EXPLANATORY STATEMENT
Issued by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing
National Housing Finance and Investment Corporation Act 2018
National Housing Finance and Investment Corporation Investment Mandate Amendment (Review Measures) Direction 2022
Subsection 12(1) of the National Housing Finance and Investment Corporation Act 2018 (the NHFIC Act) provides that the Minister may, by legislative instrument, give the Board of the National Housing Finance and Investment Corporation (NHFIC) directions about the performance of NHFIC’s functions.
The objective of the NHFIC Act is to establish NHFIC to improve housing outcomes for Australians. NHFIC is a corporate Commonwealth entity dedicated to improving housing outcomes and it commenced operation on 1 July 2018.
NHFIC was initially established to operate the Affordable Housing Bond Aggregator, the National Housing Infrastructure Facility (NHIF) and a Capacity Building Program for community housing providers. NHFIC’s activities have since expanded to include the administration of the First Home Guarantee (and subsequently, the New Home Guarantee and Family Home Guarantee), and a research function that conducts research into housing affordability in Australia. The First Home Guarantee was established with the aim of enabling first home buyers to access the housing market sooner.
The Government commissioned a Statutory Review of the Operation of the National Housing Finance and Investment Corporation Act 2018 (NHFIC Review). The NHFIC Review’s report was provided to the Minister for Housing on 13 August 2021. While the NHFIC Review found that the NHFIC Act has been a significant and successful initiative by the Commonwealth, it made recommendations it considered could improve the operation of the NHFIC Act and better achieve the overall objectives of the NHFIC Act.
The purpose of the National Housing Finance and Investment Corporation Investment Mandate Amendment (Review Measures) Direction 2022 (the Instrument) is to amend the National Housing Finance and Investment Corporation Investment Mandate Direction 2018 (the Investment Mandate) to implement the Government response to Recommendations 1, 8 and 15 of the NHFIC Review and to increase the cap of NHFIC’s total guaranteed liabilities (Liabilities Cap) by $2.0 billion to $5.5 billion. The amendments seek to improve and enhance NHFIC’s ability to deliver improved housing outcomes, particularly social and affordable housing.
In accordance with subsection 12(2) of the NHFIC Act, the amendments align with the objectives of the NHFIC Act, which includes strengthening efforts to increase the supply of housing and encouraging investment in housing, particularly in the social and affordable housing sector. The amendments require NHFIC to seek to use its lending activities to ‘crowd in’ the participation of private financiers or other participants where doing so will increase the supply of social and affordable housing. The amendments also require NHFIC to proactively seek out projects that could benefit from financing under the NHIF so it can better support the supply of new social and affordable housing. The amendments further set expectations for NHFIC to continue to deliver on its mandate to the highest standards, including the collection of additional data on the First Home Guarantee to assist with evaluating the effectiveness of the scheme.
Under the Investment Mandate, the Liabilities Cap sets the maximum value of liabilities that NHFIC can incur under its Commonwealth guarantee. NHFIC cannot incur liabilities exceeding the Liabilities Cap without prior agreement of the Minister for Housing and the Minister for Finance. Prior to this Instrument, the Liabilities Cap was $3.5 billion.
The Instrument increases the Liabilities Cap from $3.5 billion to $5.5 billion. The Liabilities Cap was previously increased from $3 billion to $3.5 billion, in February 2022. This additional $2 billion ensures that NHFIC can continue to expand its capital market and financing activities and support the continuing development of the community housing sector, including to support NHFIC’s new ‘crowding in’ mandate.
The NHFIC Review undertook consultation with a wide range of stakeholders, including in relation to providing NHFIC with an explicit mandate to ‘crowd in’ and catalyse the participation of private financiers, increasing the Liabilities Cap and enabling additional data collection on the First Home Guarantee. No public consultation was undertaken on the Instrument because consultation had already been undertaken on the policy as part of the NHFIC Review.
Details of the Instrument are set out in Attachment A.
The Instrument is a legislative instrument for the purposes of the LegislationAct 2003. The Instrument is 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 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 instrument is a direction from the Minister to NHFIC, and therefore is exempt from disallowance. This provides NHFIC with certainty in the ongoing administration of its activities.
The Instrument commences immediately after the commencement of the National Housing Finance and Investment Corporation Investment Mandate Amendment (Home Guarantee Scheme) Direction 2022 which commences on 1 July 2022.
The Office of Best Practice Regulation has assessed the Instrument as having no more than a minor regulatory impact (OBPR reference number 44739).
ATTACHMENT A
Details of the National Housing Finance and Investment Corporation Investment Mandate Amendment (Review Measures) Direction 2022
Section 1 – Name of the Instrument
This section provides that the name of the Instrument is the National Housing Finance and Investment Corporation Investment Mandate Amendment (Review Measures) Direction 2022 (the Instrument).
Section 2 – Commencement
This section provides that the Instrument commences immediately after the commencement of the National Housing Finance and Investment Corporation Investment Mandate Amendment (Home Guarantee Scheme) Direction 2022, which commences on 1 July 2022.
Section 3 – Authority
This section provides that the Instrument is made under the National Housing Finance and Investment Corporation Act 2018 (the NHFIC Act).
Section 4 – Schedule
This section provides that each instrument that is specified in the 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
Providing National Housing Finance and Investment Corporation (NHFIC) with an explicit mandate to ‘crowd in’ private financiers
Recommendation 1 of the National Housing Finance and Investment Corporation Act 2018 (NHFIC Review) recommended that NHFIC be given an explicit mandate to ‘crowd in’ and catalyse the participation of private or other financiers where doing so will increase the supply of social and affordable housing.
Item 1 to the Instrument repeals paragraph 19(c) and includes new paragraphs 19(c) and (ca) to provide for this explicit mandate. The amendment recognises that additional participation from the private sector is crucial to substantially increase social and affordable housing outcomes, and the key role of NHFIC in ‘crowding in’ and catalysing additional private sector participation that supports and increases the supply of social and affordable housing.
More specifically, the amendments require the Board of NHFIC to consider the ‘crowding in’ mandate as part of the Board’s considerations when making lending decisions through the Affordable Housing Bond Aggregator, including balancing the mandate with other matters the Board must consider when making the lending decisions. Among other matters, the Board will need to consider the availability of any private sector finance to the registered community housing provider and the terms on which that finance would be made available, as well as the extent to which a particular loan would encourage private sector participation in supporting affordable housing outcomes.
For example, the Board may consider it appropriate for NHFIC to not provide a loan where private sector finance is available to fund a project and the terms of that finance support the project’s viability and the delivery of improved social and affordable housing outcomes. NHFIC would then be able to use its existing fund, to finance other projects where private sector finance is not available. This will increase the overall supply of social and affordable housing, as the pursuit of the privately funded project and NHFIC funded projects together would otherwise not have been possible if the private sector finance was not available.
As another example, the Board may consider it appropriate for NHFIC to make a loan that would support the provision of private sector finance where the project would increase the supply of social and affordable housing and private sector finance would be unlikely to be provided unless the project is co-funded with NHFIC. In this scenario, the Board may consider the loan should be made as it would encourage private sector participation in supporting and increasing affordable housing outcomes.
Directing NHFIC to proactively seek out projects that could benefit from financing and grants under the National Housing Infrastructure Facility (NHIF)
Recommendation 8 of the NHFIC Review recommended NHFIC be directed to proactively seek out projects that could benefit from financing and grants under the NHIF. The NHFIC Review recommended that this includes quarterly reporting to the Minister.
Item 2 to the Instrument inserts a new section 23A. This new section is consistent with recommendation 8 and directs NHFIC to engage proactively in promoting the NHIF and identifying suitable projects to potentially enable increased deployment of the NHIF. The new section requires NHFIC to make reasonable efforts to identify projects that could be suitable for funding under the NHIF and to promote the NHIF to the proponents of such projects. The section further requires NHFIC to report these activities to the Minister on a quarterly basis.
Collecting additional data to assist in evaluating the effectiveness of the First Home Guarantee
Recommendation 15 of the NHFIC Review recommended that additional data be collected to evaluate the effectiveness of the First Home Guarantee, particularly on the behavioural changes induced by the scheme and the types of first home buyers that it supports and that the findings should be incorporated into the six‑monthly reporting required by section 29L of the Investment Mandate.
Items 3, 4 and 5 amend section 29L in response to this recommendation. The amendments enable the collection of additional data and information, which over time would allow the Minister to understand the cohorts of first home buyers assisted under the First Home Guarantee. This will allow the Minister to draw conclusions on the effectiveness of the First Home Guarantee in facilitating first home buyers entering into the housing market and consider if any further policy refinements should be considered.
Increasing the Liabilities Cap under the Investment Mandate
Item 7 to the Instrument increases the Liabilities Cap under subsection 34(2) to the Investment Mandate from $3.5 billion to $5.5 billion.
The increase in the Liabilities Cap is consistent with recommendation 1 of the NHFIC Review, that NHFIC be given an explicit mandate to ‘crowd in’ private financiers to increase the supply of social and affordable housing. It enables NHFIC to continue to support the development of social and affordable housing, and supports NHFIC’s ability to ‘crowd-in’ new sources of finance.
Item 6 to the Instrument makes an editorial amendment to the heading of section 34 to reflect the new amount of the Liabilities Cap.
Application of paragraph 29L(1)(ca)
Item 8 inserts a new Division into Part 7 to the Investment Mandate to provide that paragraph 29L(1)(ca), as inserted by item 3, applies to a report for a six month period commencing on and after 1 July 2022.