Industry Super Australia (ISA) has urged the Senate to vote in favour of the government’s Housing Australia Future Fund (HAFF) legislation.
In its submission to the Senate economics legislation committee inquiry, ISA stated it had been working closely with various stakeholders to “identify policy settings that would enhance their capacity to invest in social and affordable housing, including the operation of the Housing Australia Future Fund”.
It believed the proposed legislation presented an opportunity to deliver affordable homes to tens of thousands of Australians who needed them the most and would address market and regulatory hurdles that had previously inhibited private investment in the sector.
Last year, an ISA-commissioned report found that, with meaningful government backing, affordable housing investments could deliver stable long-term returns for super funds while also addressing an economic and social need.
“Government leadership is essential to address the many market and regulatory failures which contribute to a lack of private sector institutional investment. These include land availability, planning, taxation and critically a lack of a funding mechanism to close the rental income gap associated with social and affordable rental income streams to service the capital needed to build dwellings,” ISA said in its Senate submission.
“The HAFF provides that mechanism to close the funding gap for projects allowing them to be financed and service and repay the capital necessary to provide adequate returns to investors.
“The critical mechanism here is a recurrent indexed availability payment or subsidy that can be capitalised over 25 years to bring forward capital to fund construction and add to housing supply.
“Putting in place a dedicated fund for this purpose — although novel — creates an important institutional safeguard to guarantee recurrent funding that should be more resilient to the political cycle than discretionary budget expenditures that fluctuate according to the priorities of the government of the day. Furthermore, it is a model which can be easily scaled over time with additional top-ups to the HAFF.
“The involvement of institutional investors is desirable given their capacity to invest at scale efficiently and bring innovation to projects including mixed tenure models which are considered to be best practice and generally not a feature of wholly government funded housing developments.”
The industry super fund added that it had never suggested the capital being placed in the HAFF was $10 billion short of what was required — rather, the HAFF income streams would need to attract an estimated $10 billion in capital from private investors in order to construct 40,000 social and affordable dwellings.
“ISA believes indexation of the annual expenditure cap will be required to support the capital which needs to be raised,” it said.
“When it comes to investing in any projects, industry super funds’ approach is always with the best financial interests of members foremost and the HAFF is no different.”
It promised to work closely with members, other industry super funds, and collective investment vehicles to implement the important initiative and urged the Senate to support the HAFF and the “once-in-a-generation opportunity it provides”.
