Industry Briefing: Queensland Housing Investment Fund March 2023

From the Desk of the Chief Economist

Industry Briefing: Queensland Housing Investment Fund—Private Site Invitation, Wednesday, 15th March, 2023

"We are unashamedly in a rush—we need it now."

The Queensland Government’s Housing Investment Fund (HIF) acknowledged that:

1. Dwelling prices have moderated due to declining demand, not more supply.
2. We are currently in a situation where we are catching up on supply as opposed to creating new supply.
3. The rental market is where we are seeing a real imbalance in demand and supply. Private market rents are growing at a rate higher than inflation and income, with the latest data showing 41% of households experiencing rental stress.
4. Interstate migration seems to have peaked, however, the opening of our borders will see international migration increasing—almost nearing pre-COVID-19 levels.
5. There will be a boost in demand for social and affordable housing in the near future, adding to the stress of meeting the needs of the current waitlist.

Housing Investment Fund (HIF) Briefing Notes

The purpose of HIF is to accelerate innovative partnerships in the delivery of social and affordable housing for vulnerable Queenslanders. HIF is one of three programs under the Queensland Housing Investment Growth Initiative (launched in July 2021). Other programs include QuickStarts QLD and Help to Home.

HIF was boosted from $1 billion to $2 billion thanks to the October 2022 Housing Summit. HIF has a target of 5600 social and affordable homes by June 2027, with $130 million in funding available each year. Further, HIF is concentrated not only for projects located in Southeast Queensland (SEQ), but there is also a focus on regional and rural Queensland.

Key points from the industry briefing held on Wednesday 15th March 2023 include:

1. Round 1 closed in January 2023. Round 2 is now open until 8th May 2023.
2. Round 2 is focused on innovative housing solutions, and fast-track projects that are:
   1. Ready-to-proceed and located on private sites, it does not require the release of state-owned land.
   2. Have a more definitive construction timeline; security of delivery is key.
   3. Can receive vulnerable tenants as soon as possible.
   4. Strong in showcasing an innovative partnership between Community Housing Providers (CHP), private developers, and investors.
   5. Considerate of the changing needs of Queenslanders as the population grows and ages—thus a tailored approach.
   6. Strong in showcasing proof of market and proof of agency
   7. Evident in its value for money.
3. Projects can be new builds or the repurposing of current stock. This includes:
   1. Build-to-Rent
   2. Stand-alone affordable housing projects
   3. Repurposing of former office blocks, student accommodation, aged care centre, and other established buildings
4. Cost and funding structures:
   1. Commercial outcome is not a key premise of HIF. Providing for the vulnerable
   2. Expressions of interest must provide detailed cost and revenue, and how much HIF support is needed to make it commercially viable.
   3. Affordable housing: discount to market rent + HIF support
   4. Social housing: 25% income + Commonwealth rental assistance + HIF support.
5. Proponents can submit one or multiple projects under this invitation; each project will be assessed individually.
6. EOIs should demonstrate a secure long-term ownership structure and the capability to deliver projects of a similar size and scope to those proposed in the EOI submission.
7. Timeline: EOI closes on 8th May 2023, a preferred supplier appointed by Q4 2023.

For further information please check the application requirements and evaluation criteria.

Moving Forward

The time to discuss our need for housing supply has expired; now is the time for real and innovative solutions to deliver more stock. The HIF’s premise is in line with several options provided in PRD’s latest report, Alternative Solutions: Solving the Housing Supply Issue. In particular: public-private partnerships, build-to-rent, and asset repurposing.

The challenge that many operators will have is the need to already have a site on hand and the inability to request the release of state-owned land. Further, many Community Housing Providers (CHP) may not yet be ready for such partnerships, although the Queensland Government is committed to increasing the capability and capacity of CHPs. Understandably, a definitive construction timeline is wanted due to recent delays and builder collapses. Yet current construction challenges may prove this difficult. Increasing cash rates may impact borrowing capacity, thus potentially limiting financial resources for multiple stakeholders.

The first round of HIF received strong interest and multiple applications. It will be interesting to see what projects will result from round two of HIF. Without a doubt, we need a quick injection of social and affordable housing, as the waitlist for this type of housing grows daily.