17 Aug ACNC Releases Revised Interpretation Statement on Charitable Housing
The ACNC Commissioner has released her long-anticipated revised Interpretation Statement on Charitable Housing. The new Statement presents a substantial reworking of the prior iteration, providing new material on:
- Requirements for registration as a charity, including:
- collaboration within centrally governed housing provider groups;
- the interface between winding-up provisions and State and Territory Government funding contract requirements; and
- the accumulation of surpluses;
- Types of housing that may be provided, including social and affordable rental housing, key worker housing, home ownership schemes, and mixed-tenure or multi-tenure developments; and
- Commercial arrangements used to provide community housing, including debt financing and multi-party SPVs.
In this update, we provide comment on various facets of the revised statement, which can be found here: Commissioner’s Interpretation Statement: Community housing | ACNC.
Assessing Tenant Eligibility
The Commissioner provides an extensive range of factors that are relevant to determining whether a prospective tenant is in need of charitable relief. She clarifies her view that a charity’s Responsible Persons ‘are generally best placed to assess a household’s need to live in a particular location’. ‘However, Responsible People should be aware that they cannot make the assessments … in a reckless or careless way. Instead, Responsible People need to exercise appropriate judgement and decision-making’ such that ‘an outside observer could be satisfied that such an assessment appears to be informed and rational.’ To demonstrate compliance, ‘housing providers that are registered as charities should therefore retain records of their selection criteria, ongoing eligibility criteria and decisions made under those criteria, and provide those records to the ACNC if requested.’
Maintained Focus on Conferring Private Benefit
In seeking to supply housing, charities must remain keenly aware of the risk of adopting an independent purpose of conferring private benefit on non-charitable beneficiaries. The Commissioner maintains that ‘where discounted housing is provided to tenants who do not have a recognised charitable need, or who are not selected through a transparent needs-based assessment process, the housing is unlikely to further the charitable purposes of relieving poverty, distress or disadvantage (or another charitable purpose). In these circumstances, the housing provider may instead be pursuing a non-charitable purpose of conferring private benefits.’
As the Commissioner notes, this is a particular concern in the context of affordable housing, clarifying that ‘regardless, affordable rental housing may further the charitable purpose of advancing social or public welfare where it is provided to individuals or households experiencing the types of need described in this Statement.’ This concern was further considered in Dr Mark Fowler’s submission to the Senate Standing Committee on Economics, available here.
Key Workers
For the first time, the Commissioner has accepted that housing may be provided by charities to ‘key workers’. This is, no doubt, in response to recent Government schemes focussing on key worker housing, such as the Housing Australia Future Fund. The Commissioner clarifies that a ‘key worker’ is ‘someone employed to perform a key civic job or essential service to benefit the public, and who generally must be physically present at a work location to perform their job.’ Key workers ‘include people employed in the public, charity and not-for-profit sectors, or by another employer engaged in providing equivalent services to benefit the public.’
However, in seeking to supply housing to key workers, again, the risk of adopting an independent purpose of conferring private benefit on non-charitable beneficiaries remains present. The ACNC clarifies that ‘a benefit provided to an intended beneficiary may also constitute an unacceptable private benefit if it significantly exceeds what is reasonably required to meet or relieve the relevant charitable need.’
The Commissioner sets out various factors she will deploy in assessing whether an entity that houses key workers remains charitable. Notably, ‘providing housing to key workers directly furthers a charitable purpose’ where ‘there is a shortage of workers – or difficulty recruiting or retaining suitably qualified workers – to provide the relevant services’ and provided ‘appropriate controls are in place to ensure the housing is provided only while the occupants remain engaged as key workers.’
The Commissioner provides the following example: ‘housing may be provided to aged care workers to support the charitable purpose of caring for and supporting the aged, or to disability support workers to support the charitable purpose of caring for and supporting individuals with disabilities’. That a charitable housing provider may provide housing to key workers in furtherance of a charitable purpose is a welcome and long-sought clarification for charitable housing providers. However, care must be observed to ensure that a charity remains within the goalposts. The mere fact that a Government scheme purports to target key workers does not provide certainty that the requirements of charity law will be met simply by participation in it.
Commercial Activities
The boundaries that apply when housing charities engage in commercial activities to fund the delivery of housing have long been a focus of the regulator. As always in charity law, the key enquiry is directed to the purpose for which the activity is engaged. Hence, the Commissioner clarifies that ‘a housing provider that undertakes commercial activities should be able to demonstrate that the profits generated are applied to its charitable purposes and do not indicate an independent non-charitable purpose. Relevant evidence may include … financial records showing that profits from commercial activities are used to further the housing provider’s charitable purposes.’
Multi-Party SPVs
Developing the concepts applied in the recently released ACNC’s guidance on governance practices for complex structures, the Commissioner sheds light on the factors that the ACNC will consider when assessing whether multi-party engagements with developers, financiers (including private equity financiers), builders, and tenancy and property managers further charitable purposes.
The Commissioner states that ‘multi-party SPVs, which are also sometimes referred to as consortia or project groups … raise distinct issues and risks that differ from those associated with other investment structures’. As ever, the principal risk is of ‘benefits accruing primarily to non-charitable participants, including investors.’
The Commissioner sets out a range of factors that she will consider, each under the overarching principle that ‘Responsible People must act in good faith and in the best interests of the charity housing provider, and consider if participation in a multi-party SPV furthers the provider’s charitable purposes or instead primarily benefits private parties.’ She again warns that ‘a multi-party SPV may have an independent non-charitable purpose where a holistic assessment indicates that it was established primarily to confer private benefits on third parties, including investors, members or founders.’ Consistent with these principles, ‘debt financing arrangements should generally be fair, reasonable and consistent with commercial market practice.’
The Commissioner’s latest Interpretation Statement on Housing is responsive to emerging trends within the housing sector and provides welcome clarification on a number of matters that previously remained in doubt. It will be a continuing resource to charitable housing providers. However, in many respects, it demonstrates that the provision of housing by charities remains a complicated and contested space. As ever, much will turn on the facts and the evidence that charities are able to marshal in support of their claim to be extending charitable purposes through their activities.
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