Minister Sukkar:
Well good morning, it's wonderful to be here with the National Housing Finance and Investment Corporation (NHFIC) and BlueCHP, one of our outstanding community housing providers, to announce the first construction loan which has been granted by NHFIC, for some $45 million, both here at this site and also at Lane Cove, which will support the construction of 93 new dwellings or thereabouts.
It's going to mean that BlueCHP saves $600,000 alone on interest just on the construction loan and will mean, at the end of the day, on this site, we'll have 63 dwellings, 48 of which will be retained by BlueCHP and 15 which will go back to the New South Wales State Government providing social and affordable housing.
When we established the National Housing Finance Investment Corporation we wanted it to do a couple of things. One of them was to funnel low cost finance to our community housing providers who do a remarkable job in constructing social and affordable housing but also managing the final product. What is wonderful about this site is you'll see great regeneration for the area but also BlueCHP, who will have a stake in the ongoing management of the final product, which as I said, will have about 63 dwellings here providing social and affordable housing.
I want to congratulate Nathan Dal Bon particularly, and all the team at NHFIC for their great work. This is in addition to a $315 million bond issuance which occurred not that long ago which brought down interest costs for a range of CHP's including BlueCHP, in some cases from the high 4%'s to about 2.9%. And those savings aren't pocketed, those savings are then reinvested by the community housing providers into more and more housing stock, social and affordable housing.
This is another part of the Morrison Government's commitment to ensuring that we assist people throughout the housing spectrum. Yes, we are rightly focussed on first home-buyers, yes we're rightly focused on a stable housing market which was one of the contested policies at the election with the Labor Party, who were pushing pretty strongly for even more housing taxes. But at the other end of the spectrum, with social and affordable housing, there's a great role for the Government, through NHFIC, to work with great community housing providers like BlueCHP, and I want to congratulate you today particularly for putting this project together, and I might ask Nathan, the CEO of NHFIC, to say a few words and I want to congratulate NHFIC as well as Nathan on the great work that you've done in putting this project together.
Nathan Dal Bon (NHFIC):
Thank you very much, Minister. I'll be very brief. I just wanted to pass on my regards to BlueCHP. They've been a very strong supporter of the NHFIC since its inception. They were part of the first bond issuance back in March and now we're basically funding the first construction loan out here in Liverpool. I think this really demonstrates the power of the NHFIC in terms of transforming the economics of housing projects and we look forward to doing a lot more with BlueCHP going forward.
Charles Northcote (CEO – BlueCHP):
Thank you, Minister and thank you, Nathan. BlueCHP is a team of people who are really focussed on delivering outcomes. Particularly, our focus as a Community Housing Provider has been on the construction, building and then outsourcing the tenancy management. So, we started eleven years ago, we had $5 million worth of seed money and we've turned that into now over $300 million worth of assets which is some nearly 800 homes which people live in particularly in New South Wales and we have operations in Queensland as well.
I think the key for us with what I would call the NHFIC is a game changer. For us it means that we now have long term capital which enables us to invest in housing and housing as a long term asset so it fits a nice sort of asset/liability/debt sort of mix. The other thing is the key saving in interest rates.
Just to give you a picture of what I see as important is that first bond issue, we raised $70 million. That is now the equivalent in terms of interest costs of what we were paying for $50 million. So it's over a million a year worth of savings in interest and that is enabling us to not only do these projects but other projects that we have ongoing and investing in more affordable housing, particularly here out in Western Sydney where there's a huge demand for that sort of housing. Thank you.
Journalist:
Nathan, can I just ask you some questions to begin with? Just about the details of this particular loan for BlueCHP if that's all right. If you could just run through some of the details in terms of length of loan and is there an interest rate attached?
Nathan Dal Bon:
Basically this particular one will be for two years initially as part of the construction phase. We've also got, there's roughly two thirds of the project, a total of $90 million that will be dedicated to this project and the remainder will be funding the Lane Cove project. Because this is a joint New South Wales Government project, there'll be a certain proportion of properties that will also be handed back to the New South Wales Government at the end of the construction period.
Journalist:
So was there an interest rate attached to that as well?
Nathan Dal Bon:
Typically we're looking at around the Commonwealth Government bond rate plus around 200 basis points.
Journalist:
So this money is for both this project and Lane Cove and obviously the bridge development in Glebe, is that separate, that's also through NHFIC, right?
Nathan Dal Bon:
That's a separate project, that's right.
Journalist:
Charles, are you able to run through some details about what we'll actually see on this particular site, so we're just talking about Liverpool. What will be built right here?
Charles Northcote:
So it will be 63 apartments that will be built here and they'll be a mixture of one and two bedroom, I think there's a couple of three bedrooms as well. What we're looking to do here, we're also looking to innovate as well, so we're going to look at modular construction for this particularly site. Because what we're trying to do – I know there's a lot of discussion on energy costs – so the better we can actually build these buildings to improve their thermal characteristics, the better off it is for these tenants who are on lower incomes.
If we can achieve, we would like to be able to effectively create a building that doesn't have to actually tap into the electricity grid. That would be a desirable objective. Whether we get there or not, I rely on my development managers to see whether we can create that sort of opportunity. But, BlueChHP has a history of innovation, in fact your Prime Minister opened our cross laminated timber building about 18 months ago. So we look at techniques as a way of delivering lower costs, not only in a way of performance in terms of sustainability but also in the way of performance of costs for the people in them for their electricity and water usage and those sorts of things.
Journalist:
With 63 apartments, what's the break down in how many are social and affordable housing versus how many are just standard apartments?
Charles Northcote:
So effectively this building will be 15 social and the balance will be basically affordable. What we'll also do is out of that affordable, we'll carve out five specialist disability accommodation. Because as part of the building process you have to provide that. We already have the largest affordably, specialist disability accommodation in the country at the moment, so we will put that into this building as well.
Journalist:
You might be the person to answer this because we always get questions about this as well. What's the difference between social and affordable?
Charles Northcote:
Social housing, generally, and I use the word generally, is for a person who is on a welfare benefit and are effectively paying 25% of that welfare benefit plus 100% of the Commonwealth rental assistance.
Affordable housing, generally, and if you base off the National Rental Affordability scheme, is up to a maximum of 74.9% of the market rent. But it does have income bands because you're targeting those that are slightly less well off.
Journalist:
If you had built this with just the standard bank loan, under New South Wales regulations, would you have had to include the same amount of social housing in a development like this?
Charles Northcote:
Not necessarily because this type is the State Government's so part of the Community Plus programme is we give them back the equivalent in terms of the land value. In this case we've given them a little bit more in terms of that exchange. But your question about if it had been a normal bank, I think we would struggle to make the whole thing work. That's the difference between NHFIC and it's that stability of interest rates, it's the lower interest rate that actually makes the transaction actually work.
Journalist:
Can you tell us a little about Lane Cove?
Charles Northcote:
Lane Cove is effectively 30 units. That will be from our perspective, we will build and hand back to the Government nine units, and then we will sell the rest off and recycle that capital into the next projects that we'll actually do.
Journalist:
When you say sell them off, into the private market?
Charles Northcote:
I can answer another point you've made there. Effectively, when we build a unit or an apartment, there is no difference the private market spec and what we do for affordable or social. They are built the same so that if somebody has got a social apartment here, they can walk into their friends in the other one, they'll know no difference. We are absolutely clear about the way that we do that sort of thing.
Nathan Dal Bon:
That's one of the big innovations, you know, when you look at the old stock of public housing versus what's being built now and the integrated nature of social and affordable, you just can't tell the difference. And obviously that helps in terms of wider community acceptance when it comes to those initiatives.
Journalist:
This might be question for you Nathan or the Minister as well as I'm not totally across the history of NHFIC. Was there a pool of money allocated, how does this work, where does this funding base come from here?
Nathan Dal Bon:
There's a couple of different parts to the NHFIC. There's a $1 billion facility which is for infrastructure. That infrastructure is typically what we call hard infrastructure which can be used to fund electricity, utilities, water and is typically to unlock new housing developments. In addition, we have the bond aggregator which is being used to fund this particular initiative. That is demand driven but essentially we issue bonds into market. We mentioned before the $315 million and then we pass those funds through to community housing providers. So it's essentially a demand driven scheme.
Journalist:
And this is the first construction loan?
Nathan Dal Bon:
First construction loan.
Minister Sukkar:
NHFIC was established as part of the 2017/18 budget with the now Prime Minister as Treasurer and I was his Assistant Minister. In essence, we looked at state governments and what they were doing. New South Wales for example, have come to the table with a great piece of land like this. You have community housing providers like BlueCHP who have the wherewithal to put the finances together, really have innovative developments that we've heard about that cater to different cohorts and then have the ongoing management of those.
The missing piece was really, how could the Federal Government step in? We formed a view that the best way to do that was through reducing interest costs primarily, and that's why we've got Government guaranteed debt through the bond aggregator, which brings down their debt costs and just means that they can reinvest that into making projects like this, that might've just fallen short of being economic, to becoming economic, which is the difference between having 93 new dwellings or having none at all. Because if BlueCHP fall just a little bit short, the project doesn't go ahead. So this is a tangible indication or a tangible presence that you can see the New South Wales State Government, the Federal Government, standing together and utilising the expertise of CHP's like BlueCHP to deliver.
Journalist:
Just to confirm that detail as well, the New South Wales Government's come forward with the land and they're getting the 15 apartments back.
Charles Northcote:
That's correct
Journalist:
Minister, can I just ask you about another issue. The APRA report from Graeme Samuel released today. Will the Government be acting on the recommendations of that report?
Minister Sukkar:
Out of the Banking Royal Commission, we saw a range of recommendations as they impacted APRA. We've now seen a capability review from Graeme Samuel. The Treasurer has made clear that we think APRA as an organisation has certainly fulfilled a great role in the stability of our financial system in Australia. I think everybody accepts that. The purpose of the review was to determine what areas could be improved and there's no doubt the Treasurer will take on board the outcome of the capability review to see how, in a tangible way, we can ensure APRA continues to fulfil its mandate and like all these regulators, all issues as they relate to the financial system, there's no set and forget with regulators. As governments, as an industry, they have to continue to evolve with emerging circumstances and that's what the capability review is about.
Journalist:
Did APRA become too cosy with the industry that it's meant to be regulating?
Minister Sukkar:
Well look, I wouldn't comment on that and I don't think that necessarily you can draw that inference from the capability review. I think what I would say again is just because an organisation like APRA has done a fantastic job in the past, doesn't mean there aren't opportunities to improve into the future.
Journalist:
Does this report mean that perhaps the Government has gone soft on regulators and that perhaps the Government has been asleep at the wheel on this issue?
Minister Sukkar:
I think it says quite the contrary. I think the fact that we've had a capability review, that out of the Banking Royal Commission, all of the recommendations as they've related to APRA or ASIC for that matter, have been acted upon by the Government, indicates quite the opposite. That we are determined to ensure that the regulators fulfil their mandates and that they are flexible enough to continue doing that as the market changes, as circumstances change. Because again, I don't think we can rest on our laurels with what has been a very historically stable financial system.