By Nick Hedley
Australia’s superannuation funds have welcomed the new
government’s plans to facilitate the development of 1 million houses over five
years from 2024 with the help of institutional investors.
In a federal budget presented in late October, Treasurer Jim
Chalmers said the government will form a national “housing accord” with local
governments, major investors and the construction sector.
The accord will focus partly on delivering affordable
housing units through investment vehicles suitable for collective super fund
investments. Government funding will be used to cover the gap between market
rents and subsidized rents to make investments commercially viable.
Housing affordability is an ongoing issue in Australia.
According to a recent study by financial services groups ANZ and CoreLogic, the
portion of household income required to service new mortgage repayments reached
41.4% nationally in March – well above the decade average of 36.5%. Rentals
have also climbed substantially, partly because of limited supply, the study
shows.
To address this problem, the federal and state governments
have turned to institutional investors, who have expressed an interest in
providing funding – as long as mechanisms are in place to ensure the returns
are adequate.
“A trustee investment in an affordable housing vehicle would
still need to be capable of satisfying ordinary ‘members’ best financial
interests’ requirements for trustees in prudent investment decision-making,”
Mercer said in a note following the budget.
The government said parties to the accord will work “to
optimize policy settings that facilitate institutional investment in affordable
housing.”
Australian Retirement Trust (ART), which recently partnered
with institutional investment manager QIC to fund new social and affordable
housing projects in the state of Queensland, said it “fully supports” the
initiative.
“We recognize that secure and affordable housing is one of
the most significant contributors to the financial wellbeing of our members,
and all Australians, throughout their working lives and in retirement,” ART
said in a statement.
“With the national rental vacancy rate at a record low and
advertised rents significantly increasing over the last 12 months, the time has
come for all stakeholders to collaborate to improve financing for new social
and affordable housing projects.”
ART said its partnership with QIC would deliver affordable
housing without compromising its fiduciary duty to its members.
The fund is “actively looking to participate in more of
these opportunities across Australia” where they represent appropriate
risk-adjusted returns.
Cbus Super, which manages assets worth A$70 billion (US$45
billion) on behalf of workers in the construction industry, called the accord
“a great leap forward for the provision of social and affordable housing in
Australia.”
“Cbus has long been an advocate for increased investor
participation in social and affordable housing,” the fund’s CEO, Justin Arter,
said in a statement.
The scheme could “super charge” existing affordable housing
programs while also providing attractive returns for retirement fund members.
“We applaud the move to bring together governments, industry
groups and investor funds like ours so that we are working in a coordinated way
in an area of national importance,” Arter said.
Cbus Deputy Chief Investment Officer Brett Chatfield said
the accord is an opportunity to build on proven affordable housing finance
models.
“The key has been matching the risk-adjusted return profile
of social and affordable housing investments to similar investments we would
otherwise make. It is this alignment that creates the win-win situation of
strong investment returns for our members and more secure and affordable
housing for vulnerable Australians.”
Debby Blakey, CEO of super fund HESTA, said access to
affordable housing “is vitally important for our members who work in the health
and community services sector that deals with so many of the social issues that
flow on from a lack of appropriate, secure housing.”
The lack of affordable housing “is a drag on workforce
productivity” and contributes to negative health outcomes and domestic
violence, she said.
“With this in mind, we welcome the federal government’s
housing accord as an important first step towards removing long-term barriers
to growing the supply of affordable and social housing.
“Australia’s superannuation system has incredible investment expertise they can bring to the table and we’re already seeing the industry develop a range of models that, if backed by strong partnership with government, can attract patient, long-term capital,” Blakey said.
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