Affordable Housing Investment Partnerships (AHIP) makes low interest loans and government guarantees available to finance social and affordable housing for Victorians who need it most.
AHIP expands on the existing Building Financial Capacity of Housing Agencies (BFCHA) initiative, bringing the total finance available to $2.1 billion.
AHIP continues to provide finance for the development and acquisition of social housing and expands to also include projects that provide affordable housing.
This will be the first time that government low interest loans and government guarantees will be available in Victoria for affordable housing as well as social housing.
This expansion encourages the design and development of mixed-use housing projects that provide positive housing outcomes for Victorians most in need.
The expansion will also greatly enhance opportunities for institutional finance including superannuation funds and private sector partners to support mixed-tenure housing projects.
As of 30 June 2023, the success of the BFCHA initiative, now AHIP, has seen the approval of more than $510 million in loans to community housing associations and providers to support the development and acquisition of more than 3,100 new social housing dwellings.
To accommodate the extension, changes to some finance parameters have been made to allow for this wider participation and collaboration across the housing sector.
Who can apply?
Community housing associations and providers
Low interest loans and government guarantees are open to community housing associations and providers that are registered, or in the process of being registered, to operate in Victoria by the Registrar of Housing Agencies.
Other not-for-profit housing providers and councils
Low interest loans and government guarantees for affordable housing components of mixed-tenure projects, and affordable housing projects are also open to not-for-profit organisations and councils.
Property developers, superannuation funds, banks and financial institutions
There are opportunities for private sector entities, including building developers, superannuation funds and banks to partner with these community housing associations and providers and not-for-profits to deliver a range of social and/or affordable housing solutions.
This includes mixed-tenure social, affordable and market housing projects that can provide positive housing outcomes for Victorians.
What is the difference between social and affordable housing?
Social housing is for people on low incomes who need housing, especially those who have recently experienced homelessness, family violence or have other special needs.
Affordable housing is a continuum of housing outcomes that range from providing housing to those on very low incomes, up to affordable housing with rent discounts consistent with the Government’s Affordable Housing Rental Scheme.
Low interest loans
Low interest loans aim to reduce the cost of borrowing for eligible loan recipients compared with private sector financing.
Loans will be available for up to 30 years (plus the initial construction or acquisition period), with a fixed interest rate period up to the initial 15 years.
Interest rates will reflect the State’s cost of borrowings, plus a small state margin. There are no establishment or line fees.
What can the loans be used for?
Low interest loans are available for:
- Social and/or affordable housing developments.
- Social and affordable components of mixed-tenure housing projects.
- Acquisition of new dwellings to be run as social and/or affordable housing.
- Purchase of land to be used for social and/or affordable housing.
- Equity/quasi-equity for mixed-use housing developments but limited to the social and affordable housing components.
- Refinancing debt, whereby the savings are reinvested back into additional social and/or affordable housing.
Loans are only available for social and affordable housing components of any housing project with the market housing components funded from other finance or equity contributions. Social and affordable housing components financed by these loans are required to be maintained as such, consistent with the terms and maturity of the low interest loans.
Loans for social housing only
For social housing only loans, applications are required to meet or exceed 20% of all dwellings allocated to social housing.
For these social housing dwellings, at least 75% of these are required to be allocated to Housing Register priority access applicants. For projects without funding under other Victorian Government social or affordable housing programs, a minimum percentage of priority access tenants must be negotiated and agreed with the Department of Treasury and Finance, including with consideration to the benefit provided by the AHIP loan or guarantee.
Social housing must be operated as such for the life of the loan or guarantee and for at least 20 years.
Loans for a mix of social and affordable housing
For social and affordable loans, applications are required to meet or exceed 20% of dwellings across a mixed tenure project allocated to social housing, with at least 75% of these allocated to Victorian Housing Register priority access applicants. For projects that do not include other Victorian Government funding, variations will be considered where this may result in a project not being financially viable.
Social and affordable housing must be operated as such for the life of the loan or guarantee and for at least 20 years, whichever is longer.
Loans for affordable housing only
Loans can be provided for projects that include a range of affordable housing dwellings but no social housing dwellings.
For these types of projects, applications are required to meet or exceed a minimum of 20% of the affordable housing dwellings allocated at a lower rate of rent which is broadly equivalent to social housing settings (e.g., 25% below the market rent or at no more than 30% of the middle of the low-income band, whichever is lower).
Variations may be considered depending on the circumstances of the proposal and where adequate rationale is provided.
Affordable housing must be operated as such for the life of the loan or guarantee and for at least 20 years, whichever is longer.
Loan covenant parameters
These loan covenants reflect those that applied under the BFCHA initiative.
Financial loan covenants include:
- a minimum interest cover ratio of 1.5:1 for the borrower
- a maximum loan-to-value ratio for the borrower of up to 40%
- a minimum security coverage ratio of 1.5 times the value of the loan
- a bad debts ratio expressed as a percentage not to exceed 2%.
Minimum liquidity requirements may also be imposed, dependent on the application and outcomes of a credit assessment.
Variations may be considered depending on the circumstances of the proposal and where adequate rationale is provided. All applications and variations will be subject to the outcomes of a credit assessment.
The Victorian Government can provide guarantees over private financing to reduce lending risk and help secure more competitive commercial terms with private banks and non-bank lenders. This could be for full or partial cover of the loan.
Guarantees are not provided for low interest loans issued by the Treasury Corporation of Victoria or financing provided by the National Housing Finance and Investment Corporation or as it may be known from time to time.
How do I get connected or make partnerships to utilise AHIP finance to create new social and affordable housing?
Please get in touch with the AHIP team via the form below to express your interest in these types of projects. This may be as:
- a community housing association or provider or not-for-profit that wants to build social and affordable housing but does not have land, funding or finance available to get started
- a council with land that could be provided or leased for the development of social and affordable housing, including for key workers
- a superannuation fund that is interested in providing equity or finance investments into project structures
- or any other organisation interested in AHIP.
The AHIP team can work with interested participants to help bring them together for meaningful projects.
Register your interest in AHIP
Reviewed 20 September 2023