Opening up early access to super for housing would have a negative effect on the balances of even those members that don’t dig into their savings, with funds forced to adopt more conservative investment strategies and hold more liquid assets.
The chief member officer of the circa $90 billion profit-to-member fund will step down after “nine terrific years” in the role with the fund now commencing its search for a replacement.
HESTA brings total portfolio thinking to ‘nuanced’ housing crisis
The role of superannuation in providing affordable housing has become increasingly controversial, with both sides of politics outlining policies to get funds involved in either increasing the housing stock or improving access to it.
But HESTA told the senate economics reference committee on Thursday that its investments in build-to-rent and build-to-sell housing can alleviate the issue of affordable housing at the system level while also maximising returns to members.
“We start with a total portfolio approach, and inside HESTA that forces us to join the dots; we understand that if there’s a housing crisis and vacancies are low and affordability is very poor, those problems are going to show up in inflation, and that’s going to hurt our bond portfolio,” Jeff Brunton, head of portfolio management, told the committee.
“What I mean by join the dots is when we’re making investments in one particular asset class, we’re also thinking about the consequences for all of the assets that HESTA owns, to drive that long-term performance. So we do believe there is a role for private capital as part of the solution.”
HESTA “doesn’t have all the answers” on the housing crisis, but does think that private capital has a role to play in alleviating it, and that the stable returns created by building secure housing are enough to make it worthwhile for members and their investments.
“Over time more housing supply should help lift the prices of all the assets in our portfolio through lower inflation and through easing the cost of living crisis… HESTA’s providing choice; we’re building apartments for sale and we’re building apartments for rent, and we’re allowing that choice to occur in the marketplace. I think both of those options are really important in a well-functioning marketplace.
“We do see the housing crisis, the low vacancies, the really high prices of Australian housing, and that’s why we’re looking to increase our investments in this sector.”
But quizzed by senator Andrew Bragg as to whether HESTA believed Australians would tolerate superannuation funds as corporate landlords – an arrangement that’s commonplace in the United States but fairly rare down under – Jorden Lam, head of member services and operations, said that both she and HESTA “take the view that Australians care about having access to affordable housing”.
“HESTA members are in low-income earning roles, working in the health and community services sector, and we believe that they and all Australians should be able to have that healthy retirement balance as well as secure housing,” Lam said.
The Liberal Party’s “super for housing” policy would allow members to crack open their retirement savings for a house deposit, which funds have resisted for the effect it would have on both balances and liquidity in a mirror of the Covid early access period, which saw HESTA pay out over $1.1 billion to members.
“In more recent times we’ve conducted research (on our members) and we can say that members who are accessing their funds early, of those members only three per cent are accessing it to pay mortgages or housing-related costs,” Lam said.
“HESTA does not believe that the answer to affordable housing is to access their superannuation funds. We believe it’s a nuanced issue and that we can’t be releasing funds for housing because of that low balance our members have.”
