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Directions/Financial as made
This instrument amends the National Housing Finance and Investment Corporation Investment Mandate Direction 2018 to extend the First Home Loan Deposit Scheme by introducing the New Home Guarantee which enables qualifying first home buyers to build new dwellings or purchase a newly built dwelling to expand housing stock and stimulate the residential dwelling construction sector.
Administered by: Treasury
General Comments: This instrument was registered at 7:32pm (by legal time in the Australian Capital Territory) on 6 October 2020.
Registered 06 Oct 2020
Tabling HistoryDate
Tabled HR07-Oct-2020
Tabled Senate08-Oct-2020
Date of repeal 07 Oct 2020
Repealed by Division 1 of Part 3 of Chapter 3 of the Legislation Act 2003

EXPLANATORY STATEMENT

Issued by authority of the Minister for Housing and Assistant Treasurer

National Housing Finance and Investment Corporation Act 2018

National Housing Finance and Investment Corporation Investment Mandate Amendment (New Home Guarantee) Direction 2020

Subsection 12(1) of the National Housing Finance and Investment Corporation Act 2018 (the Act) provides that the Minister may, by legislative instrument, give the Board of the National Housing Finance and Investment Corporation (NHFIC) directions about the performance of the NHFIC’s functions.

The Act establishes the NHFIC, a corporate Commonwealth entity dedicated to improving housing outcomes. 

The purpose of the National Housing Finance and Investment Corporation Investment Mandate Amendment (New Home Guarantee) Direction 2020 (the Instrument) is to amend the National Housing Finance and Investment Corporation Investment Mandate Direction 2018 (the Investment Mandate) to extend the First Home Loan Deposit Scheme (FHLDS) by introducing the New Home Guarantee and make other changes to ensure consistency between the FHLDS and the New Home Guarantee. The New Home Guarantee enables qualifying first home buyers to build new dwellings or purchase a newly built dwelling to expand housing stock and stimulate the residential dwelling construction sector.

10,000 New Home Guarantees are available in the 2020-21 financial year where new home buyers enter into contracts for the construction of a dwelling or purchase a house and land package, a newly constructed dwelling or an off-the-plan dwelling. For guarantees in relation to loans for the purchase of land and construction of a newly built dwelling (building contracts), or purchase of a newly built dwelling (sales contracts), the Instrument requires first home buyers to enter into a building contract or a sales contract within 90 days after notice of entitlement to a guarantee is received. This ensures that the provision of guarantees encourages timely residential housing construction activity.

The Instrument establishes a separate price cap for dwellings under the New Home Guarantee recognising that median cost of new home purchases across Australia are higher than the median cost for existing dwelling purchases to address valuation risks over the period of construction.

The Instrument also establishes an exemption to enable active Australian Defence Force (ADF) members who are first home buyers to be eligible under the FHLDS and New Home Guarantee. The exemption recognises that active ADF members often cannot live at home while they serve abroad or live on base, which can put them in breach of the requirement to live in their home for as long as the home loan has a guarantee under FHLDS or the New Home Guarantee.

The Instrument also provides that the Minister has the exclusive power to determine that unissued guarantees under the FHLDS (including the New Home Guarantee) at the end of a financial year can be rolled over to the following financial year based on the performance of the FHLDS or the New Home Guarantee or any unique circumstances influencing the uptake of the guarantees.

The Instrument also increases the liability cap on the NHFIC’s total guaranteed liabilities from $2 billion to $3 billion. This $1 billion increase in the liability cap ensures that the NHFIC can continue to expand its capital market and financing activities and support the continuing development of the community housing sector by allowing community housing providers to continue to benefit from accessing lower cost and longer tenor loans.

Consultation was undertaken with the NHFIC on drafts during the course of the development of the Instrument and the accompanying Explanatory Statement with some adjustments made to the Instrument and Explanatory Statement following this consultation to clarify the operation of the eligibility requirements for the New Home Guarantee.

Details of the Instrument are set out in Attachment A.

The Instrument is a legislative instrument for the purposes of the Legislation Act 2003. The Instrument is exempt from disallowance under Section 42 of the Legislation Act 2003 as a result of regulations made for the purposes of paragraph 44(2)(b) of that Act.

The Instrument commenced immediately after registration.

ATTACHMENT A

Details of the National Housing Finance and Investment Corporation Investment Mandate Amendment Direction 2020

Section 1 – Name of the Instrument

This section provides that the name of the Instrument is the National Housing Finance and Investment Corporation Investment Mandate Amendment (New Home Guarantee) Direction 2020 (the Instrument).

Section 2 – Commencement

Section 2 provides that the Instrument commences immediately after it is registered.

Section 3 – Authority

Section 3 provides that the Instrument is made under subsection 12(1) of the National Housing Finance and Investment Corporation Act 2018 (the Act).

Section 4 – Schedules

This section provides that each instrument that is specified in the Schedule to this instrument will be amended or repealed as set out in the applicable items in the Schedules, and any other item in the Schedules to this instrument has effect according to its terms.

Schedule 1 – Amendments 

10,000 New Home Guarantees in the 2020-21 financial year

The Instrument amends the National Housing Finance and Investment Corporation Investment Mandate Direction 2018 (the Investment Mandate) to expand the First Home Loan Deposit Scheme (FHLDS) to make available 10,000 New Home Guarantees from immediately after the time of registration of the Instrument to 30 June 2021 for first home buyers to purchase a newly built dwelling or build a new dwelling. This includes house and land packages, land and a separate contract to build a home, detached dwellings, off-the-plan purchases and ‘spec’ dwellings. This is in addition to the 10,000 guarantees available under the FHLDS prior to the introduction of New Home Guarantee for the 2020-21 financial year.

The Instrument also makes amendments to the FHLDS including providing a discretion for the Minister to rollover unissued guarantees (including New Home Guarantee) from the previous financial year to the following financial year, as well as additional reporting and consulting obligations required to be undertaken by the National Housing Finance and Investment Corporation (NHFIC). These are further discussed below.

All legislative references in this attachment are to the Investment Mandate unless otherwise stated.

The meaning of ‘newly built dwellings’

The New Home Guarantees are issued under the FHLDS for home loans that satisfy additional criteria (Schedule 1, item 1, section 4 meaning of ‘New Home Guarantee’). These guarantees are similar to guarantees under the FHLDS prior to these amendments but generally apply to loans for ‘new residential premises’, similar in meaning to the term’s meaning under subsection 40-75(1) of the A New Tax System (Goods and Services Tax) Act 1999. In particular, residential premises are ‘new residential premises’ if they:

·      have not previously been sold as residential premises and has not previously been rented or leased as residential premises or commercial residential premises) as defined in the A New Tax System (Goods and Services Tax) Act 1999; or

·      have been created through substantial renovations of a building; or

·      have been built, or contain a building that has been built, to replace demolished premises on the same land.

(Schedule 1, item 1, section 4 meaning of ‘newly built dwelling’).

In general terms, a New Home Guarantee may only be provided for loans for the purchase or building of a newly built dwelling (as outlined above) (Schedule 1, item 11, paragraph 29IA(3)(a)). These generally include loans for:

·      recently constructed dwellings (whether a freestanding house, townhouse or apartment);

·      off-the-plan dwellings;

·      house and land packages;

·      land and a separate contract to build a new dwelling; and

·      ‘spec’ dwellings, generally where the builder, rather than the buyer, chooses the layout, flooring, appliances and other features – essentially a house that is built before the first home buyer makes a purchase.

Home loans that are eligible for the New Home Guarantee

The New Home Guarantee encourages first home buyers to enter into contracts to build a new dwelling or purchase newly built dwellings. Due to the extended nature of these transactions, the amendments test certain eligibility criteria earlier to ensure that guarantees can be offered, reserved and issued under these circumstances and provides greater certainty to borrowers.

The Instrument modifies certain aspects of the eligible loan and eligible first home buyer tests so that they are tested at the time the borrower applies for a guarantee under the New Home Guarantee, rather than at the time the loan is entered into under the existing FHLDS (Schedule 1, items 3, 4, 5 and 6, subsections 23C(2), 23C(2A), 29D(1) and 29D(2)). In applying these modified tests, the timing to which the tests apply must be applied consistently to determine whether a loan is eligible and whether a borrower is an eligible first home buyer (i.e. if the relevant eligibility criteria of a loan for the purchase of an off‑the‑plan dwelling is tested at the time the contract of sale is entered into, the borrower’s eligibility as a first home buyer must also be tested at that time).  Under the modifications:

·      whether the borrower is a first home buyer under section 29D is tested either at the time they apply for a loan, or when the contract for the building or purchase of a newly built dwelling to which the loan agreement relates is entered into for the purposes of the New Home Guarantee; and

·      whether the future loan is an eligible loan under paragraphs 29C(2)(a) to (g) to which a guarantee can be issued is instead tested either at the time the borrower applies for the loan, or when the contract for the building or purchase of a newly built dwelling to which the loan agreement relates is entered into for the purposes of the New Home Guarantee. These criteria do not need to be tested again at the time the loan agreement is entered into. They include all of the following:

-          the loan is made by an eligible lender;

-          there will be no more than two borrowers under the loan agreement;

-          where there are two borrowers under the loan agreement—each borrower is the spouse or de facto partner of the other borrower;

-          each borrower under the loan agreement is an eligible first home buyer;

-          the loan is for the purchase of residential property;

-          if the loan relates to the purchase of an interest in land on which a dwelling is not affixed, the loan also relates to the construction of a dwelling on the land; and

-          the value of the residential property does not exceed the price cap for the area in which the property is located for the purposes of the New Home Guarantee.

The meaning of ‘value’ is defined at section 4 of the Investment Mandate. In relation to a residential property, this value is the value assessed by the lender at the time the loan is entered into, and is used to calculate the loan-value-ratio contained in paragraph 29C(2)(i). This meaning applies to both the existing FHLDS and the New Home Guarantee. Generally, value (including for off‑the-plan purchases) is expected to be the lower of the value assessed by the lender at the time the loan is entered into and the contract price for the dwelling to which the loan agreement relates to.

When a borrower approaches an eligible lender for the purposes of the New Home Guarantee, it is expected that the eligible lender provides a timely confirmation on whether a first home buyer is eligible for a New Home Guarantee under the modified rules, and they acknowledge that an eligible loan will not be able to be entered into until settlement of the purchase of the dwelling.

While the guarantees are issued by the NHFIC to the eligible lender, it is intended to benefit first home buyers. Therefore, the borrower who has been offered a guarantee is not prohibited from ultimately obtaining a guarantee from another eligible lender at the time a loan that is eligible for the New Home Guarantee is entered into. However, whether a loan will ultimately be obtained by the borrower is subject to that eligible lender’s lending practices.

In order to be eligible for a guarantee under the New Home Guarantee, there are also other specific conditions regarding a loan in respect of a relevant newly built dwelling (Schedule 1, item 11, paragraphs 29IA(3)(b) and (c)). Under these conditions, a guarantee cannot be issued for a loan unless by the time the guarantee is issued, the required events have occurred as appropriate. These requirements are tested at the time of issue and they are core principles of the New Home Guarantee to encourage timely and effective economic support for the residential construction sector.

Under these requirements for New Home Guarantee however, once a guarantee is validly issued following a loan agreement, there is no requirement for the lender to continue to assess whether the conditions are met subsequent to when the loan is entered into. This means that there is no risk that the guarantee will be void as a result of these requirements once the guarantee is issued. The requirements act as milestones between when the guarantee is offered and when it is issued pursuant to a loan agreement between the lender and the first home buyer.

Where the first home buyer is building a home and buying land, they may be eligible for a New Home Guarantee in respect of their loan if they meet the following additional conditions. These conditions are:

·      within ninety days of the borrower receiving notice from the eligible lender of approval by the NHFIC for the guarantee, the borrower must enter into a contract for the construction of the dwelling; and

·      within six months of the borrower entering into the contract for construction, construction for the dwelling has commenced; and

·      within twenty-four months of the commencement of on the construction, construction for the dwelling has completed.

Similarly, to ensure first home buyers are able to make off-the-plan purchases (including of an apartment, a freestanding house or townhouse), the Instrument provides for specific conditions that must be met in order to be eligible for a guarantee under the New Home Guarantee. These conditions are:

·      within ninety days of the borrower receiving notice from the eligible lender of approval by the NHFIC for the guarantee, the borrower must enter into a contract for the sale of the dwelling; and

·      within six months of the borrower entering into the contract of sale, construction for the dwelling has commenced, unless construction for the dwelling has already commenced; and

·      depending on whether construction had commenced at the time the contract of sale was entered into:

-          if construction had not commenced at the time the contract of sale was entered into, within 24 months from the commencement of construction for the dwelling, construction must be completed; or

-          if construction had commenced at the time the contract of sale was entered into, within 24 months from when the contract of sale was entered into, construction must be completed.

These conditions effectively require the borrower to ensure that contracts are entered into in a timely manner and to encourage construction activity. Where these requirements are not met by the specified timeframes, the offer and reservation of the guarantee effectively expires. However, these requirements do not affect guarantees that have already been issued in respect of loan agreements that have been entered into before the relevant periods. To provide certainty for the borrower and the lender the NHFIC’s scheme rules may impose further requirements at each stage of the conditions, such as to require specific terms in the relevant contract.

For example, an eligible first home buyer who applies for a loan pre-approval also obtains an approval of the issue of the guarantee on the same date for a loan agreement that would eventuate at a later date. The additional conditions require the borrower to enter into a sale contract within 90 days from the date of the approval. Where the relevant sale contract is entered into within 90 days, the conditions require that construction must commence in 6 months if it had not commenced prior to the borrower entering into the sale contract. However, if the borrower enters into an eligible loan agreement with an eligible lender within this 6 month period and a guarantee is validly issued, there is no need to test the subsequent condition of building completion within 24 months for purposes of determining the eligibility of the guarantee. This is because the guarantee does not become void merely because of these additional conditions after eligibility is confirmed and it has already been validly issued.

The conditions ensure that for the purposes of the New Home Guarantee, subject to meeting the additional conditions, the guarantee continues to be offered to that first home buyer, even if they are otherwise unissued (because a loan agreement would not have been entered into). This provides greater certainty for first home buyers who are compliant with the New Home Guarantee conditions.

The remaining criteria in subsection 29C(2) remain unmodified. These include paragraphs 29C(2)(h) to (k), and they are tested at the time the loan agreement is entered into. This ensures that the loan will only be eligible for a guarantee under the New Home Guarantee if, at the time the loan agreement is entered into, all of the following criteria are met:

·      the residential property that is the subject of the loan is to be owner-occupied;

·      the loan-to-value ratio is between 80 and 95 per cent;

·      where relevant, the terms of the loan agreement require scheduled repayments of the principal of the loan for the full period of the agreement; and

·      the loan agreement has a term of no more than 30 years.

The New Home Guarantees are issued under similar terms to the general operation of the existing FHLDS, with up to 10,000 guarantees separately available to be issued in the 2020-21 financial year (Schedule 1, item 11, subsections 29IA(1) and (2)). Further, no more than 50 per cent of the total number of guarantees available for issue in a financial year may be issued by the major banks to ensure equitable access to the scheme for smaller lenders. The term ‘major banks’ is defined at section 4.

Price caps under the New Home Guarantee

Separate price caps apply under the New Home Guarantee compared to the existing FHLDS (Schedule 1, items 7 and 8, subsections 29F(1) and (2)). This is because new dwelling sales prices across Australia are generally higher than existing dwelling sales prices and there are risks with building new dwellings in contract price variations and changes in their valuation over the period of construction. The separate price caps provide eligible first home buyers with more choice. Consistent with the existing FHLDS, purchases under the New Home Guarantee need to satisfy the price cap based on the value of the new build at the time the borrower applies for the loan, or when the contract for the building or purchase of a newly built dwelling to which the loan agreement relates is entered into.

The relevant price caps for each area under the New Home Guarantee are summarised in the table below (Schedule 1, item 9, section 29F(2A)). While the price caps for the New Home Guarantee have altered, there is no change to each geographic area that is defined by the Investment Mandate.

Area

Price cap ($)

New South Wales capital city and greater regional area

950,000

New South Wales - other

600,000

Victoria capital city and greater regional area

850,000

Victoria - other

550,000

Queensland capital city and greater regional area

650,000

Queensland - other

500,000

Western Australia capital city and greater regional area

550,000

Western Australia - other

400,000

South Australia capital city and greater regional area

550,000

South Australia - other

400,000

Tasmania capital and greater regional area

550,000

Tasmania - other

400,000

Australian Capital Territory

600,000

Northern Territory

550,000

Jervis Bay & Norfolk Island

600,000

Christmas Island & Cocos (Keeling) Islands 

400,000

General ADF exemption of owner occupied residence

The Instrument introduces an exemption for active Australian Defence Force (ADF) members (Army, Air Force and Navy (but not reservists or cadets)) from the ongoing requirement that first home owners must purchase or build an owner-occupied residence as their first home. The NHFIC must administer the FHLDS (including the New Home Guarantee) to ensure that properties subject to guarantees are owner-occupied. However, an exemption applies where ADF members are unable to meet the owner‑occupier requirement after entering into a loan because of their duties (Schedule 1, item 13, paragraph 29K(1)(b)). Where a couple jointly acquire a first home under the FHLDS or New Home Guarantee, the exemption applies if the ADF duties of one of the couple result in the owner occupied requirement being unable to be met after they enter into the loan.

The exemption has been introduced because ADF members on active service can be regularly deployed to other parts of Australia or internationally. Accordingly, the exemption ensures that if an ADF member is required to be posted there is no obligation to maintain the dwelling which has been subject to a loan as their principal residence as this would be inconsistent with their ADF service duties. This applies to both the FHLD and the New Home Guarantee.

Rollover of unissued guarantees for the FHLDS and New Home Guarantee

While the New Home Guarantee form part of the FHLDS, they are an additional set of guarantees that are subject to some different rules. The rules regarding the number of guarantees that may be issued and the rollover of unissued guarantees are different for guarantees under the existing FHLDS and for New Home Guarantee (Schedule 1, item 11, subsection 29IA(14)).

Unissued guarantees are effectively guarantees that have not been issued and generally include guarantees that at the end of the financial year have lapsed or expired. This applies to both guarantees under the existing FHLDS and New Home Guarantee (as this forms part of the FHLDS) (Schedule 1, item 1, section 4, meaning of ‘unissued’ in relation to guarantees).

Guarantee rules for FHLDS guarantees (that are not New Home Guarantees)

The principles in respect of the existing FHLDS regarding the maximum number of guarantees that may be issued in a financial year and the distribution of these guarantees among eligible lenders that are major banks remain unchanged (Schedule 1, item 10, subsection 29I(1) and paragraph 29I(2)(a)).

Consistent with the operation of the FHLDS prior to the amendments, the Instrument ensures that no more than 50 per cent of guarantees may be issued to the major banks in respect of eligible loans in a financial year (Schedule 1, item 10, subsection 29I(7)).

The Instrument provides the Minister with the power to determine, in writing, the rollover of any guarantees under the existing FHLDS that are not issued at the end of the previous financial year, including from the 2019-20 financial year (Schedule 1, item 10, paragraph 29A(2)(b), subsections 29I(3), (4), (5), (6), (10),(11) and (12)). No rollover of guarantees under the FHLDS can occur without the Minister determining the extent, if any, of unissued guarantees to be rolled over (Schedule 1, item 10, subsection 29I(12)). The power to rollover guarantees is only available to the Minister and cannot be exercised by the NHFIC as part of its administration of the existing FHLDS or New Home Guarantee. In making the determination, the Minister is required to consider the performance of the FHLDS or New Home Guarantee or any unique circumstances influencing the uptake of guarantees.

The NHFIC must, in writing, notify the Minister of any unissued guarantees for the prior financial year on the 100th day after the end of each financial year, unless the Minister provides otherwise (Schedule 1, item 10, subsection 29I(8)). This notification must include a detailed breakdown of the number of guarantees that are unissued. This includes providing a breakdown of the unissued guarantees, whether they were reserved or had lapsed or expired, the distribution of these unissued guarantees among major banks and other eligible lenders, and any other information requested by the Minister (Schedule 1, item 10, subsection 29I(9)). This allows the Minister to then take a decision about whether the discretion should be exercised and if so the number of guarantees to be rolled over. The Instrument mandates a 100 day reporting period because under the existing scheme rules administered by the NHFIC, guarantees that are offered and reserved will expire after 90 days. In the event that a guarantee is offered on 30 June of a financial year, the NHFIC is in a position to report on the number guarantees that were issued, expired and lapsed on the 100th day.

Under the amendments, former subsection 29I(3) regarding the reservation of guarantees that are taken up in a following financial year and the re‑issue of guarantees following a refinancing of the eligible loan are instead included in subsection 29I(10) (Schedule 1, item 10).

Where the Minister has exercised the power to rollover any unissued guarantees under the existing FHLDS, the operation of paragraph 29I(10)(a) does not apply to those guarantees (Schedule 1, item 10, subsection 29I(11)). Paragraph 29I(10)(a) ensures that where a guarantee is offered in one financial year but formally issued in the following year, that guarantee is treated as having been made in relation to the former financial year when it was first available to be offered. The provision recognised that settlement may occur in the following financial year after a guarantee was offered in the previous financial year. Once the power by the Minister is exercised to rollover unissued guarantees under the FHLDS, the continued operation of paragraph 29I(10)(a) is not required because it would result in a double counting of a guarantee that had been reserved in the previous financial year and rolled over to the following financial year.

Guarantee rules for New Home Guarantees

Generally, the additional 10,000 New Home Guarantees may only be issued in the 2020-21 financial year (Schedule 1, item 11, subsections 29IA(1) and (2)). However, the Minister has a similar exclusive discretion to roll over any unissued guarantees under the New Home Guarantee for the 2020-21 financial year to the 2021-22 financial year (Schedule 1, item 11, subsections 29IA(4), (6) and (12)). In making this determination, similar to the existing FHLDS, the Minister is required to consider the performance of the New Home Guarantee or any unique circumstances affecting the uptake of guarantees. However, there is no further rollover of unissued New Home Guarantees after the 2021-22 financial year as the NHFIC may not issue any guarantees under the New Home Guarantee after the 2021-22 financial year (Schedule 1, item 11, subsection 29IA(13)).

However, the discretion to roll over guarantees under the New Home Guarantee does not apply to all unissued guarantees. In particular, the rollover does not apply to guarantees that are unissued but nevertheless compliant with the additional conditions for the New Home Guarantee in new paragraphs 29IA(3)(b) and (c) (Schedule 1, item 11, subsection 29IA(5)). In effect, this preserves the status of those guarantees as being offered to the first home buyer so long as they meet the additional conditions within the required timeframes (this is explained above). This exclusion from being rolled over ensures that where the borrower has met the additional conditions for the purposes of the New Home Guarantee, the guarantee continues to be offered to that first home buyer, even if they are otherwise unissued, as a loan agreement would not have been entered into. This provides greater certainty for first home buyers who are compliant with the New Home Guarantee conditions.

Where guarantees are rolled over, the maximum number of New Home Guarantee that may be issued by major banks in a financial year is 50 per cent of the total number of guarantees (inclusive of guarantees rolled over) that may be issued in the financial year (Schedule 1, item 11, subsection 29IA(7)). This amendment is consistent with the original policy of allocating up to 50 per cent of available guarantees to the major banks and allows for any rolled over guarantees from the previous financial year to be distributed evenly among major banks and other eligible lenders.

Similar to the existing FHLDS, the Instrument provides for circumstances where guarantees issued under the New Home Guarantee in one financial year are instead counted towards the number of guarantees issued in a previous financial year (Schedule 1, item 11, subsections 29IA(10) and (11)). This can occur under two circumstances:

·      where a guarantee is offered in one financial year in respect of an eligible loan, but the settlement of the contract in respect of that loan occurs in a later financial year, a guarantee that is issued in the later financial year is taken to be a guarantee issued in the previous financial year; or

·      where a guarantee is issued in a financial year and the loan is later refinanced in accordance with subsection 29C(4), the later issuance of a guarantee is not taken to be a guarantee issued in the later financial year.

However, where there is a discretion to rollover of unissued guarantees under the New Home Guarantee to the 2021-22 financial year, paragraph 29IA(10)(a) does not apply. This is because, similar to the existing FHLDS, where a rollover occurs, by continuing to apply paragraph 29IA(10)(a), it would result in a double counting of a guarantee that had been reserved in the previous financial year and rolled over to the following financial year.

The NHFIC must notify the Minister of any unissued guarantees under the New Home Guarantee for the prior financial year on the 100th day after the end of the 2020-21 financial year, unless the Minister provides otherwise (Schedule 1, item 11, subsections 29IA(8) and (9)). The information must include a detailed breakdown of the number of unissued guarantees including how many were reserved, elapsed and expired, where the offer is preserved under subsection 29IA(5), and the split between major banks and other lenders; and any other details requested in writing by the Minister. Similar to the requirements under the existing FHLDS, the Instrument mandates a 100 day reporting period because guarantees that are offered and reserved will generally expire after 90 days. In the event that a guarantee is offered on 30 June of a financial year, the NHFIC is in a position to report on the number of guarantees that were issued, expired and lapsed to allow the Minister to decide on whether rollovers should occur.

Other amendments

Consulting and reporting requirements

The amendments formalise best practice arrangements for consulting with the Government on changes to the scheme rules (including rules and policies) that are developed by the NHFIC to administer the FHLDS and the New Home Guarantee (Schedule 1, item 12, section 29JA). This is consistent with the importance of the operation of the FHLDS and New Home Guarantee in assisting first home buyers to access the housing market and stimulating new residential construction activity. Under the amendments, the NHFIC is required to consult with the Minister on any new scheme rules or any changes to the rules and policies at least 15 business days prior to the rules either being released publicly, or if not released publicly, coming into effect. The Minister has the discretion to notify the NHFIC in writing if a period shorter than 15 business days applies.

If there is failure by the NHFIC to consult the Minister before making or amending the scheme rules, the Board of the NHFIC must in 30 days, provide a written explanation to the Minister setting out the reasons for the failure to consult with the Minister.

The Instrument also introduces new reporting requirements (Schedule 1, items 14, 15 and 16, subsection 29L(1) and paragraphs 29L(1)(ba) and (bb), and subsection 29L(2)). These requirements include reporting to the Minister of the NHFIC’s operating expenses for the FHLDS (including the New Home Guarantee), itemised details of expenditure, and the performance of loans in relation to which a guarantee has been issued.

Increasing the NHFIC’s guaranteed liability cap

The Instrument increases the liability cap on total guaranteed liabilities by $1 billion to a total of $3 billion (Schedule 1, items 17 and 18, heading to section 34 and subsection 34(2)). This increase in the liability cap ensures that the NHFIC’s Bond Aggregator function can continue to expand its capital market and lending activities. The NHFIC Bond Aggregator channels institutional investment into the community housing sector by issuing bonds in the wholesale capital market. The issue of these bonds is limited by the cap on the NHFIC’s total guaranteed liabilities.

The increase in the liability cap expands the capacity of the Bond Aggregator to provide lower cost and longer tenor loans than otherwise available to community housing providers through commercial lenders. This reduces barriers to community housing providers to access finance and meet current and future demand for affordable housing. This supports jobs in the construction sector and improves housing outcomes by increasing affordable housing outcomes for Australians.

The increase in the liability cap does not apply to ‘guarantee liabilities’ arising from the FHLDS or the New Home Guarantee as they are not part of the NHFIC’s guaranteed liabilities. They are instead funded by appropriations from the Consolidated Revenue Fund.

Consequential amendments

The Instrument makes consequential amendments including:

·      to the guide after the heading to Part 5A – First Home Loan Deposit Scheme to include a summary of the New Home Guarantee (Schedule 1, item 2); and

·      an amendment in respect of the overlap of the existing FHLDS and the New Home Guarantee, where a guarantee can be issued under either schemes, it is the discretion of the NHFIC to administer which scheme the guarantee is issued under (Schedule 1, item 11, subsection 29IA(15)).