NHFIC uses a bond aggregator model to issue social bonds in the capital market. The proceeds of a social bond issuance are used to provide loans to registered community housing providers (CHPs).
This model enables NHFIC to provide concessional funding arrangements to CHPs by providing lower-cost and longer-term finance solutions compared to traditional sources of funding. The issuance of social bonds also facilitates greater private and institutional investment in the sector.
The Affordable Housing Bond Aggregator (AHBA) uses this ‘pass-through’ model to provide greater funding certainty and lower finance costs to CHPs. This assists CHPs to expand their operations and the supply of affordable housing.
To support the AHBA, the Australian Government has provided a $1 billion line of credit that NHFIC may use to advance initial loans to CHPs prior to issuing bonds. Loans financed by the line of credit will subsequently be refinanced by NHFIC issuing a social bond when a critical mass of such loans have been advanced.
The bond aggregator model has international precedent. It is currently used in countries such as the UK where it operates as a tried, tested and successful means of providing efficient finance for social and affordable housing.
Investors have the opportunity, through the purchase of social bonds issued by NHFIC, to combat the significant and prevailing funding gap in Australia’s community housing sector.
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NHFIC was recognised by financial publication KangaNews as the 2019 Australian Government-Sector Issuer of the Year.
NHFIC's second bond of $315 million (issued in November 2019) was awarded 'Social Infrastructure Deal of the Year' in The Asset's Triple A Infrastructure Awards 2020.