National Housing Finance and Investment Corporation draft investment mandate released

Draft outlines how the NHFIC will finance core functions including the bond aggregator

20 Feb 2018

The Treasury has released a draft investment mandate for how the National Housing Finance and Investment Corporation (NHFIC) will finance its two core functions: the Affordable Housing Bond Aggregator and the National Housing Infrastructure Facility. The NHFIC may also provide finance to support registered community housing providers (CHPs) develop their financial and management capabilities. With the aim of boosting Australia’s affordable housing stock, the Affordable Housing Bond Aggregator will aggregate loans for registered CHPs and issue bonds to institutional investors to raise finance at rates cheaper than bank loans. Ultimately the Bond Aggregator will be funded through its ongoing operations with support from an ongoing government guarantee.

When assessing loans through the Bond Aggregator, the Board must consider:

  • the purpose for which the loan is sought
  • the credit-worthiness of the relevant registered CHP
  • the extent and likelihood of a return on any loan and the associated financing cost
  • whether private sector finance is available to the CHP
  • whether the loan complements other sources of government finance.

The NHFIC Board may allocate up to $150 million of reserve to support the initial operation of the Bond Aggregator. This reserve will ‘provide a warehouse facility that extends bridging financing to registered community housing providers’ until the first round of affordable housing bonds can be issued.

The Government has committed $1 billion over five years to the Infrastructure Facility to provide finance in the form of loans, equity investments and grants to eligible infrastructure projects which support the creation of housing-related infrastructure. This will include new or upgraded infrastructure for services such as water, sewerage, electricity or transportation, and site remediation works including the removal of hazardous waste or contamination. The Infrastructure Facility will not finance housing projects directly or community infrastructure such as parks or libraries.

The Infrastructure Facility will work in partnership with, and provide finance to, local, state and territory governments, government corporations and registered community housing providers to support housing-related infrastructure projects.

Applicants need to show that without investment, projects ‘would not proceed, or would proceed at a smaller scale or at a later time’ and that the assistance will ‘accelerate or increase housing supply’.

A cap of $175 million applies to the total amount of money the Infrastructure Facility can provide in the form of grants and capacity building activities, so for example, total of $173.5 million in grants may be issued with  $1.5 million (maximum) spent on capacity building activities.

The draft investment mandate is available on the Treasury website with feedback sought until 9 March 2018.