Building Capacity of Community Housing in Tasmania

1. Building Capacity of Community Housing in Tasmania Michael Lennon CEO

2. Why Private Finance? • Decline in public funding • ‘De-politicising’ housing • Commercial disciplines via Corporations Act and Directors Duties

3. 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)

4. Historical means of protecting interest • Mortgages • Charge/Caveat • Planning instruments • These rights were usually connected with the terms of funding

5. 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.

6. 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

7. 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

8. 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

9. 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

11. 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

12. 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.

13. 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

14. 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: • State and Commonwealth rental subsidies (National Rental Affordable Scheme and Commonwealth Rent Assistance) • Equity contributions (cash or land) • Sales to private market • Unencumbered stock • Investment loans secured to deliver additional units

15. Development Opportunities • Inclusionary zoning • Redevelopment of under utilised properties • Blended redevelopment of public housing estates • Outsourced management of public housing estates

16. Springfield Road, Croydon (10) 10 x 2 bedroom apartmentsCompleted: November, 2010

17. Shepparton Parkside (6) 6 x 3 bedroom houses Completed: September, 2010

18. Nelson Street, Ringwood (36) 12x1 bedroom & 24x2 bedroom apartments (4x Fully Accessible 4x Universal Apartments) Completed: December 2010

19. 79A Raglan Street, Daylesford (3) 2 x 1 Bedroom & 1 x 2 Bedroom Completion Date: June 2011

20. Freshwater Drive, Craigieburn (8) 6 x 3 & 2 x 2 bedroom Townhouses Completion Date: 5th November, 2010

21. New Quay, Docklands (85) 42 x 1 & 43 x 2 bedroom apartments Completion Date: June, 2011

22. Cottrell Street, Werribee (15) 6 x 2 bedroom & 9 x 3 bedroom villa units Completion Date: 7th December,2010

23. Drill Hall Redevelopment (59) 51 x 1 Bedroom units & 8 x 2 Bedroom units Completion Date: November, 2011

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. Risks • For government • Assets • Performance • For tenants • Affordability • Reliability • Empowerment

30. 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

31. 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

32. Creating Communities…