Australia will develop a means of packaging debt to finance affordable housing after calls from local pension providers to ease their entry into the market.
The housing bond aggregator model was endorsed last week during a meeting between the federal treasurer, Scott Morrison, and his state counterparts, and was one of four models examined by a working group on affordable housing.
In a submission to the working group, which conducted a consultation earlier this year, the AUD74bn (€55bn) First State Super proposed the introduction of housing bonds as a way of broadening the base of financing available for affordable housing, arguing that bond financing would be required to allow for “meaningful changes” to the supply of housing.
In its submission, the pension provider also backed the creation of an entity to package the debt issuances of affordable-housing suppliers, overseeing the steady flow of investment-grade bonds and sufficient issuances to attract institutions.
“The development of a pipeline of projects,” it said, “would allow the financing entity to undertake [housing bond] issuances on a semi-regular basis, improving the breadth and depth of Australia’s asset-backed/secured-bond debt market and capital markets in general.
“Additionally, the development of a strong pipeline of housing projects provides additional economies of scale, further enhancing the risk/return profile of the securitised assets.”
Morrison and his state counterparts agreed to conduct further work on the design of a bond aggregator model, with a report on its design – likely to detail possible tax incentives – to be published by mid-2017.
A number of Australian Super funds are already active in the affordable-housing space, including the healthcare sector fund HESTA, which committed AUD30m to a project in the northern state of Queensland earlier this year.
