HA Housing Insights: Innovative ways to change the housing landscape with Brad Hosking, National Affordable Housing
“A person’s financial wellbeing in retirement absolutely depends on owning their own home. However, today, 75% of households that retire with a mortgage, have a mortgage balance that is greater than the balance of their superannuation fund”
The housing crisis remains a critical issue in Australia.
In this HA Housing Insights series, our social and affordable housing team speak with key industry experts – including developers, builders, community housing providers, investors and property and tax specialists – to gain a well-rounded perspective on the challenges faced in delivering housing outcomes and potential solutions.
In our previous snapshots, we gained valuable perspectives from:
Jesse Radisich, Director of the Victorian JLL Capital Markets – Development Team
Jess Jones, Head of Strategy and Business Development at Balmain and Co
Brian Farrelly, Partner and Executive Director at Pitcher Partners
In this instalment, we speak with Brad Hosking, Chief Executive Officer of the National Affordable Housing group of companies (NAH). NAH is an owner and manager of community housing in Queensland and Victoria, and an allocator and manager of affordable housing for built to rent investors. NAH also facilitates share shared equity home ownership outcomes through its long-established BuyAssist Australia platform.
Brad’s background is in the non-for-profit community housing, construction and development finance, corporate banking, and tertiary education sectors.
Brad Hosking
Chief Executive Officer
nahc.org.au
Q. What innovative housing solutions have you seen that could help solve the housing crisis?
A. Innovation in the housing sector has most recently moved to state and federal taxpayer funded long term subsidiary streams that support commercial investment returns to institutional investors, and the creation of subsidy pass through special purpose vehicles in partnership with community housing providers. Also, a reduction to withholding tax for foreign investment in affordable housing supply has just recently been introduced, and it is too early to know whether this will provide for additional supply.
Shared equity models that create first home buyers has had limited application but continues to represent a great opportunity to boost new supply, through the building of new homes that free up existing rental properties.
We believe that to have strong and positive communities, the trajectory of homeownership needs to change, so that in the future less people retire into housing stress and insecurity.
We know the key barrier to being able to afford to buy a home is being able to save for a deposit while paying rent. Rates of homeownership amongst every demographic are at historic lows (particularly those aged 26 – 35) and more households are renting for life - facing increased housing stress and at worst risks of homelessness – and particularly those at or post-retirement.
For homeowners, 20 years ago, 23% of people aged 55-64 had a mortgage. Today that number is more than double, at 54%. More than 45% of first home buyers in Queensland and 55% in Victoria rely on the 'bank of mum and dad' for a deposit. For many, particularly First Nations Peoples, this will never be an option.
A person's financial wellbeing in retirement absolutely depends on owning their own home. However, today, 75% of households that retire with a mortgage, have a mortgage balance that is greater than the balance of their superannuation fund. You would think that the overall financial wellbeing of members would be an imperative for member owned superannuation funds rather than their superannuation fund balances at retirement. But unfortunately, no, and currently we have not seen anywhere near enough investment by superannuation funds in the residential property sector.
We also all know - that there are major economic and social impacts on individuals and government (and frankly all taxpayers) if a person does not own their home by retirement.
Much more needs to be done in this space to allow younger working households to acquire a home sooner.
Q. What changes need to be made to make home ownership more accessible to first home buyers?
A. Ensure that transactional costs (like stamp duty) do not apply to first home buyers. This has recently been introduced in Queensland, and we are waiting to see the impact of this. Certainly, it makes sense.
I do not recommend anything beyond minimal access to ‘Super for Housing’, because it will be price inflationary, like First Homeowner Grants have demonstrated to be.
Largely however, it is a housing system issue that has mostly to do with supply, and the system can be fixed through additional supply. Any initiative that boosts supply across any part of the housing spectrum makes a difference, whether that be more capital funding for public and community housing, more grants for institutional investors operating in the affordable rental arena, or support for first homeowners. The big challenge is that supply is so expensive due to trade shortages, material costs and very low construction productivity.
Q. Can you comment on the role of institutional investors as a source of finance to increase the supply of rental housing as a long-term solution to addressing the housing crisis?
A. There is an important role for institutional investment. Forever we have been dependent on the three million ‘mum and dad’ investors that own a single investment property to supply 75% of our rental housing in this country.
Institutional investors have an important role to play in supplying capital (not debt) as quasi-equity to initiate new investment. The challenge is that most investors demand significant financial returns on that investment (10% plus per annum) and that comes at a cost to future taxpayers (our children) through tax settings or long-term subsidy streams from governments.
Q. One of the key challenges for affordable housing projects in Australia is the sourcing and structuring the funding required for such projects. What are some examples of innovative funding structures in affordable housing project that help address this challenge?
A. Our organisation pioneered joint venture, partnership and debt structures that included government subsidy streams over six years ago upon the commencement of the Victorian Government’s Social Housing Growth Fund New Rental Development Scheme.
Most of the financial structures that we are seeing now within the Housing Australia Future Fund Facility, for example, are similar or slight variations on this, so we are not really seeing much innovation in capital, debt or asset structures currently.
Q. High financing costs are a typical barrier to project viability. Are there ways that the financing costs of affordable housing projects can be reduced to help make these projects more economically viable?
A. No. Investors and debt providers require an adequate return on capital or risk. If there is a reduction in cost, someone must pay for it, and it generally is us, the taxpayer.
The information provided in this article is for general informational and conversational purposes only. While we strive to ensure the accuracy and relevance of all content, we make no guarantees about the completeness, reliability, or suitability of the information for any particular purpose. The views and opinions expressed in this article or associated materials are those of the respective contributors and do not necessarily reflect the views of Harwood Andrews or any of its affiliates.
This article is the seventh in a series of Housing Insights. Follow us to be notified when the next instalments are released.
1st instalment: HA Housing Insights: A Policy Perspective - Q&A with Mike Myers, QLD Chair of Housing All Australians
2nd instalment: HA Housing Insights: Housing market overview with - Q&A with Jesse Radisich, JLL
3rd instalment: HA Housing Insights: A builder perspective on the housing crisis - Q&A with Jess Jones, Balmain & Co
4th instalment: HA Housing Insights: A lender’s perspective on the housing crisis - Q&A with Bruce Wan, MaxCap Group
5th instalment: HA Housing Insights: Tax Considerations for tackling the housing crisis - Q&A with Brian Farrelly, Pitcher Partners
6th instalment: HA Housing Insights: A developer’s perspective on housing solutions - Q&A with Tim Copley, McNab
For more information or to be featured in our HA Housing Insights series please contact:
Briget O’Callaghan
Principal Lawyer
0457 117 925
bocallaghan@ha.legal
Evelyn Zeglinas
Associate
03 5225 5245
ezeglinas@ha.legal
