12 February 2019

NHFIC a piece of the puzzle to solve Australia’s housing affordability woes

The National Housing Finance and Investment Corporation (NHFIC) is providing much needed ammunition to those fighting for more affordable housing in Australia.

NHFIC is an independent corporation established by the Commonwealth on 1 July 2018. It provides low-cost funding to Community Housing Providers (CHP) and other eligible entities for critical infrastructure projects and affordable housing developments.

NHFIC distributes funding through two schemes:

  1. The National House Infrastructure Facility (NHIF), which is a $1 billion facility funded by the government for infrastructure projects such as transport links and utilities infrastructure. CHPs and various government entities are eligible to apply for funding in the form of concessional loans, grants and equity investments.
  2. The Affordable Housing Bond Aggregator (AHBA), which provides concessional loans to CHPs for the acquisition, construction or maintenance of existing housing stock, as well as to assist with refinancing and working capital requirements. AHBA loans are funded by Commonwealth borrowings and out of finance raised by bonds issued in the capital markets.

The schemes were implemented following the recommendations of a report delivered to Australian Treasury in 2017, which noted that the affordable housing sector in Australia lacked access to suitable finance options.

The report found that the length and terms of loans were an issue. In Australia, CHPs tended to be offered loans of a three- to five-year term, which create refinancing risk and a mismatch with asset lifespans. Refinancing is further complicated by differences in rules surrounding security debt in each of the states and territories. This means that CHPs are faced with periodic headaches in renegotiating loan terms.

Also noted as an issue were asset valuations. CHPs reported that their assets are undervalued as a result of offering sub-market rents. This limits the security available for future loans, and inhibits their growth potential.

NHIF and AHBA are designed to address these concerns. While borrowers are required to provide appropriate security, they can expect favourable lending terms, such as extended terms and concessional interest rates.

NHFIC’s first finance project was announced last week, with a $35 million loan offered to Hume Community Housing. The funding will assist with the management of approximately 2000 community homes in Western Sydney, and support the development of a further 2200 homes in the Hunter region.

For many Australians, improved access to affordable housing cannot come soon enough. The Productivity Commission’s Report on Government Services 2019 indicated that, in 2015-16, over 50 per cent of Australian low income households experienced rental stress, meaning more than 30 per cent of gross household income was spent on rent. Moreover, the Australian Institute of Health and Welfare report that the supply of social housing in Australia is failing to keep up with household growth, with social housing stocks dropping from 5.1 per 100 householders in 2007-08, to 4.6 in 2016-17.

While NHFIC alone cannot address this issue, it is certainly a step in the right direction. Hall & Wilcox is already advising CHPs on proposed NHFIC financings along with other social housing projects such as the NSW Social and Affordable Housing Fund and looks forward to seeing growth in Australia’s community housing sector, particularly as NHFIC expands its pipeline of projects.


Katrina practises principally in the areas of commercial law and property law and development.

More about Katrina

Nick has 19 years’ experience acting for Australian and international financiers and borrowers in corporate finance, acquisition finance, real estate finance and general finance across a range of sectors including financial services, property and  technology.

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