A
A

What is a bond aggregator and will it make housing more affordable?

With the federal budget due for release on 9 May, and rumours swirling of a housing bond aggregator as its centrepiece, now seems like the right time to ask; what is a housing bond aggregator and, importantly, will it help make housing more affordable?

 

What is a housing bond aggregator?

The first thing to clarify; a bond aggregator is not a bond like you pay on a rental property. The bonds we’re talking about are a type of government borrowing.

Governments can borrow money at a much cheaper rate than community housing providers. ‘Issuing bonds’ will essentially mean that the government takes out big loans on the behalf of community housing providers, and those providers pay it back to the Government, but at those cheap interest rates. Currently, community housing providers have to take out their loans for building houses from banks, which are usually more costly and have shorter terms. 

The ‘aggregator’ part comes into it because no one single community housing provider wants to take on the amount of debt that is required to access those cheap interest rates. But as a sector, there is huge interest in taking on that debt collectively to build new housing.

So a bond aggregator is just like a government bank, issuing cheap debt to community housing organisations so that they can build more houses with the same amount of money.



Will a bond aggregator model make housing more affordable?

Dr Carolyn Whitzman, Professor of Urban Planning at the University of Melbourne has told ABC Radio Melbourne a that bond aggregator model is not meaningful affordable housing strategy,

“This scheme is not about eradicating homelessness and this scheme is not about making home ownership more affordable, this scheme is about putting more rentals on the market, which is part of the solution, but only a very small part.” 

CHP believes that the housing bond aggregator will lead to an increase in the availability of community housing stock, at next to no cost to government.  While that’s something we can all support, it doesn’t remove the need to provide funding for the ongoing costs of public housing.

A bond aggregate model is no replacement to an enduring social housing funding plan – like the $1.3 billion a year National Housing Affordability Agreement (NAHA). 

Earlier this year, the Treasurer flagged a scrapping of the NAHA in the upcoming federal budget. 

(Read our #Factcheck on claims that the NAHA has failed to deliver)

It’s estimated that defunding the NAHA would put a $362 million hole in Victoria’s public housing funding.  As CHP has stated before, we believe that the NAHA needs more funding, not less.  Our Manager of Policy and Communications Kate Colvin has warned that reducing or scrapping the NAHA will result in a ‘tsunami of homelessness’. 

While CHP believes that a bond aggregator model could help to alleviate pressures in the housing and rental markets, it is by no means adequate to address the issue on its own.

A well-funded NAHA is essential to addressing housing affordability and homelessness.  A bond aggregator model should be seen as a complementary measure – not a solution. 

 

You can read more about bond aggregators in this article from AHURI 


Subscribe to eNewsletter