occurred after that day).

Section 3 – Authority

Section 3 provides that the Instrument is made under the Housing Australia Act 2018 (the Act).

Section 4 – Schedule

This section provides that each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule, and any other item in the Schedule to this instrument has effect according to its terms.

Schedule 1 – Amendments

Legislative references in this attachment are to the Housing Australia Investment Mandate Direction 2018 (the Investment Mandate) unless otherwise stated.

Definitions

Items 1 and 2 of the Instrument insert new definitions in section 4. They are:

                ‘HAFFF availability payment’ – the amendment includes a signpost to subsection 28N(4);

                ‘HAFFF upfront grant’ – the amendment includes a signpost to subsection 28N(4); and

                ‘index number’ – the amendment includes a signpost to section 4B.

Increasing the limit on grants and capacity building contracts

The Instrument makes amendments to increase Housing Australia’s spending limits on grants and capacity building contracts.

•                 Item 4 amends subsection 15(1) to increase the limit on the total value of amounts payable by Housing Australia under infrastructure grants and capacity building contracts from $175 million to $176.5 million.

•                 Item 5 amends subsection 15(2) to increase the total value of amounts payable under capacity building contracts from $1.5 million to $3 million.

Increasing the AHBA reserve

Item 3 of the Instrument amends subsection 11(2) to omit the reference to $1 billion and substitute this with $4 billion. The amendment provides that up to $4 billion may be allocated to the Affordable Housing Bond Aggregator (AHBA) reserve by the Board of Housing Australia (the Board). Previously, the Board could only allocate up $1 billion.

The AHBA reserve is used to fund loans by Housing Australia to eligible registered community housing providers (CHPs). It primarily is used to provide a loan warehousing facility that enables lending to eligible registered CHPs to occur before sufficient scale of loans is achieved to enable a bond issuance, and to provide construction finance to CHPs. The increase to the allocation limit for the AHBA reserve supports the expansion of the AHBA, and thereby Housing Australia’s financing activities to the CHP sector. It allows Housing Australia to support increased volume and size of applications made by eligible registered CHPs for support through the AHBA.

Supporting the delivery of 30,000 social and affordable homes under the Housing Australia Future Fund through the HAFFF

Housing Australia operates a facility known as the Housing Australia Future Fund Facility (HAFFF) under section 7A and Part 4A. Items 6 to 9 of the Instrument make amendments to Part 4A to set new limits for loans and grants that Housing Australia can make under the HAFFF to facilitate the Government’s commitment to deliver 20,000 new social homes and 10,000 new affordable homes over 5 years under the Housing Australia Future Fund (HAFF).

Limits on loans and grants made for the purposes of the HAFFF

Item 9 of the Instrument amends section 28N to revise the limits on loans and grants made for the purposes of the HAFFF. Previously, the limit on these loans and grants was nil.

Subparagraph 13(c)(i) of the Act allows the Investment Mandate to provide directions on limits on making loans and grants. Further to this subparagraph, subsection 28N(1) provides that section 28N specifies the limits on making loans and grants under the HAFFF. The note to this subsection clarifies that it is intended that the monetary limits specified in section 28N will be increased from time to time. To avoid doubt, it is intended that future amendments to section 28N will facilitate such increases.

Subsections 28N(2) and (3) provide the limits on loans made under the HAFFF. These limits are that:

                a loan must be a no interest loan to finance a HAFFF project that increases available social housing, affordable housing, or both social and affordable housing;

                a loan must be made on or after 1 July 2024 but before 1 July 2029 (relevant period);

                the cumulative total of all loans made under the HAFFF during the relevant period must be less than or equal to $1.531 billion; and

                a loan must be made to a project proponent mentioned in paragraph 28F(1)(f), (g), (h), or (i) of the Investment Mandate.

For the last dot point, these proponents are registered charities that:

                have the primary purpose of directly or indirectly improving housing outcomes for Aboriginal or Torres Strait Island people;

                have the primary purpose of improving, directly or indirectly, housing outcomes for current members of the Australian Defence Force; or

                are constitutional corporations (corporations to which paragraph 51(xx) of the Constitution apply) and either:

               have the primary purpose of improving, directly or indirectly, housing outcomes for former members of the Australian Defence Force; or

               are registered community housing providers.

Subsection 28N(4) provides that there are two types of grants that can be made under the HAFFF. These are:

                HAFFF upfront grants – a one-off grant to finance a HAFFF project that increases available social housing; and

                HAFFF availability payments – a recurring grant made over a 25-year period to finance a HAFFF project that increases available social housing, affordable housing, or both social and affordable housing.

Subsection 28N(5) sets the annual limit for the cumulative total of all HAFFF availability payments for the 2024-25 financial year and each subsequent financial year until the 2029-30 financial year. This annual limit is $288 million. The annual limit from the

2029-30 financial year onwards is indexed annually using the method in section 28NA, described below.

Subsection 28N(6) provides that the annual limit for the cumulative total of all HAFFF upfront grants is, for the 2024-25 financial year, $388 million, and for later financial years,

$0. As described above, and to avoid doubt, the note to subsection 28N(1) applies to all of section 28N and thus is applicable to subsection 28N(6). This note states that it is intended that the monetary limits specified in this section, including for future financial years, will be increased from time to time.

Indexation of limit on total annual amount of all HAFFF availability payments

Section 28NA provides the method used to annually index the limit on total annual amount of all HAFFF availability payments in the 2029-30 financial year and subsequent financial years under paragraph 28N(5)(c). From the 2029-30 financial year, the limit will be adjusted in line with the Consumer Price Index (CPI). This aims to ensure that the annual limit will keep pace with inflation from the 2029-30 financial year and not diminish in real terms.

New subsection 28NA(1) provides that on the first day in each financial year, starting on or after 1 July 2029, the limit is to be indexed by multiplying it by the indexation factor for

1 June in the preceding financial year.

The relevant indexation factor for the 1 June of a financial year is worked out using the method statement set out in subsection 28NA(2). This method has three steps:

•                 first, add the index number for the quarter ending on 31 March in that financial year to the index numbers for the 3 quarters that immediately preceded that quarter;

•                 second, add the index number for the quarter ending on 31 March in the immediately preceding financial year to the index numbers for the 3 quarters that immediately preceded that quarter; and

•                 third, divide the first number by the second number to get the indexation factor for 1 June of that financial year.

Using March quarter CPI data in the formula allows for calculations to be made ahead of the relevant financial year to assist with planning.

The ‘index number’ for a quarter is the All Groups Consumer Price Index number (being the weighted average of the 8 capital cities) published by the Australian Statistician in respect of that quarter (see the new definition in section 4B inserted by item 4). However:

•                 if, at any time before or after registration of the Instrument, the Australian Statistician has changed or changes the index reference period for the CPI, after that change, only the index numbers published in terms of the new index reference period are to be used (subsection 4B(3)); and

•                 subject to the aforementioned dot point, index numbers published after registration by the Australian Statistician in substitution for an index number in respect of that quarter are to be disregarded (subsection 4B(2)).

To simplify administrative processes, amounts are rounded as follows:

•                 the indexation factor is to be worked out to 3 decimal places, rounding up if the fourth decimal place is 5 or more (subsection 28NA(3)); and

•                 the final amount of the limit as indexed is rounded to the nearest whole dollar, with 50 cents rounded down (subsection 28NA(4)).

Example: Indexation of limit

As an example, to calculate the hypothetical annual limit for HAFFF availability payments for the 2030-31 financial year, assume the index numbers (as discussed under the last heading) are the same for the 2029-30 financial year as they were for 1 June of the 2023-24 financial year.

Following the method statement in subsection 28NA(2):

•                 First, the index number for the quarter ending on 31 March 2024 (137.4) is added to the index numbers for the 3 immediately preceding quarters (136.1, 135.3 and 133.7), giving 542.5;

•                 Second, the index number for the quarter ending on 31 March 2023 (132.6) is added to the index numbers for the 3 immediately preceding quarters (130.8, 128.4 and 126.1), giving 517.9;

•                 Third, 542.5 is divided by 517.9;

•                 Fourth, the result is rounded to 3 decimal places (rounding down as the fourth decimal place is ‘4’), giving an indexation factor of 1.047 for 1 June of 2030-31;

•                 Fifth, $288 million is multiplied by 1.047.

The result would be that $288 million increases to $301,536,000, which becomes the limit for the sum of all HAFFF availability payments for the 2030-31 financial year.

Consequential amendments

Item 6 of the Instrument amends paragraph 28H(3)(b) to clarify that Housing Australia may provide loan concessions in the form of no interest loans, consistent with the limits mentioned previously.

Items 7 and 8 amend section 28K to repeal subsections 28K(2) and (3). These subsections were inconsistent with providing no interest loans. Subsection 28K(2) required Housing Australia to limit concessions offered under the HAFFF to the minimum it considered needed for the project to proceed in the proposed timeframe. Subsection 28K(3) clarified that Housing Australia could propose contract terms to ensure the HAFFF was not providing greater concessions than it considered were needed.

Supporting the delivery of 10,000 affordable homes under the National Housing Accord through the National Housing Accord Facility

Housing Australia operates a facility known as the National Housing Accord Facility (NHAF) under section 7B and Part 4B. Items 10 to 13 of the Instrument makes amendments to Part B to set new limits for loans and grants that Housing Australia can make under the NHAF to facilitate the Government’s commitment to deliver 10,000 new affordable homes over 5 years under the National Housing Accord (Accord).

Limits on loans for the purposes of the NHAF

Item 13 of the Instrument repeals and replaces section 28ZA to set new limits on loans and grants Housing Australia can make under the NHAF. Previously, as with the HAFFF, the limit on these loans and grants was nil.

As noted above in discussion of the HAFFF amendments, subparagraph 13(c)(i) of the Housing Australia Act allows the Investment Mandate to provide directions on limits on making loans and grants. New subsection 28ZA(1) provides that section 28ZA, as amended, sets out limits in making loans and grants under the NHAF for the purposes of

subparagraph 13(c)(i). As with the amendments to subsection 28N(1), a note to subsection 28ZA(1) clarifies that it is intended that the monetary limits specified in section 28ZA will be increased from time to time.

Subsections 28ZA(2) and (3) set limits on loans made under the NHAF. These limits are that:

                a NHAF loan must be a no interest loan to finance a NHAF project that increases available affordable housing;

                a loan must be made on or after 1 July 2024 but before 1 July 2029 (relevant period);

                the sum of all loans made under the NHAF during the relevant period must not exceed $383 million; and

•                 a loan must be made to an eligible project proponent for NHAF projects, mentioned in paragraph 28T(1)(f), (g), (h) or (i).

These eligible project proponents are the same types of entities discussed previously in respect of the HAFFF – i.e. registered charities with specific purposes.

Limit on grants for the purposes of the NHAF

New subsection 28ZA(4) inserted by item 13 provides that the annual limit for the sum of all grants made under the NHAF for the 2024-25 financial year and each later financial year is $72 million. This is a ‘per year’ limit, meaning it is only exceeded for a financial year if new grants made in that year exceed $72 million.

However, as with HAFFF availability payments, and consistent with new

subsection 28ZA(5), this annual limit will be indexed from and including the financial year starting on 1 July 2029 – i.e. 2029-2030 financial year. The mechanism operates the same way as discussed previously in the context of HAFFF availability payments.

Consequential amendments

Item 10 of the Instrument amends paragraph 28V(3)(b) to clarify that Housing Australia may provide loan concessions in the form of no interest loans, consistent with the limits mentioned previously.

Items 11 and 12 amend section 28X to repeal subsections 28X(2) and (3). These subsections were inconsistent with the new limits above. Subsection 28X(2) required Housing Australia to limit concessions offered under the NHAF to the minimum it considered needed for the project to proceed in the proposed timeframe. Subsection 28X(3) clarified that Housing Australia could propose contract terms to ensure the NHAF was not providing greater concessions than it considered were needed.

Increasing the liability cap of Housing Australia

Items 14 and 15 amend the heading of section 34 and subsection 34(1) to omit the reference to $7.5 billion and ‘the cap’ respectively, substituting this with $10 billion. Item 16 further repeals the definition of ‘the cap’ from subsection 34(2) as this defined term is

no longer required for the section. From commencement of the Instrument, Housing Australia will have a maximum of $10 billion in liabilities comprised of:

                the total sum of all current and expected amounts that are payable to a person other than the Commonwealth, or guaranteed by the Commonwealth under the Act; and

                the current value of the AHBA reserve.

Increasing the cap of Housing Australia’s total liabilities (Liability Cap) by $2.5 billion, from $7.5 billion to $10 billion, ensures Housing Australia can continue to expand its financing activities to the CHP sector. These activities include Housing Australia’s operation of the AHBA, through which Housing Australia makes loans to eligible registered CHPs. The increased Liability Cap further supports Housing Australia’s lending activities under the HAFFF and the NHAF. The HAFFF and the NHAF aim to deliver the Government’s commitments to support 30,000 dwellings available as social and affordable housing under the HAFF and to support 10,000 dwellings available as affordable housing under the Accord.

The Government’s focus on providing housing options to all Australians requires Housing Australia to have the ability to finance these projects within the legislated Liability Cap. The increase in the Liability Cap to $10 billion from commencement of the

Instrument is necessary to ensure projects that have been committed to in the medium-term can proceed and that Housing Australia has sufficient liability space to facilitate long-term projects in the future.

Impact Analysis

Supporting social and affordable housing under the Housing Australia Future Fund and the National Housing Accord

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Contents

Executive Summary...............................................................4

Background to the HAFF and Accord.................................................6

1.   What is the policy problem the HAFF and Accord are trying to solve?.......................8
2.   Why is Government action needed?.................................................19
3.   Policy options: Status quo versus the HAFF and the Accord..............................23
4.   What are the likely net benefits of the HAFF and Accord?................................30
5.   Consultation...................................................................40
6.   Chosen option and implementation.................................................49
7.   Measuring success..............................................................52

Executive Summary

This Impact Analysis has been prepared by the Department of the Treasury (Treasury) to support the Government’s consideration of the Housing Australia Future Fund (HAFF) and the National Housing Accord (Accord) commitments. This Impact Analysis is a final compilation of analysis undertaken by the Treasury and other agencies, including the Department of Social Services (DSS) and Housing Australia (previously the National Housing Finance and Investment Corporation (NHFIC), provided to the Government to inform significant policy decisions throughout the development and implementation of the HAFF and Accord programs.

The analysis provided in this Impact Analysis has found that implementing the HAFF and Accord delivers substantial net benefits compared to maintaining the status quo. The analysis also shows that the implementation approach to delivering the HAFF and Accord minimises the costs of delivering the policies and effectively manages risks to delivery. Treasury notes that because the HAFF is a Government election commitment, this Impact Analysis only compares the policy against the status quo. This approach is consistent with Office of Impact Analysis guidance.

An initial draft of this Impact Analysis was provided to the Government to inform policy design and implementation decisions ahead of the October 2022 Budget, with updated drafts provided to the Government ahead of all major policy decisions. This Impact Analysis has been continuously updated and expanded over the course of the policy development process to incorporate new findings and data from external sources along with the feedback and outcomes of the multiple public and targeted consultation processes.

This final version of the Impact Analysis has been prepared for the Government in May 2024, and will inform amendments to the Housing Australia Investment Mandate that will allow Housing Australia to commence delivery of the programs.

Key milestones in the development of the HAFF and Accord policies informed by the draft and final analyses provided in this Impact Analysis include:

• Initial announcement of the HAFF and Accord measures as part of the October 2022-23 Budget.
• The design of the enabling legislation for the HAFF, including the Housing Australia Future Fund Bill 2023, which was introduced into Parliament in February 2023.
• The Housing Australia Future Fund Investment Mandate Direction 2023, registered on

1 November 2023, setting out directions to the Future Fund on the management of the HAFF.

• Amendments to the Housing Australia Investment Mandate Direction 2018, registered on 8 December 2023, setting out directions to Housing Australia for the delivery of the HAFF and Accord and empowering Housing Australia to seek applications for funding.
• Final amendments to the Housing Australia Investment Mandate, which will empower Housing Australia to begin entering into contracts for delivery and set out the initial funding

amounts Housing Australia has available for availability payments, upfront grants and concessional loans to support delivery of the policies.

Background to the HAFF and Accord

Australia has an undersupply of social and affordable homes. The proportion of social housing as a share of the housing stock has fallen from around 5.5 per cent in 1991 to less than 4 per cent in 2021. This has left many vulnerable and low-income earners either paying unaffordable rents in the private rental market, living in unsafe housing, or experiencing or being at risk of homelessness.

To help address the consistent undersupply of social and affordable housing, the Government committed to establishing the $10 billion Housing Australia Future Fund as part of its 2022 election platform. The HAFF is a perpetual fund under the management of the Future Fund Management Agency that provides an ongoing funding stream of a minimum $500 million per year, indexed to the consumer price index from 2029-30, to fund new social and affordable housing and address acute housing needs. The Government’s commitment specifically sets out that this includes the delivery of 30,000 new social and affordable rental homes over five years as well as funding of

$324 million over five years to address acute housing needs.

In addition, the Government committed, as part of the National Housing Accord (Accord) signed in October 2022, to fund an additional 10,000 affordable homes.

The purpose of the HAFF and Accord is to increase the supply of social and affordable housing available for vulnerable and low-income households for whom the private rental market is not affordable. The goal of the policies is to help address the ongoing decline in the share of social housing and associated growth in social housing waitlists, as well as increase the supply of low-cost rental accommodation. By supporting the delivery of 40,000 social and affordable dwellings, the HAFF and Accord will directly increase availability of such housing compared to the status quo, potentially supporting around 80,000 people access safe and affordable accommodation.

Housing Australia, a Commonwealth corporate entity which already delivers a number of the Government’s housing programs, has been tasked with managing the delivery of new social and affordable homes under the HAFF and Accord. Eligibility for funding support through the HAFF and Accord is open to Community Housing Providers (CHPs) and other charities delivering housing, state, territory and local governments, and joint ventures between CHPs and private institutions.

The funding mechanism is through a combination of availability payments and up-front grants funded through HAFF disbursements and direct funding from the budget for the Accord, combined with concessional loans where necessary.

The HAFF and Accord are part of a broad suite of measures in the Government’s housing reform

agenda designed to alleviate housing stress across the housing system and to support new supply.

Key dates

• Announcement of the HAFF as a key election commitment ahead of the election in May 2022.
• The HAFF was included as part of the Safer and More Affordable Housing measure in the October 2022-23 Budget.
• Also in October 2022, the Government agreed the National Housing Accord with states and territories and other housing industry stakeholders, including funding for an additional 10,000 affordable rental homes that would be delivered in conjunction with the HAFF.
• The exposure draft of the Housing Australia Future Fund Bill 2023 and explanatory material were released for public consultation between 19 December 2022 and 11 January 2023 as part of the Housing Legislative Package (the Package).
• Introduction of legislation on 9 February 2023, with the Package passing the House of Representatives on 15 February 2023 and subsequently introduced to the Senate on 6 March 2023.
• The Senate passed the amended legislation package on 13 September 2023, with passage through both houses completed following the House agreeing to the Senate amendments on 14 September 2023, with Royal Assent on 28 September 2023.
• The HAFF was formally established on 1 November 2023, with the Housing Australia Future Fund Investment Mandate Direction 2023 registered on the same day.
• Amendments to the Housing Australia Investment Mandate were registered on 8 December 2023.
• Housing Australia opened the first funding round under the Housing Australia Future Fund Facility (HAFFF) and National Housing Accord Facility (NHAF) on 15 January 2024, with applications closing on 22 March 2024.

1.    What is the policy problem the HAFF and Accord are trying to solve?

A range of factors contribute to high housing costs

There is a broad mismatch between supply and demand in the Australian housing market, with supply not sufficient for the level of demand. This imbalance has contributed to a structural increase in house prices – both for ownership and rental housing. As prices rise faster than incomes, more houses have become unaffordable, leading to housing stress and living conditions that are insecure or unsafe.

Housing affordability is not expected to improve in the near future due to heightened demand and supply constraints. There is a slowing in the numbers of new dwellings being built, with only 172,000 of homes completed in 2023, the lowest number in a decade1. Supply chain problems and worker shortages are delaying home building and leaving projects unfinished, adding to housing pressures. Building approvals have also fallen significantly.2

At the same time, rental prices have grown significantly. Increases in rental prices are particularly influential on housing affordability for lower income households, who are more likely to rent than own their home and are more at risk of housing stress and homelessness.3 As house prices have increased, home ownership has declined, and the proportion of households renting has increased.4 Pressures from a growing proportion of renters has caused low vacancy rates and strong price increases.5

As a result, many rental homes are unaffordable. In its 2023 Rental Affordability Snapshot, Anglicare surveyed over 45,000 rental listings across Australia and found that a tiny fraction was affordable for those on a low-income, age pension, disability support pension or income support.6 For those on minimum wage, affordability had halved over the past year and crashed to below one

1 National Housing Supply and Affordability Council – State of the Housing System 2024 https://nhsac.gov.au/reports-and-submissions/state-housing-system-2024

2 Treasury calculations based on ABS Building Approvals data, released May 2023

3 Renters, Rent Inflat...~https://www.rba.gov.au/publications/bulletin/2023/mar/renters-rent-inflation-and- renter-stress.html

4 AIHW - Home ownership and housing tenure, Home ownership and h...~https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure#ownership  5 CoreLogic - CoreLogic Rental Pulse May 2023,

https://www.corelogic.com.au/  data/assets/pdf_file/0012/14223/2305-CoreLogic-RentalPulse-FINAL.pdf

6https://www.anglicare.asn.au/wp-content/uploads/2023/04/Rental-Affordability-Snapshot-National-

Report.pdf, Figure 1

per cent of all rentals, the lowest level on record. This decline in affordability has contributed to the increase in housing stress and homelessness.

High housing costs are particularly harmful for the most vulnerable

High housing costs are particularly harmful to low-income households, with a very significant proportion of low-income households experiencing housing stress due to a lack of affordable housing options. Housing stress is described as low-income households (defined as the lowest 40 per cent of households on the income distribution) spending more than 30 per cent of their income on housing7. Around one million low-income households were in housing stress in 2019-20. 8

Housing stress has worsened over time. In 2007-08, 35 per cent of low-income households were in housing stress. This climbed to 42 per cent in 2019-209. Housing stress is highest in the private rental market, with two thirds of low-income households renting privately in housing stress. Within this group of low-income households, 20 per cent spend more than half their income on housing.10 Housing stress is reduced by Commonwealth Rent Assistance, a supplementary payment for eligible renting households that receive income support payments or Family Tax Benefit Part A, however, it may not fully alleviate housing stress for all households.

In addition, despite such payments, many Australians also do not have access to housing that is safe. Individuals without safe and affordable housing experience lower wellbeing and health, lower participation in the economy, and reduced access to the essential needs of life. Unsafe housing includes housing that is overcrowded, has basic structural problems, and puts occupants at risk of violence. Prior to COVID-19, research estimated one million Australians were living in poor to very poor-quality housing11. It is also estimated that of all Australian adults, 2.2 million had experienced violence from a partner they were living with at the time.12 The lack of safe housing puts the physical and mental health of people at risk.

A lack of safe and affordable housing can force many at-risk individuals, who cannot find affordable or suitable homes in the private rental market, into homelessness. The 2021 Census

7 AIHW - Housing affordability, https://www.aihw.gov.au/reports/australias-welfare/housing-affordability

8 AIHW - Housing affordability, https://www.aihw.gov.au/reports/australias-welfare/housing-affordability

9 AIHW - Housing affordability, https://www.aihw.gov.au/reports/australias-welfare/housing-affordability

10 Productivity Commission, “In need of repair: The National Housing and Homelessness Agreement: Study

Report: Overview”,p5, Figure 2, In need of repair: The National Housing and Homelessness Agreement

11 University of South Australia - Rental housing standards a threat to resident health and wellbeing, https://www.unisa.edu.au/media-centre/Releases/rental-housing-standards-a-threat-to-resident-health-and- wellbeing/

12 AIHW - Family, domestic and sexual assault: FDSV summary, www.aihw.gov.au/family-domestic-and- sexual-violence/resources/fdsv-summary

estimated that 122,494 people were experiencing homelessness. This represents 48 people per 10,000 people, an increase from 45 people per 10,000 people in 2006.13

A lack of access to safe and affordable housing can have a great impact on individuals’ wellbeing, health,14,15 participation in the economy and their access to the essential needs of life.16 In its 2022 report on the National Housing and Homelessness Agreement, the Productivity Commission outlined the economic costs of not having affordable, safe, and secure housing. These include17:

• It can be a barrier to finding and holding down a job and engaging in education.
• It can affect family relationships and community connections.
• High housing costs can force people to cut spending on other essentials (such as food, medicine, and heating) and/or compromise on the suitability of their housing. Because low- income households spend a higher share of their income on housing than other households, declining affordability particularly affects these households.
• Poor housing can harm physical health, mental health, and people’s ability to participate fully in society. For example, living in overcrowded and poor-quality housing increases the likelihood of acquiring chronic health conditions, which can affect children’s long-term development. The health and social issues caused by overcrowding can also increase the risk of domestic and family violence.

Access to good quality, affordable housing is fundamental to wellbeing. It can help reduce poverty and enhance equality of opportunity, social inclusion and mobility.18 Housing is a need which must be met before an individual can consider other needs, including employment and social needs.

Housing affordability issues may have indirect effects such as increasing structural unemployment either by limiting transfers of labour to where it is most needed, or by forcing individuals to move from areas where they were previously employed. Structural unemployment occurs when there is a mismatch between jobs available and people looking for work with the necessary skills to do the work.19 The costs of housing unaffordability are not limited to the individuals that experience it, rather individuals and society bear the cost of reduced access to affordable housing.

The cost of homelessness to homeless persons, the community, and the economy is significant, and increases the longer the individual remains homeless. The annual cost to the community of rough

13 ABS, Estimating Homelessness: Census

14 AHURI - Housing affordability, housing stress and household wellbeing in Australia

15 Health of people experiencing homelessness

16 Productivity Commission, “In need of repair: The National Housing and Homelessness Agreement: Study Report: Overview”, p3, August 2022. Overview - In need of repair: The National Housing and Homelessness Agreement (pc.gov.au), p3

17 Productivity Commission, “In need of repair: The National Housing and Homelessness Agreement: Study Report: Overview”, p3, August 2022. Overview - In need of repair: The National Housing and Homelessness Agreement (pc.gov.au), p3

18 Housing affordability - Australian Institute of Health and Welfare (aihw.gov.au)

19 Unemployment: Its Measurement and Types | Explainer | Education | RBA

sleeping has been estimated to exceed $25,000 per person, while the cost of youth homelessness in Australia, in terms of additional health and criminal justice costs, has been calculated to be $626 million per year.20

The cost of inaction to alleviate housing stress and homelessness also includes forgone positive externalities and the aforementioned direct and indirect costs. These foregone positive externalities, direct benefits and indirect costs have been estimated by a broad range of institutions and thinktanks. The cost estimates show that without intervention, the cost to individuals and society as a result of an undersupply of affordable housing for vulnerable and low-income households is significant.

Table 1.1 – Foregone benefits

20 The many costs of homelessness | The Medical Journal of Australia (mja.com.au)

21 SGS Economics & Planning Pty Ltd (2019) City of Melbourne Housing, p31, https://sgsep.com.au/assets/main/SGS-Economics-and-Planning_Give-Me-Shelter.pdf

22 External Benefits do not capture the income savings from more affordable housing costs

23 Assumed to be a household of two adults both over the age of 75 and receiving the aged care pension. Both members of the households are no longer in the labour force. Due to the characteristics of the assumed household benefits from reduced crime cost, enhanced human capital, key work retention and educational benefits were not estimated.

24 Community Housing - Unlocking positive social benefits with social and affordable housing, https://www.communityhousing.com.au/wp-content/uploads/2023/10/SBCA-summary-and-HAFF-web- version.pdf?x97340

25 These benefits are over and above the appreciating value of the underlying land and housing assets and represent an overall gain to Australian society that would not have happened in the absence of these dwellings.

26 The McKell Institute - How Government investment in housing can boost the economy, https://mckellinstitute.org.au/research/articles/how-government-investment-in-housing-can-boost-the- economy/

Some cohorts are particularly impacted by the lack of safe and affordable housing

First Nations Australians, women and children impacted by family and domestic violence, older women, veterans and youth, experience higher rates of housing stress and homelessness.

First Nations Australians

First Nations people face greater barriers to home ownership, and as such, 68 per cent of First Nations people rent. 27 This puts them more at risk of housing stress and homelessness. While 3.8% of the Australian population identify as being of Aboriginal and/or Torres Strait Islander origin28,

20.4 per cent of all persons experiencing homelessness were First Nations.29

First Nations people are also more likely to live in unsafe housing. In 2018-19, 18 per cent of Aboriginal and/or Torres Strait Islander people were living in overcrowded dwellings,30 compared with 5 per cent of non-Indigenous Australians. The proportion of First Nations people living in overcrowded dwellings is higher in Remote areas at 32 per cent and climbs to 55 per cent in Very Remote areas.31

As well as being more likely to live in overcrowded dwellings, Aboriginal and/or Torres Strait Islander people are more likely to live in homes with structural issues. In 2018-19, 33 per cent of First Nations people lived in homes with at least one major structural problem. This increased to 46 per cent in Remote areas32.

Women and children experiencing family and domestic violence

Family and domestic violence is a leading cause of homelessness for women and children. In

2022-23, 38 per cent of the 273,600 Specialist Homelessness Services (SHS) clients had experienced family and domestic violence.33 Across the nation in 2022-23, around 6 in 10 clients accessing SHS

27 Indigenous housing - Australian Institute of Health and Welfare. https://www.aihw.gov.au/reports/australias-welfare/indigenous-housing 28 ABS - Estimates of Aboriginal and Torres Strait Islander Australians,

https://www.abs.gov.au/statistics/people/aboriginal-and-torres-strait-islander-peoples/estimates-aboriginal- and-torres-strait-islander-australians/latest-release

29 2021 Census ABS - Estimating Homelessness: Census, https://www.abs.gov.au/statistics/people/housing/estimating-homelessness-census/latest-release

30 Situation in a dwelling when one or more additional bedrooms are required to adequately house its inhabitants, according to the Canadian National Occupancy Standard. Compare with underutilisation (housing). The definition is used by AIHW.

31 Indigenous housing - Australian Institute of Health and Welfare. https://www.aihw.gov.au/reports/australias-welfare/indigenous-housing

32 Indigenous housing - Australian Institute of Health and Welfare (aihw.gov.au)

33 AIHW, https://www.aihw.gov.au/family-domestic-and-sexual-violence/responses-and-outcomes/housing

were women, whilst around 3 in 10 were children. 34 Many clients accessing SHS due to domestic and family violence do not have their housing needs met - 42 per cent of clients experiencing homelessness at the start of support were housed at the end of support.35 A shortage of transitional and long-term social and affordable housing means some women and children exiting crisis accommodation face a choice of returning to a violent home or becoming homeless36.

Older women

The number of older women (defined as those aged 55 years and over) experiencing homelessness has grown substantially. Between 2011 and 2021, the number of older women experiencing homelessness increased by almost 40 per cent.37 Older homeless women face particular challenges in accessing housing and other support services due to systemic and compounding factors such as the lack of superannuation, working part time or casually throughout their life, gender pay gap, taking time out of the workforce to care for family and more.38 Older women are now becoming more at-risk of homelessness and are increasingly experiencing homelessness.

Veterans

Research indicates that veterans are represented in the rough sleeping population at twice their level in the general population, with veterans representing 2.8 per cent of the Australian population but 5.6 per cent of people sleeping rough.39 40 People sleeping rough include people who are living on the streets, sleeping in parks, squatting, staying in cars or living in improvised dwellings. They are some of the most disadvantaged and vulnerable people in society.41

Veterans experiencing homelessness also live longer on the street or in crisis accommodation, with the average length of time being 6.3 years for veterans compared to 5 years for non-veterans.42 In addition, there are a number of unique risk factors associated with veteran homelessness, including rapid entry into rough sleeping and delays in seeking help until a crisis point is reached.43 Geoff

34 AIHW, https://www.aihw.gov.au/family-domestic-and-sexual-violence/responses-and-outcomes/housing

35 AIHW, Specialist homelessness services annual report 2022-23, see Clients who have experienced family and domestic violence; Figure FDV.3: Clients who experienced family or domestic violence, by services needed and provided, 2022–23.

36 National Plan to End Violence against Women and Children 2022-2032, 2022.

37 AIHW, Specialist homelessness services annual report 2021-22

38 Mercy Foundation - Older women and homelessness, https://www.mercyfoundation.com.au/our- focus/ending-homelessness/older-women-and-homelessness/

39 Department of Veterans’ Affairs, “Census reveals nearly 600,000 veterans in Australia”, June 2022. Available at: https://www.dva.gov.au/newsroom/latest-news-veterans/census-reveals-nearly-600000-veterans-australia 40 Wood, L. et al. (2021) “Out of the trenches; prevalence of Australian veterans among the homeless population and the implications for public health,” Australian and New Zealand Journal of Public Health, 46(2), pp. 134–141. Available at: https://doi.org/10.1111/1753-6405.13175

41 R Phillips and C Parsell,’The role of assertive outreach in ending 'rough sleeping’’, AHURI, 2012

42 Ibid

43 Department of Veterans’ Affairs (2022) Submission to the Productivity Commission Review of the National

Housing and Homelessness Agreement.

Evans, Founder of Homes for Heroes, has described the need for veteran-focused housing support, noting many veterans are less likely to access mainstream services due to a sense of shame and failure.44

Youth

Younger people are more likely to experience housing stress and homelessness. In 2016, young people aged 15-24 made up 21 per cent of the homeless population45, despite only accounting for 13 per cent of the population.46 The proportion of 20-24 year olds experiencing homelessness has climbed from 0.7 per cent to 0.8 per cent from 2006 to 2016. Rates of youth homelessness are substantially higher among those living in Remote or Very remote areas with 6.2 per cent of youth in Remote and Very remote areas experiencing homelessness compared to 0.8 per cent of youth in major cities.47

Younger people are also more likely to experience housing stress with 28 per cent of 15-24 year olds living in lower income households experiencing housing stress. This figure is higher for 20-24 year olds, with 37 per cent experiencing housing stress.48

Social and affordable housing helps address the problem

Social and affordable housing is housing that is provided at below market rent and designed to make housing solutions available to individuals and households that cannot access market housing or for whom market housing, at market prices, is unsuitable. It directly addresses the problem of housing affordability.

Social housing is generally understood to be government subsidised rental housing. Social housing provides housing for people who are unlikely to afford private rental market rents. Social housing is made up of public housing, which is owned and managed by the states and territories, and community housing, which is managed (and often owned) by CHPs, which are predominantly not- for-profit organisations.

Affordable housing is more varied in its definition. It is usually provided at a discount to market rent and often involves the provision of housing for low to moderate income households, including essential and frontline workers.

44 Evans, G. (2 022) “From One to One Hundred,” Parity, 33(6), pp. 11–12.

45 AIHW - Australia's youth: Homelessness and overcrowding, https://www.aihw.gov.au/reports/children- youth/homelessness-and-overcrowding

46ABS - 2016 Census - a ‘selfie’ of young people in Australia, https://www.abs.gov.au/ausstats/abs@.nsf/mediareleasesbyreleasedate/AC02F0705E320F58CA25817C00016 A47?OpenDocument

47 AIHW - Australia's youth: Homelessness and overcrowding, https://www.aihw.gov.au/reports/children- youth/homelessness-and-overcrowding

48 AIHW – Australia’s youth: Housing stress, Australia's youth: H...~https://www.aihw.gov.au/reports/children- youth/housing-stress

In addition, acute housing covers a range of housing types, including crisis and transitional housing, but can also refer to specific housing needs.

Social and affordable housing is an essential part of the policy solution.49 Placing a vulnerable person in social housing reduces their risk of homelessness by 6-13 per cent.50 Some tenants considered social housing as the ‘only path out of homelessness’.51 Highly targeted affordable housing is also key to reducing housing stress. It creates a path out of social housing dependency and, by definition, removes housing stress. This is especially beneficial for essential workers.

Australia’s social housing stock has declined from about 6 per cent of houses in 1991 to less than 4 per cent in 2021.52 For new households allocated public housing in 2020-2021, 47.2 per cent of applicants were on a waiting list for one or more years, including 10.3 per cent that had waited five or more years.53 During this time, applicants may not have access to safe and secure housing, and may experience homelessness. The number of people on waiting lists for social housing is also increasing over time. According to the 2022 Report on Government Services, there were 216,846 people on waiting lists for social housing as of 30 June 2021, up from 189,414 on waiting lists in 2017 (a 14.5 per cent increase).54

49 Productivity Commission, In need of repair: The National Housing and Homelessness Agreement, p44

50 Productivity Commission, In need of repair: The National Housing and Homelessness Agreement, p242

51 Productivity Commission, In need of repair: The National Housing and Homelessness Agreement, p242

52 Grattan Institute, A place to call home: it's time for a Social Housing FUture Fund, https://grattan.edu.au/news/a-place-to-call-home-its-time-for-a-social-housing-future-fund/ 53 Australian Institute of Health and Welfare - Housing assistance in Australia, Data, https://www.aihw.gov.au/reports/housing-assistance/housing-assistance-in-australia/data

54 G Housing and homelessness - Report on Government Services 2022 - Productivity Commission (pc.gov.au)

This data also likely understates the true number of households in need of social housing as households may not apply because they believe the chances of securing a tenancy are slim and/or due to the stigma attached to being dependent on social housing.55

The HAFF and Accord are part of a suite of policies to address housing affordability

The HAFF and Accord are part of a broad suite of policies designed to address pressures across all parts of the housing system, with most of these policies designed to work together in a complementary manner.

While each housing measure is designed to target a very specific problem in the housing system, the policies can be broadly grouped into four categories.

Measures to support first home ownership

                The Government is establishing the Help to Buy scheme with state and territory governments to help thousands of Australians to purchase a home of their own. Under the scheme, the Government will provide an equity contribution to eligible participants of up to 40 per cent for new homes and 30 per cent for existing homes.

                The Home Guarantee Scheme has helped more than 100,000 people into home ownership, including more than 13,000 single women and more than 15,800 through the Regional First Home Buyer Guarantee. The scheme has now been expanded significantly – July 2023

55 Report - Review of the operations of the NHFIC Act (treasury.gov.au), P28

changes allow friends, siblings, and other family members eligible for joint applications under the First Home Guarantee and the Regional First Home Buyer Guarantee.

Measures to support new supply

                On 16 August 2023, National Cabinet agreed to an ambitious new national target to build 1.2 million homes over five years from 1 July 2024. This is an additional 200,000 new homes above the National Housing Accord agreed by states and territories in 2022. As part of the National Cabinet meeting, the Government announced:

      $3 billion for a New Home Bonus, for states and territories that achieve more than their share of the one million well-located homes target under the National Housing Accord.

      $500 million for a Housing Support Program, a program for local and state and territory governments to kick-start housing supply in well located areas. Applications for Stream 1 have now closed. As part of the 2023-24 Budget, an additional $1 billion is being provided to states and territories.

                Tax incentives have been provided to encourage more build-to-rent developments to boost new supply in the private rental market.

                A National Planning Reform Blueprint with planning, zoning, land release and other measures to improve housing supply and affordability.

                A Better Deal for Renters to harmonise and strengthen renters’ rights across Australia.

                Universities are now required to deliver more purpose-built student accommodation. This will increase housing supply and help to ensure that increases in international student numbers do not put pressure on the domestic housing market.

                The Government is making available an additional 20,000 fee-free TAFE and pre- apprenticeship places. The Government has also committed $1.8 million to deliver streamlined skills assessments for around 1,900 migrants from comparable counties to work in Australia’s housing construction industry.

Measures to support low-income and vulnerable households

                The HAFF and Accord will support the delivery of 40,000 new social and affordable homes and fund a range of acute housing needs over its first five years.

                The $2 billion Social Housing Accelerator is a direct payment to the states and territories to help deliver thousands of new social homes across Australia.

                Commonwealth Rent Assistance has been increased, with a 15 per cent increase in the maximum rates in the 2023-24 Budget from 20 September 2023, followed by a further 10 per cent increase to maximum rates in the 2024-25 Budget, to take effect on 20 September 2024, subject to the passage of legislation.

                Targeting the $1.0 billion for social housing under the National Housing Infrastructure Facility in the 2023-24 MYEFO towards crisis and transitional accommodation for women and children experiencing domestic violence, and youth, including changing the mix of concessional loans and grants to increase the amount of grants to $700 million.

Measures to support homelessness and other acute housing needs, including crisis and transitional housing

                National Cabinet has agreed a new, 5-year $9.3 billion National Agreement on Social Housing and Homelessness (NASHH) for state and territories (states) to combat homelessness, provide crisis support and build and repair social housing. The NASHH will replace the National Housing and Homelessness Agreement (NHHA) and provide an additional

$423.1 million over the life of the agreement. Under the new agreement, the Government will double the funding component for homelessness services to $400 million a year – funding the States are required to match.