This week the months-long heated altercation between the Greens and the Albanese government over the Housing Australia Future Fund came to a conclusion. The passage of the government's signature legislative reply to the housing affordability crisis represents a significant win for the nation's most vulnerable renters.
However, at the danger of raining on everyone's parade, I'm afraid that amidst the political fracas a major flaw in the legal architecture of the proposal which could significantly hamper its ability to address the housing crisis has been overlooked.
Minister Julie Collins explains the intention of the fund: provide 20,000 homes to social housing and "10,000 affordable homes for front-line workers like police, nurses and cleaners who kept us safe during the pandemic."
The affordable housing sector, comprised of charities who partner with developers at large scale to provide housing stock to those in need, is no minnow in Australia's charity pool. The latest figures from the Community Housing Industry Association show an annual aggregate revenue of $1.85 billion and $15 billion in assets in 2021.
The community housing sector has been critical to the delivery of large scale government housing initiatives in the past, including the now winding-down 2008 Rudd government response to the global financial crisis, the National Rental Affordability Scheme (NRAS).
Judging on this prior experience, the HAFF's ambitious targets will necessitate the involvement of community housing providers, who are registered charities. From my discussions with members of the sector, that is the clear expectation.
However, here enters the Socratic gadfly in the ointment: the Australian Charities and Not-for-profits Commission (ACNC). Its guidance to housing charities presciently warns: "Australian governments have created, and may in the future create, schemes to encourage organisations to provide housing. The fact that a government has created a housing scheme does not necessarily mean that providing housing under the scheme is charitable under the Charities Act."
Having regard to both the common law and the Charities Act 2013, it is not at all clear that the provision of housing to key workers comprises a charitable purpose in Australia. If that view is correct, charitable housing providers would be effectively excluded from one-third of the 30,000 offering. If the minister is of the view that one-third of the offering is targeted exclusively to for-profit providers, the community housing industry seems to be unaware of it.
The ACNC's guidance to housing charities does not say that the provision of housing to key workers is charitable. In this it departs from the position adopted by the Charity Commission in England and Wales, which does so clarify. Rather, the tests the ACNC applies would tend against that conclusion.
For example, the ACNC acknowledges that "the 30/40 rule is often used as a benchmark for whether a household is experiencing "housing stress". The 30/40 rule refers to households with income in the bottom 40 per cent of Australia's income distribution and housing costs of more than 30 per cent of the household income.
The ACNC accepts that that rule can be legitimately applied by charitable housing providers.
However, many key workers do not meet the 40 per cent limb of the rule. The ACNC considers that the 40 per cent is to be determined according to "Australia's income distribution", being the national, not local, standard.
The average Australian wage is $68,900. The average teacher salary in Australia is $84,866 per year. Entry-level positions start at $74,301 per year. Ambulance drivers earn $67,847. In NSW a probationary constable receives $80,733. Entry level registered nurses start at $77,154. Each of these fail the 40 per cent rule.
If these tenants are not eligible for charitable relief, the receipt of reduced rent will give rise to a concern that a purpose of conferring a private benefit on tenants may have arisen for a charity. As the ACNC makes plain:
If an organisation provides housing to people who are not in need of charitable relief, the evidence will need to demonstrate that this is merely a fundraising activity and does not amount to an independent non-charitable purpose.
The consequences for a charity that has a non-charitable purpose can be disastrous, leading to the loss of tax exemption and associated concessions, reputational damage and (in the context of housing schemes such as the HAFF) exposure to investors and financiers. Large-scale development undertakings by charities rely upon their tax concessions for their financial viability. Loss of the concession mid-stream can be detrimental to that viability.
The critical question of when an independent non-charitable purpose has arisen is to be answered according to the common law of charities. Leading charity law academic Professor Gino Dal Pont summarises that the courts' approach is "hardly exact" and "as with all matters of degree, a principle capable of certain application has appeared elusive."
However, it is upon that elusive standard that a housing provider is expected to stake its charity endorsements when participating in the key worker component of the HAFF. This is not a firm foundation for such a substantial government initiative. In fact, it's the $10 billion question on which the success or failure of the community housing sector's participation could ride.
The same concern arose with the akin housing affordability programme under the Rudd government's 2008 NRAS, which also targeted key workers. However at that time the government acted prudently by providing clarity by introducing legislation to amend the legal definition of "charity" to ensure the participation in the NRAS would not vitiate the charitable status of community housing providers.
My central concern is that the community housing sector is being invited into a government scheme unwittingly assuming that the government has already ensured that they can do so while maintaining compliance with charity law.
The current state of that law does not provide sufficient certainty. Legislative clarification is required to provide confidence to charities, investors, developers and tenants and to ensure the ultimate success of the HAFF.
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