Establishment of an Australian affordable housing bond aggregator

Internationally, Community Housing Providers (CHPs) are able to access long term finance via capital markets. In Australia, the Community Housing sector has yet to access this capital source, instead relying on shorter term bank debt (typically 3-5 years). Longer term capital markets finance can lower interest costs and better match the sector’s asset life – a core principle of good corporate finance practice – and can therefore make a meaningful contribution to the Australian sector’s growth in scale and sophistication.

The CHP sector’s ability to access to the Australian Corporate Bond market is negligible compared to international comparators. Whilst the sector can expect to obtain similar pricing benefits via capital markets funding, the tenor obtained in markets such as the UK are uncommon in Australia at this time.

Analysis demonstrates that the Australian Community Housing sector could benefit from the creation of a bond aggregator (BA), set up with a pass-through structure with borrower funding requirements equally matched to funding sourced from the debt capital markets (DCM) with a standardized product to reduce complexity and enhance transparency.

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