Labour says it would increase Crown guarantee for Community Housing Funding Agency social bonds, to 'help get more affordable homes built faster’

The Labour Party is pledging to reduce the cost of finance for community housing providers in a move it says would enable more community housing to be built.

Labour’s housing spokesperson Kieran McAnulty says one of the fastest and most effective ways to build more homes is to reduce the cost of finance for the organisations already doing the work - which is why Labour is proposing to raise the Crown guarantee for Community Housing Funding Agency (CHFA) social bonds.

This means Labour wants to reduce the cost of finance for community housing providers and will provide a guarantee if loans are defaulted on. The guarantee would be $950 million, and would come from Labour’s first Budget if elected into Government in November's election.

The CHFA, which was founded by Community Finance, is a lender to the community and affordable housing sector, providing loans to community housing providers that can be used for new builds, refinancing and portfolio growth.

Currently the CHFA has access to a Crown Standby Facility, essentially an emergency safety net from the Crown, of up to $150 million. On top of this standby facility, the Government, in October, announced it would guarantee an 80% repayment of bank loans made to community housing providers as a way to reduce borrowing costs for social housing builders.

Community Housing Aotearoa, the peak body for New Zealand's community housing sector describes community housing as a form of affordable housing working alongside private housing in the open market. 

"Typically, community housing organisations are not-for-profit groups meeting housing need through a range of affordable rental and home ownership options. They provide an alternative to the public housing provided by Kāinga Ora (formerly Housing New Zealand) and local authority housing."

Models of community housing include things like affordable rentals, public housing, emergency housing and transitional housing.

A Crown guarantee

On Wednesday, McAnulty said Labour’s proposal was a Crown guarantee, similar to the guarantee provided to banks, and it would only be called on in the unlikely event of a default.

"The community housing sector was hoping the current Government would provide this guarantee. They didn't but Labour will." 

“This policy will help get more affordable homes built faster, so more New Zealanders can access the housing they need," he said.

“Combined with further reductions in CHFA lending margins, the guarantee is expected to cut borrowing costs by around half a percentage point from day one."

“By enabling AAA- [credit] rated borrowing, interest rates for housing providers are cut, and those savings are invested in building more homes. The maths is straightforward, the CHFA estimate for every 11 homes built, the financing efficiency could pay for a twelfth, at no additional cost to the taxpayer,” McAnulty said.

He said this meant more homes could be built with the same investment.

“Every dollar saved on interest is a dollar that can go into building homes and supporting tenants.”

“Community housing providers are ready to build. What they need is a Labour government willing to back them,” McAnulty said.

"This will back the organisations already delivering affordable housing across New Zealand, including charities, iwi, Pacific and disability organisations, and providers of public housing, transitional housing, affordable rentals, accessible homes and housing for older people."

'Fund more places with the same amount of money'

Speaking at the Community Housing Aotearoa Conference on Wednesday, Housing Minister Chris Bishop said the CHFA was already helping CHPs access finance.

“They have advanced $530m of funds nationwide and financed 34 community and affordable housing providers. This frees up resources to deliver more homes, faster, and for less."

“With the banks, CHPs were paying about 8.5% interest rates, and now CHFA is enabling refinancing at a fixed rate of 4% for three to five years.

“There are also savings for taxpayers. For new CHP social housing, the government could save around $45k per house over the first five years of a 25-year IRRS (income-related rent subsidy) contract. This enables us to continue to back the CHP sector with more investment over time," Bishop said.

“This also means governments will be able to fund more places with the same amount of money.”