Victorian Co-Operative Housing Societies
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VICTORIAN CO-OPERATIVE HOUSING SOCIETIES ANNUAL REPORT 1985. VICtORIA CO-OPERATIVE HOUSING SOCIETIES Report of the REGISTRAR for the Year ended 30 June 1985 Ordered by the Legislative Assembly to be printed MELBOURNE F D ATKINSON GOVERNMENT PRINTER 1986 No. 76 VICfORIA CO-OPERATIVE HOUSING SOCIETIES Fortieth Annual Report on the Registrar Financial year ended 30 June 1985 The Honourable the Minister of Housing This report, which is submitted pursuant to section 71 of the Co-operative Housing Societies Act 1958 (No. 6226), covers the financial year ended 30 June 1985. A brief statistical summary of some of the operations of co-operative housing societies, to the close of the year under review, is presented in a supplement to this report. The summary is necessarily brief as staff and time constraints have considerably reduced the volume of statistical information collected and details gleaned from various Australian Bureau of Statistics Bulletins are unavailable at the time of preparation of the report. REGISfRAR'S STATEMENT The year to June, 1985, was again one of great change for financial institutions and co-operative housing societies took part in these developments. The deregulation of the banking sector continued with the Federal Treasurer announcing that 16 major foreign financial institutions had been invited to make application for licences to operate banks in Australia. It was quite clear that, although not all had commenced operations, the spectre they raised was having a marked effect on the existing banks as they positioned themselves to prepare for the new entrants. This was best seen in extensive advertising campaigns, the aggressive search for funds and other measures to raise their corporate profile and operations. This competition, when coupled with the economic conditions prevailing, resulted in a marked tightening of the demand for funds and an inevitable increase in interest rates throughout the borrowing community which was passed on to those members financed by institutionally funded societies. Another development during the year was the acceptance by the Government of a new loan instrument predicated on a capital indexed basis. The adoption of this approach and instrument is bound to have a marked effect on societies as the Ministry of Housing has indicated that funds from the Commonwealth State Housing Agreement for the 1985-86 lending program will only be made available to societies which agree to adopt such a capital indexed or CAPIL lending instrument. Much discussion has taken place between representatives of societies and officers of the Ministry with regard to the amendments needed to be made to the legal and accounting frameworks required to be adopted to disburse and account for the loan funds to have the CAPIL lending program operational in July, 1985. Another development that impacted on societies during the course of the year was the return of the State Bank of Victoria into the area of lending to co-operative housing societies. In the past, the State Bank had been a lender subject to the granting of a Treasurer's guarantee, but the money made available in the past year has been at an interest rate above that which would attract such a guarantee. 3 The large parcel of funds, in excess of $72 million for the year, directed societies into a market that they had not previously tapped. As the rate of interest was above that which would attract a guarantee, no indemnity was available and all loans were required to be insured with an approved mortgage insurer. In addition, the management fee able to be charged was restricted in order that the overall cost to borrowers should not exceed that faced by borrowers through permanent building societies. The tlow of funds from the State Bank looked to be continuing unabated at the end of the year and the funds made available at the guarantee rate was forty per centum greater than 1983-84, a clear indication that lenders regard co-operative housing societies as an important vehicle for the disbursement of housing funds. During the year the Co-opemtive Housing Advisory Committee continued to meet and made many recommendations to the Minister or myself and discussions continued with The Federation of Housing Societies of Victoria when issues of vital concern to societies were aired. Some key issues that were under discussion and not resolved at the end of the year will be of vital concern to all societies. They include a review of the management fees and other charges able to be levied by a society which has been referred to a sub-committee of representatives of the Ministry and The Federation for advice. It has also been proposed that the Co-operative Housing Societies Act 1958 be amended to increase the sum available to permit the execution of further indemnities, and also that, as a result of the Financial Institutions Review about which I wrote last year, the Advisory Committee be restructured and renamed the Victorian Co-operative Housing Council with the representation of societies being increased to four. Over the course of the year I endeavoured to maintain the excellent relations between the Government and societies by visiting and speaking to Secretaries and Directors and I again addressed the Annual Convention of The Federation. An important development has been regular National Meetings of Registrars, which rotate around the State and Territory capitals bi-monthly. Matters of interest to societies have been included on the agenda of all these meetings, including legislative reform and industry restructuring. As can be noted from the comments above, the 1984-85 year was one of major developments affecting all societies. Further and new forms of funding have been made available and the proposed amendments to the Act will lead to a stronger and more representative advisory body. In addition, it is the intention of the Government to completely review the Co-operative Housing Societies Act 1958 in the forthcoming year in order that there is legislation in place that will ensure that the regulation an<.! development of co-operative housing societies is conducted in an efficient and effective manner. Although the consolidation of the Legal and Registry Division of which I am General Manager was completed, there still remain problems in the administration and oversight of co-operative housing societies due to the division of functions throughout the Ministry. In addition, due to the non-replacement of inspection and administrative staff who have left the Registry, it is becoming clear that once again the oversight of Government housing funds is not being adequately carried out. LEGISLATION AND REGULATIONS The Co-operative Housing Societies Act 1958 and the Regulations remained unchanged throughout the year. CO-OPERATIVE HOUSING ADVISORY COMMITTEE The members of the Committee at the commencement of the year were Registrar of Co-operative Housing Societies-Ex Officio Chairman: Mr. A. V. Cahir. B.Ec.-Nominee of the Governor in Council; 4 Mr. F. Elzink, C.I.T., B.Ec.-Nominee of the Treasurer; Mr. R. McPhail, A.A.S.A., A.B.S.-Nominee of The Federation of Housing Societies of Victoria; Mr. K. Palmer-Nominee of the Building Societies Institute Incorporated; Mr. T. Harrington-Nominee of the Guaranteed lenders. During the course of the year Mr. Harrington resigned his position due to a promotion and transfer in his employment and his place on the Committee had not been filled by the end of the year. Apart from attending to its statutory obligations the Advisory Committee directed its attention to a variety of matters relevant to co-operative housing societies. Matters of importance are summarised hereunder- Transfer of Powers Proposals to transfer the administration of functions relating to guarantees and indemnities from the Treasurer to the Minister of Housing were not proceeded with. Offshore Funding A suggestion that offshore funds may be available for co-operative housing society lending was investigated but due to problems with exchange risks and interest rates at or beyond the limit that the Treasurer was prepared to guarantee the matter was not considered viable. Guarantees and lndemnities A number of matters were considered which included- Contingent Liabilities Following a suggestion that the overall contingent Iiability of the Government could be reduced by reviewing the actual balance outstanding of each guaranteed loan rather than the original loan, research was completed which indicated that the actual balance outstanding under Treasurer's guarantees was only about forty per centum of face value. The matter was to be discussed with the Department of Management and Budget. Maximum Loan Size The Committee recommended that the maximum loan for which an indemnity may be provided be increased to $60 000 and the increase was approved by the Governor in Council in April. Interest Rates With a large sum of money being made available at an interest rate above that which would attract a Treasurer's guarantee, the Committee investigated "limited guarantees" but, due to problems with their practical implementation the proposal lapsed and all loans made available at the higher rate were secured by mortgage insurance from an approved mortgage insurer. Indemnities As the amount of indernnities awaiting execution exceeded the amount available, the Committee recommended that the Treasurer increase the maximum sum available from $15 million to $30 million. After considering the matter of the State's contingent liability referred to above in connection with the guarantees the Treasurer agreed in principle to increase the amount to a maximum set from time to time by the Governor in Council and to recommend that the limit be lifted initially to $30 million. In addition, the Committee considered the methods available for the cancellation of outstanding indemnities after receiving the advice of the Ministry's Solicitor. In response to a request from the Registrar for advice, many societies provided the names of members who had discharged their advance which facilitated the cancellation of a large number of indemnities thus freeing up funds for executing further indemnity agreements.