[+] Shovel-Ready Affordable Homes in the Crosshairs

Applications have opened for Australia’s newly minted $10-billion Housing Australia Future Fund initiative that will provide funding for more social and affordable housing. HAFF makes provisions for 30,000 new and affordable social houses to be built within the first five years off the back of returns from its dedicated investment vehicle, which is tied to the stock market. But the first round of funding will focus on shovel-ready projects to get the wheels in motion, with an 18-month delivery deadline attached to the grant. Housing Australia last year reported the new fund could aid in the development of 16,000 homes in the next two years. But more importantly, according to Traders in Purple director Charles Daoud, it will close the viability gap and help attract capital investors. The private developer partners with groups including Landcom and the Anglican Church to deliver social and affordable housing projects. But it’s certainly not about the money, Daoud says. ▲ Traders in Purple director Charles Daoud and a render of the developer’s Kamira Crt project in Villawood, NSW. “We genuinely do it (develop social and affordable housing) for passion and for love,” Daoud says. “If it makes any money, it’s nowhere near enough for big institutions. Of the projects we’ve done in this sector, very few of them make a profit, you don’t even make a construction margin and you’re taking all the risk. “If we’re really going to make a difference, the private sector needs to be incentivised.” The HAFF is different to previous major funding grants ,which Daoud says were aimed at providing money for building. “That’s really inefficient use of capital,” he says. “What these funds do is they give that bit of a catalyst to the community housing sector to go to institutional debt lenders [with greater bargaining power]. “We will definitely put in at least one project for the HAFF, and there could be a second and a third. “I feel that Housing Australia has done a great job listening to community housing providers (CHPs) and the development industry in trying to increase participation. “It’s really going to push the industry to be working at its limit. “This program has two main objectives; to increase social and affordable housing supply, and build capacity of the community housing sector … so the CHPs can be building and developing these projects so they won’t need as much government support as they are need today.” Housing Australia reports there is about $9 billion worth of shovel-ready housing projects that could begin in the next two years if work flowing from key legislation held up in the Senate was added to the existing pipeline. Community Housing Provider Bridge Housing chief financial officer David Miller said it was a “unique opportunity to leverage the community housing sector’s capability and expertise to increasing affordable housing supply”. “We welcome the opportunity to fast-track more homes on the ground to tackle the housing crisis,” Miller said. ▲ Community Housing Provider Bridge Housing chief financial officer David Miller. “Importantly, we are hopeful that this funding will kickstart institutional investment in a new affordable housing asset class. “The HAFF will enable community housing providers such as Bridge Housing to deliver innovative housing projects that leverage the expertise of government, not-for-profit, and private industry to deliver more homes for our community.” The Urban Developer understands the HAFF funding could also extend to acquisition of unsold stock, and easily converted office-to-residential projects. But the key will be the pace at which developers can get projects out of the ground and value for money—a tough ask in the current construction cost climate. Australia has been grappling with housing affordability and supply in the past five years, which has been exacerbated by the pandemic and a trend towards smaller households. Australia’s housing shortfall was forecast to be at least 175,000 homes by 2027. HIA managing director Jocelyn Martin said the $10-billion investment in 40,000 social and affordable homes was “recognition that Australia’s shortfall in housing supply is contributing to increased rental costs and reduced options for those most in need within our community”. “The investment mandate should particularly support more housing in regional, rural and remote areas of Australia,” Martin said. ▲ HIA managing director Jocelyn Martin: $10-billion investment recognises Australia’s shortfall in housing supply is contributing to increased rental costs. “For homes to be delivered in regional areas, it is also important to ensure that the system of funding works to enable smaller community providers and the regional construction industry to be eligible to receive it, rather than just larger institutional investors.” Martin said the application process needed to ensure that that ‘special purpose vehicles’ set up to apply for funding in remote and regional areas were not disadvantaged by bureaucratic processes that increased costs and extended timeframes. “The provision of social housing is often most needed in areas where the financial returns are not always realistic,” Martin said. “While this investment should see a boost in social and community housing, it is critical to recognise the Australian government’s target to build 1.2 million homes over five years from July 1 this year will largely be dependent on the delivery of private housing. “It is the adequate supply of all homes across the housing continuum which will have the biggest impact on the cost of housing and rental availability.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. 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[+] Shovel-Ready Affordable Homes in the Crosshairs

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