Industry backs HAFF, worry construction costs and planning delays will hinder national target: HSF Survey

Herbert Smith Freehills (HSF) has released findings from its new survey ‘A Pulse on Social & Affordable Housing in Australia’ revealing senior industry leaders strongly support the Federal Government’s $10 billion Housing Australia Future Fund (HAFF), however believe further reform is required before its five-year target is reached.

Industry backs HAFF

• Majority surveyed include Executive/General Managers (41%), CEOs (20%) and Managers (20%)
• Two thirds (67%) surveyed applied for HAFF funding
• Of those who applied, 98% said it will be significant source of support

The survey of 88 industry leaders across community housing, private capital, financial, property development and advisor sectors found that of the two thirds (67%) of respondents who applied for HAFF funding, almost all of those (98%) said it will be a primary or considerable source of support for their organisation in the next five years.

HSF partner and Global Co-Head of Infrastructure, Nicholas Carney said: “When asked what has been working well, there was a strong consensus that government investment schemes, and in particular the HAFF, was crucial to supporting the delivery of housing.

“We recently advised clients on their tender submissions, and we are expecting the first allocation of HAFF funding to be announced soon.”

Industry says there are barriers to reaching national housing target

• 49% believe the government target will be met in the next 8-10 years. 22% believe it will be met within the timeframe
• Cost of construction, planning approval timeframes and return on private investment identified as top barriers to meeting target

The Commonwealth Government has set a national target for the development of 30,000 social and affordable rental homes over the next five years via the HAFF and a further 10,000 via the National Housing Accord, administered through Housing Australia.

Despite strong backing for the initiatives, almost half of those surveyed (49%) think the Federal Government’s five-year target could instead take up to a decade to deliver, while 22% expect it will be met within the timeframe and 20% think it will be reached in 6-7 years. Only 8% think the target will not be met in 10 years.

"The cost of construction, planning approval timeframes and return on private investment were the top barriers identified to meeting the national target,” Nick said.

“Australia is in a housing crisis with not enough homes available to meet demand. The Federal Government has prioritised the issue through the establishment of the HAFF and National Housing Accord, among other initiatives, which has been well received by industry and is a positive step towards supporting the delivery of more social and affordable homes.

“There are some reservations from industry about their ability to meet the national target, however the solutions are clear. It will require quick action and whole-of-industry buy-in from state and federal governments, as well as the private sector,” Nick said.

Industry identifies key reforms to support national target, desire for national scheme

• Reform of state planning approval processes, additional Federal Funding, development of new commercial and contractual models identified as top incentives required to meet target
• 62% believe the national regulatory system needs some change but does the job

Reform of state planning processes to expedite project approvals, additional federal funding and development of new commercial and contractual models were the top three incentives identified to support the national target.

Over one third (35%) of respondents said that government investment is just as important as private capital investment to support the target, while the same number said it would be impossible to achieve the target without private capital. Respondents (62%) said the national regulatory system also needs some change but does the job, with a common desire for a national scheme. 

HSF Real Estate partner, Jane Hodder said: “The benefits of a national scheme would help to accelerate the delivery of social and affordable housing through consistent cross-border regulation including registration processes and eligibility.

“Reducing the burden on community housing providers, expediting planning and approval processes, and attracting private investment were also top of mind.”

Industry positive about their own housing goals

• 78 respondents have plans in the pipeline to build social and affordable housing dwellings in the next five years
• 21% of respondents intend to build or acquire over 2000 dwellings in the next five years. No respondents completed over 2,000 dwellings in the past five years
• Top three sources of funding being used: federal funding, private capital and Housing Australia debt finance

Meanwhile, industry has set their own housing goals. Around 20% intend to build or acquire over 50,000 dwellings collectively in the next five years. The top three sources of funding identified were federal funding, private capital and Housing Australia debt finance.

HSF partner and Global Co-Head of Infrastructure, Nicholas Carney said: “Our findings show there is alignment between industry and public sector housing goals, with respondents indicating they plan to collectively build or acquire over 50,000 social and affordable dwellings in the next five years.

“Respondents however have made it clear that in order to achieve their organisation’s goals, federal funding will be a significant source of support required, alongside further reforms to planning processes and regulatory frameworks."

HSF Finance partner, Erin Wakelin said: “While there is clearly a desire from industry for the public and private sectors to work together to attract investment at the rapid rate required to increase Australia’s housing supply, funding remains a key constraint.

“The top three sources of funding used by respondents to build this housing shows the key role played by the Federal Government in providing availability and other payments to support the sector.”

“It is interesting that, notwithstanding the provision of this Federal funding, more than half of the respondents will also be utilising Housing Australia debt finance. To ensure the longevity of the sector it will be important for debt funding sources to be diversified,” Erin said.

The survey was conducted between 20 May - 24 June 2024 and has been published as part of the launch of HSF’s first report: A Pulse on Social & Affordable Housing in Australia. The report and full survey findings can be viewed at https://www.herbertsmithfreehills.com/insights/reports