National Bond: The Australian Government’s push for social and affordable housing

Australia is in the midst of a critical shortage of housing supply, with Queensland alone expected to see a population increase of 2.2 million people by 2046. The Federal Government has estimated the nation needs nearly 900,000 new dwellings to meet this demand, however, at the current rate of housing development in the pipeline, achieving this target will be nearly impossible.

In the face of this crisis, the Federal Government has released a series of development initiatives that aim to expedite the delivery of housing. Running alongside the Housing Australia Future Fund (HAFF) and the National Housing Accord Facility (NHAF) is the Affordable Housing Aggregator Bond (AHAB).

What is the Affordable Housing Aggregator Bond?

The Affordable Housing Aggregator Bond (AHAB) is a government loan facility, where the Federal Government is providing an interest only loan for a 10-to-15-year period to fund the development or provision of social and affordable housing.

This interest only, fixed rate loan must have a minimum value of $5 million and can be used in conjunction with HAFF and NHAF or independently as an incentive for investors and developers, with the intent to encourage development in the sector.

Developers applying for the AHAB can expect to receive a different source of funding that is not associated with any major bank, including lower interest rates, longer loan terms, options for deferred payments as well as acceptance of certain market risks that a typical financial institution would not be willing to accept.

The Federal Government is issuing bonds into a domestic debt capital market and then raising funds through that market. Those funds then become a loan that is given back to applicants, meaning there is a cycle of money flowing with the key goal of increasing housing supply.

How can a developer use the Affordable Housing Aggregator Bond?

To be eligible for the AHAB, developers must be linked with a Community Housing Provider, but unlike the HAFF and NHAF funds, there is no timeline or closing date for submissions. This means developers have time to plan for new social and affordable housing projects and still apply for the loan.

The loan can be used for a range of purposes, including:

  • Purchase new housing

  • Construct new housing

  • Maintain existing housing supply

  • Refinance to an interest only loan

  • Land acquisition

  • Land remediation (i.e. remediating or removing contaminated soil)

  • Transaction costs (i.e. stamp duty)

  • Design and professional fees

  • Construction costs

  • Capitalised interest.

Unlike HAFF, a developer does not need to submit plans or have approval of a project to apply for the AHAB, instead an applicant needs to be able to demonstrate their commitment to using this money to develop social or affordable housing.

How Development Directive can help

Development Directive can help clients navigate the application process and assist to implement a feasibility study, connect you with the right people – whether that be a community housing provider, architect or builder – and help create a financial model which is required for lodgment.

While the application requirements appear to be less rigorous than the HAFF or NHAF schemes, it is important for developers to partner with the right team and ensure they meet the criteria to secure this interest only fixed rate loan.

We understand what is needed to maximise a developer’s chance of receiving this funding and can help to start or reinvigorate affordable and social housing plans.

Contact Development Directive today for help with applying for the Affordable Housing Aggregator Bond.

Scott MacgregorComment