Transcript Document

The NRAS
The Story to Date
and the Future
Mark Fowler
Neumann & Turnour Lawyers
ACPNS, CHFA & ACLA Day Seminar
Thursday 05 December 2013
© N & T Lawyers Pty Ltd
trading as Neumann & Turnour Lawyers (A.B.N. 11 955 351 885)
Overview
• NRAS
– What is it?
• What’s the problem?
– Charitable heads: common law & statute
– Responses to date
– Further charitable recognition
• Managed Investment Schemes
• NRAS Futures: Institutional Investment
• NRAS and NRSCH
National Rental Affordability
Scheme (NRAS) and Charity
• Enacted with bipartisan support in 2008
• Aims :1. stimulate the supply of up to 50,000 new affordable
rental dwellings;
2. reduce rental costs for low and moderate income
households by making these dwellings available for
rent at a rate that is at least 20 per cent below the
prevailing market rate; and
3. encourage large-scale investment and innovative
delivery of affordable housing.
NRAS – What is it?
• Allocations issued to Approved
Participants with conditions
• NRAS Incentive CPI-ed to basket of rents
index each year, currently:
Contributed by
Amount
Australian Government Contribution
$7,763.00
State/Territory Contribution
$ 2,587.00
Total
$ 10,350.00
NRAS – What is it?
• NRAS Incentive is:
– Cth: Refundable tax offset certificate or
payment (NFPs)
– State Government: in kind or payment
• Paid to party entitled to rent if relying on
Division 380 ITAA (investor models)
• Head Lease and NRAS Consortiums
Who’s relieved?
Household composition
Initial household income Existing tenant income
limit ($)
limit ($)
One adult
45,956
57,445
Two adults
63,535
79,419
Sole parent with two
children
78,822
98,528
Couple with two children
94,021
117,526
• Comparable incomes childcare workers,
nurses, police officers and fire-fighters
Obstacles
• Overcome:
– Legislation stifling innovation and uncertain
– Finance Institutions
– Tenant awareness
• To be met:
– Managed Investment Schemes
– Institutional Investment
– Charitable treatments(?)
Charitable Housing:
Applicable CL Heads of Charity
1. Relief of poverty: provision of
housing for the poor
2. Other beneficial purposes head
3. Word Investments.
Charitable Housing:
Statutory Definition of Charity
• Charitable purpose: ‘relief of poverty’ under common law now
subset of ‘advancing social or public welfare’ (ss 12 & 15)
– EM: ‘providing housing and accommodation support for people with
special needs or who are otherwise in a special disadvantage in
terms of their access to housing’
– Addendum: ‘something more than the issues commonly
experienced by the public, such as general problems with housing
affordability.’
• Section 12(1)(k) ‘Other beneficial purposes’ under common
law.
• Word Investments
– Preserved?
– June 2013 amendments to ITAA charity must “apply its income and
assets solely for the purpose for which the entity/fund is
established”. Effect?
Helena Partnerships Case, per Lloyd LJ:
• The provision of housing without regard to a charitable
need for the tenant is not charitable as:
– Housing not in spirit of preamble, either directly or by
analogy with existing public utility heads (e.g. sea wall
or fire brigade)
– The private benefit ‘confers an especially significant
benefit’ on tenants, so substantial that it cannot be
considered to be subordinate to public benefit, it is not
incidental or subsidiary (ECHR recognition reinforces
this).
Application to Australia?
• Common Equity Housing Ltd (1994), SCV per Ashley J:
– ‘Had I concluded that…the provision of “housing
assistance and co-operative education … to low
income persons” did not disclose a purpose of relief
of poverty I would nonetheless have concluded that
the provision of such assistance (by way of secure,
low-cost rental) to low income persons not owning
their own homes – a description unfortunately, of a
significant and identifiable section of the community –
fitted the fourth head identified in Pemsel.’
NRAS and Charitable Housing
• NRAS
– Relief of poverty
– Word Investments
– Fourth charity head: other beneficial purposes
• NRAS and PBI: Hunger Project Case
Responses to date
• Extension of Charitable Purposes Act 2001
– Parliamentary declaration NRAS activity in Rounds
1 and 2 is charitable?
– Is this a recognition that the affordability crisis
requires charitable intervention?
• Treasurer’s letter 14 January 2010
UBIT and NRAS
• UBIT consultation paper 27 May 2011:
- ‘NFP entities who participate in the 50,000
National Rental Affordability Scheme allocations will
be allowed to use their tax concessions in support of
that activity.’
Relief of Poverty and NRAS
• ‘Working classes’ cases:
– Guinness Trust (London Fund) v Green [1955] (per
Denning LJ).
– Re Niyazi’s Will Trusts ‘working men’s hostel’
• Re Gardom [1914] 1 Ch 662 at 668]
• Tenants had an income, but were too poor to provide a
home of that nature in the area without assistance.
• Hayes and Gubbins (1992/93)
Affordable Housing Crisis?
• 2008 Senate Inquiry
– ‘Ontario measure’
– ‘On this definition it is estimated that there are
now over one million low and middle income
families and singles in housing stress. This
represents about 10 per cent of the population.’
Affordable Housing Crisis?
• October 2012 ACOSS Report
– 12.8% of Australians are living in poverty after housing
costs.
• COAG Affordable Housing Report 2011
– 41.7% of low income households (lowest 40% by income)
were in housing stress in 2009-2010
– 60.8% of the lowest 10% of households were in rental
stress 2009-2010.
• Vacancy rates well below 3%, benchmark for fully
utilised supply.
NRAS and Charity Evolution
• Incorporated Council of Law Reporting CA
[1972], Sachs LJ:
– The fourth head ‘has an admirable breadth and
flexibility which enables it to be reasonably applied
from generation to generation meeting changing
circumstances’
NRAS and Charitable Endorsement
• Scottish Burial Reform [1968], HL, per Lord
Wilberforce re fourth head:
– ‘decisions given by the courts … which have endevoured to
keep the law as to charities moving according as new social
needs arise. The law of charity is a moving subject which
may well have evolved even since 1891’
• National Anti-Vivisection Society [1948](HL), Wright
LJ: ‘approval by the common understanding of
enlightened opinion for the time being’
HMRC Guidelines on
Affordable Housing
• In 2009 HM Revenue and Customs, the Charity Commission
and the Homes and Communities Agency issued Affordable
Home Ownership-Charitable Status and Tax (May 2009).
• The following are relevant to charitable status:
– that key workers are not priced out
– better mix of housing tenures creating stable, mixedincome communities
– urban and rural regeneration
– promotion of sustainable development
NRAS Goals
• Governments, the business sector and community
organisations recognise housing affordability is an
issue of community concern. The increasing cost of
housing is having an impact on the ability of many
Australians to meet their financial commitments.
• Rental housing has become increasingly unaffordable
and vacancy rates in all capital cities have fallen well
below the three per cent level which is widely used
as a benchmark of fully-utilised supply.
NRAS Goals
• The NRAS Policy Guidelines note that the
income brackets for NRAS incorporate those
who fall within the key worker demographic
and that NRAS:
– … can provide significant benefits, including
increasing the availability of affordable housing
for key workers whose low to moderate incomes
would impinge on their ability to pay rent in the
area.
NRAS Assessment Criteria
• NRAS Assessment criteria et. al:
– (c)
the proposal delivers accessibility and
sustainability outcomes, including the following:
• (i) proximity of dwellings to transport, schools,
shops, health services and employment opportunities;
• (ii) types of dwellings and proposed household
compositions that facilitate a balanced social mix;
• (iii) use of universal design principles or other
measures that make properties more accessible to
people who are ageing or live with disabilities; …
NRAS Assessment Criteria (cont)
• (f) the proposal details or forecasts, for
each dwelling:
(i)
the energy rating of the dwelling; and
(ii) the extent to which the dwelling
incorporates efficient lighting,
environmentally friendly hot water systems,
ventilation and water tanks.
Overseas Examples:
Charity Definition
• Is there scope for housing affordability?
• Charities Act 2006 England and Wales head ‘the
advancement of citizenship or community
development’ (cf ‘welfare’) includes:
– urban and rural regeneration
– the promotion of civic responsibility
• Also in Ireland, Northern Ireland and Scotland
• Ireland ‘Harmonious community relations’.
Charity Definition
• EM Addendum:
– ‘Charitable housing may also address particular or special
physical, social or psychological needs or other special
disadvantages of individuals and families.’
•
•
•
•
‘advancing health’
‘advancing education’ (citizenship)
‘promoting or protecting human rights’
‘promoting reconciliation, mutual respect and
tolerance between groups of individuals’
NRAS and the Fourth Head
• NRAS indirectly decreases the strain on social
housing by increasing housing options for lower
income households.
• Allows tenants to put aside $ for a deposit, therefore
moving out of rental stress.
• Do these outweigh the benefit to the individuals who
receive:
– Accommodation?
– The NRAS Incentive?
NRAS - Special Treatment?
• Why a specific recognition for affordable
housing providers operating in NRAS?
• a number have entered into the fray and grown
sizeable holdings, either business or stock (to
require transfer out would incur large tax
burdens on recipient)
• Has worked to date
• Government encouragement of the NFP Sector
to utilise tax concessions in NRAS, e.g. GST
benefits or stamp duty right downs.
What then are we to do?
• Tenant profiles reflecting the common law
definition of charity:
– Relative to local area average income cf income
needed to acquire open market rental
– Eligibility for other governmental rental assistance
• Clear demarcation and direction of funds
from commercial (non-relief of poverty or
beneficial purposes) activities to charitable
activities.
• Pemsel’s Fourth Head(?)
NRAS and MIS
• Five elements:
– Contribution of money or money’s worth
– Rights or benefits of scheme as consideration
– Pooling or common enterprise
– Objective or expectation of benefits to
persons holding the rights
– Lack of day to day control
• ASIC Relief
• Class Order
Institutional Investment
• AHURI March 2013: Institutional investment
requires:
– higher rental yields
• Diverse rental portfolio: improve scalability, rate of return and
offset risks
– larger scale investment
• Scale is $50 to $250 million for an individual institution
• Investors would need to invest at least $500 million per
annum in aggregate to create liquidity and establish a
sustainable market
– good market information, and certainty (incl in NRAS)
• Financial incentives and credit support will be essential to
achieve increased supply at the affordable end of the market,
and more diverse forms of government support
Institutional Investment
• Opportunities
–
–
–
–
–
–
–
Steady predicable return based on cash-flow
Government superfunds housing for members
Proven demand
Need for Government stimulation and innovation
Use of intermediaries
Offshore investment
Construction: land release, credit support,
planning favouring affordable housing.
NRSCHP
• National Regulatory System
– Comes into effect on 01 January 2014
• Double reporting requirements?
• MoU with ACNC yet to be released
Questions