Building Capacity of
Community Housing in
Tasmania
Michael Lennon
CEO
Why Private Finance?
• Decline in public funding
• ‘De-politicising’ housing
• Commercial disciplines via Corporations Act
and Directors Duties
How Public Interests are Protected
• Arises as a consequence of capital funding from
government
• Keep property used for its funded purpose
• Claim over proceeds if property is sold
• Right to transfer asset to another HA if there is
a failure of the HA
• Can be created by statute or by contract (or
both)
Historical means of protecting
interest
• Mortgages
• Charge/Caveat
• Planning instruments
These rights were usually connected with the
terms of funding
New means of state’s interest
Victoria: Sections 107-110 of the Housing Act 1983 (2005)
NSW: section 67HA – 67N Housing Act 2001 (2010)
• SHA has interest in land where:
• It has transferred that land to the HA; or
• Where HA has agreed to it in a funding agreement.
• HA must not transfer, sell, lease, mortgage, charge or
otherwise deal with land in which SHA has an interest.
Consent will not be unreasonably withheld.
• Interest may be recorded on title.
• NSW provisions also allow SHA to remove interest from
title, and create a charge in a community housing
agreement which may also be registered on title.
So what is this interest?
• Not a traditional interest in land
(mortgage, charge)
• Novel interest created by
special statutory provisions
• Constitutes a restrictions on
dealing with the land – different to a
mortgage/charge which includes a power of
sale and creates priority over other creditors
• Not strictly necessary since a mortgage over the
property could have the same effect – therefore
this could be created by contract
Approach in other jurisdictions
WA: –
• Community Housing Agreement creates charge over
land, SHA may register caveat on title in respect of that
charge.
• SHA may also register restrictive covenant requiring land
be used for community housing
SA: –
• South Australian Housing Trust Act enables deed of
statutory covenant to be registered on title to land.
• South Australian Co-Operative and Community Housing
Act enables registration of a charge over title to land in
favour of SHA to secure funding covenants
Impact on raising finance
• Bank will require first-ranking security over which
they may exercise their power of sale
• Land must be capable of being sold unencumbered
to maximise its value as security
• Tripartite or deed:
• Priority of interests
• Notice by lender to state
if HA defaults and cure
period
• Cancellation of recording
in register if bank
exercises power of sale
Security Trust
• Mortgages held by Security Trustee
• One tripartite agreement between state housing
authority and Security Trustee to manage priority
of interests
• Multiple security pools can be created
• Property can be removed/added from security pool
without having to discharge or grant new
mortgages
Other implications of Security
Trusts
• What is meant by “will not be unreasonably
withheld”?
• Implications for asset planning – e.g. sale of
assets to regenerate other stock and potential
loss of unit numbers
• Contingent liabilities in funding deeds
• Implications for duties for directors
Housing Choices Australia
• Owns more than 1,100 properties and manages an
additional 550 properties
• Merger of four affordable housing organisations to
maximise growth opportunities by State and Federal
policy settings.
• Integrated property development, property and rental
management services
• Constructed 460 new units since June 2009 and
finalising contracts for 190 units.
Housing Choices Australia
Key Target Groups are people:
• with a range of disabilities;
• priced out of housing market (i.e. inner city and
central activity districts); or
• in neighbourhoods of multiple disadvantage.
• The net asset position of HCA is valued at $433
million
• Debt facilities in place of $50 million
• Asset growth of 69% in past two years
Funding Models
• Product is no different to standard market product
• Nation Building Social Housing Initiative – 75% Govt
Funds and 25% Housing Association (VIC)
• Capacity to raise additional revenue from:
o State and Commonwealth rental subsidies (National
Rental Affordable Scheme and Commonwealth Rent
Assistance)
o
o
o
o
Equity contributions (cash or land)
Sales to private market
Unencumbered stock
Investment loans secured to deliver additional
units
Development Opportunities
• Inclusionary zoning
• Redevelopment of under utilised properties
• Blended redevelopment of public housing
estates
• Outsourced management of public housing
estates
Springfield Road, Croydon (10)
10 x 2 bedroom apartments
Completed: November, 2010
Shepparton Parkside (6)
6 x 3 bedroom houses
Completed: September, 2010
Nelson Street, Ringwood (36)
12x1 bedroom & 24x2 bedroom apartments
(4x Fully Accessible 4x Universal
Apartments)
Completed: December 2010
79A Raglan Street, Daylesford (3)
2 x 1 Bedroom & 1 x 2 Bedroom
Completion Date: June 2011
Freshwater Drive, Craigieburn (8)
6 x 3 & 2 x 2 bedroom Townhouses
Completion Date: 5th November, 2010
New Quay, Docklands (85)
42 x 1 & 43 x 2 bedroom apartments
Completion Date: June, 2011
Cottrell Street, Werribee (15)
6 x 2 bedroom & 9 x 3 bedroom villa units
Completion Date: 7th December, 2010
Drill Hall Redevelopment (59)
51 x 1 Bedroom units & 8 x 2 Bedroom units
Completion Date: November, 2011
Housing Choices Tasmania –
Funding Model
• Government Outsourced Tenancy Management
Plan.
• 138 Housing Tasmania units leased for 3 years.
• Surplus net rental income, Commonwealth Rent
Assistance and debt funding are combined to
deliver further units for low income tenants.
• Within the 3 year lease, HCT intends to deliver
an additional 40 units into the Tasmanian
market – 25 this year.
Housing Choices Tasmania –
Funding Model
• HCT debt is guaranteed by HCA.
• HCT is newly established in Tasmania - logical
decision to collaborate with a local organisation.
• Tenancy management provided by Colony 47.
• Both parties bring their respective strengths to the
project.
Title Transfer or Not?
• An evolving policy, Government will need to be
prudent.
• Protecting tenants interests.
 Perceptions of current and new landlord
• Management of Government’s asset base
- credit ratings and debt borrowing ability.
 Recorded as a loss in Government’s financial
statements.
Title Transfer or Not? (contd.)
• May enable Community Housing providers to
secure debt finance facilities and greater control
with property management.
• Transfers the long term maintenance liability
from the Government to the Community
Housing provider.
Title Transfer or Not? (contd.)
Another Option:
Lease arrangement similar to the Housing
Provider Framework in Victoria.
• Community Housing provider has access to
rental cash flow and CRA and is responsible for
all maintenance except structural.
• Part of gross rental income (approx. 20-25%) is
returned to the Government to fund structural
maintenance etc.
Risks
 For government
 Assets
 Performance
 For tenants
 Affordability
 Reliability
 Empowerment
Risks
 For banks
 Reputation
 Solvency
 Governance
 For providers
 Capability – people, systems, governance.
 Commerciality – Directors’ duties, lending
covenants, leverage
 Retaining organisational values
 Building partnerships and relationships
Conclusion
• Exciting times, great potential, but…
• There are risks for everyone
• Non-market tenancy management is relatively
straightforward
• Ownership, development, private funding and
Directors duties introduce much greater
complexity
• This is key to the next evolution of the sector
Creating Communities…