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YPC First Farm Buyers Guarantee Scheme

 

Purpose:

This document exists to seek the endorsement and approval of the AgForce Farmers Board in relation to the First Farm Buyers Guarantee Scheme, a policy initiative developed by the AgForce Young Producers Council. 

Appendix:

  1. AgForce YPC First Farm Buyers Guarantee Scheme
  2. National Housing Finance and Investment Cooperation: First Home Guarantee
  3. National Housing Finance and Investment Corporation: First Home Loan Deposit Schem


Policy Position:

The AgForce Young Producers’ Council is addressing several issues impacting young, emerging producers in agriculture within Queensland. One of the largest barriers to entry for emerging primary producers, shown in both qualitative [3] and anecdotal reports [4] is securing access to appropriate levels and forms of capital. Agriculture is intricately linked to global food security and the environment. With a global population of 7.7 billion, and a projected increase of over two billion by 2050, there is a high and growing demand for food and fibre production. Given Australian farmers manage 70% of Australia’s land mass, and 88% of Queensland’s land is used for agriculture and food production, many households depend upon agriculture for their livelihoods, making investing in agriculture an effective way of addressing food insecurity, environmental sustainability, and economic stability.

According to ABS data, the average age of an Australian farmer is 58 years old, with the ageing farming population often dependant on the farm for income. For the past two decades, the value of farmland has been on a steady rise, with specialist lender Rural Bank calculating the compound average annual growth rate at 7.5%. The shift towards aggregated properties also makes it difficult for first-time buyers to find a smaller property. Since 1990, the average value of farms, including land and fixed improvements, has increased by over 220%, while the number of farms under $500,000 has decreased by 54%. 

Together with the rising age of the Australian farmer, rising land values, lack of achievable financial mechanisms and access to capital support, it is becoming increasingly difficult for emerging farmers to purchase and operate agriculture land, even with family succession on the horizon. Rural communities are becoming adversely linked to the inability to retain young, emerging farmers within rural areas, and a large migration to urban areas is largely prevalent.

Issue:

Young, beginning farmers oftentimes lack the requisite funds to establish a farm business, and many find it difficult to satisfy current commercial and government backed lender guidelines to access current lending programs. Difficulty securing standard deposit funds or equity is often cited as the most prevalent barrier to entry faced by emerging primary producers.

Whilst the federally funded Regional Investment Corporation (RIC) has been a welcome step in improving access to low interest finance, guidelines are extremely difficult to satisfy, along with raising an adequate deposit amount.

Current programs and guidelines require urgent review, and do not cater for agisting and/or share farming operations to allow an injection of fresh young talent within the agriculture sector. Likewise, the Queensland Government funded First Start and Sustainability Loan has an annual budget of $120m, with currently only $22m (18% of the total annual budget) drawn down for successful applications. This further solidifies the view that such programs are overwhelmingly underutilised due to unachievable lending terms, resulting in programs left unobtainable by the majority.

There are multiple examples of why both the RIC Agri-Starter Loan and Queensland Government First Start Loans require urgent further enhancing to increase successful application approvals, as currently the programs are widely deemed to support those who are already well established with equity, financial backing, or family involvement.  This further inhibits and creates a significant barrier for first start farmers seeking to enter the market, or further expand their size once an established foothold has been accomplished. As land values have increased at a rapid rate in recent years, it has had the effect of pricing out new entrants, particularly affecting the next the generation as the increase in land values have far exceeded the ability to gain capital. Therefore, to keep young people and young families in regional Australia, a new financial model is urgently needed to ensure the viability of regional and rural communities, and to ensure the continued investment in Australian agriculture.

Solution:

The AgForce Young Producers’ Council seek to determine reasonable action to address the above issues in providing viable, fit for purpose financial assistance to emerging primary producers to enable significant contribution to global food security, environmental sustainability, and economic stability through the First Farm Buyers Guarantee Scheme.

Refer appendix 1 - First Farm Buyers Guarantee Scheme.

AgForce YPC actions to date:

The YPC have completed the following actions to date:

  • Adopted the First Farm Buyers Guarantee Scheme as a cornerstone policy priority for the Council.
  • Submitted a recommendation to the QLD Treasurer for this issue to be addressed in the 2022-2023 state budget.
  • Raised the issue and policy priority with the office of Mark Furner, Minister for Agricultural Industry Development and Fisheries and Minister for Rural Communities.
  • Developed a national policy paper addressing the barriers to entry for first start farmers through the NFF Young Farmers Council, in collaboration with NSW Young Farmers Council.
  • Will engage with DAF to request a review of the QRIDA First Start Loan guidelines, program, and policy, and discuss the lack of drought and disaster support mechanisms for agisting and leasing primary producers.
  • October 2023: Met with national policy advisors at Parliament House to discuss barriers to entry for first start farmers and raise solutions set out in the NFF Barrier to Entry policy paper.
    • Increased funding for financial upskilling for emerging primary producers
    • Review of current state and national guidelines for First Start Farm government lending.
    • Develop an equity scheme backed by Government (AgForce YPC First Farm Buyers Guarantee Scheme)
  • October 2023: Secured endorsement and approval from AgForce Farmers Board to adopt the First Farm Buyers Guarantee Scheme as an AgForce proposed policy position.

References:

Appendix 1

Proposed Policy Initiative

First Farm Buyers Guarantee Scheme

Policy Objectives:

Develop a scheme to assist emerging primary producers to purchase their first farm, addressing the chronic barrier to entry - access to capital.

Assist in the investment, growth and development of regional Australia and rural communities for the betterment of our state and nation, while actively contributing to global food security, environmental sustainability, and economic stability.

Policy Priorities Framework:

The AgForce YPC proposes the First Farm Buyers Guarantee Scheme (FFBGS).

Specific Policy Recommendations for the First Farm Buyers Guarantee Scheme:

A government-backed guarantee scheme to assist in the shortfall in equity required by commercial/government lenders, less any individual equity deposit contribution to assist in the purchase of rural property for use of primary production.

WHAT IS IT

An Australian or Queensland State Government initiative that aims to support eligible first farm buyers to purchase a farm, for use of primary production.

  • A guarantee scheme administered by lenders either, Queensland Rural and Industry Development Authority QRIDA, the Australian Government: Regional Investment Corporation (RIC), other body (Scheme) on behalf of the Government.
  • Guarantees limited to a set number of places (10,000 places, to be determined based on appetite of Government Guarantee)
  • Available rolling 3 years, reviewed every 12 months.


HOW IT WORKS

  • An Australian Government or State Government scheme. The FFBGS is designed to assist emerging primary producers to purchase their first farm with a combination of a minimum deposit provided by the applicant and a deposit amount guaranteed by government, to fund a rural property purchase with a participating lender, (lender’s credit criteria to apply).
  • The Guarantee is not a cash payment or a deposit for a farm loan, simply a guarantee, hence no money Is extended. 
  • Eligible regional first farm buyers must have resided within regional, rural or remote Australia/Queensland during the preceding 12-month period. Rural and remote definition to satisfy Australian Standard Geographical Classification System - “encompasses all areas outside Australian major cities.” 
  • Applicant to be working within primary production or adjacent primary production fields directly related to primary production. The adjacent primary production fields such as aviation, agronomy, agent etc is due to the necessity to work outside of primary production eg “off-farm income” in order to raise a viable deposit.
  • Equity such as unencumbered livestock, gifts, and assets permitted as deposit funds.

WHO IS ELIGIBLE

  • Sole Traders, Partnerships, Companies, Trusts
  • Applicant must be owner/operator.
  • New entrant, first farm/land buyers
  • New loans, for purchase of agricultural land to be used for primary production.
  • Show 3 years’ experience operating a profitable primary production business or showing the potential to be profitable or generating “off-farm income” through agriculture relevant industries and services to agriculture. 
  • Provision of acceptable budgets, detailed business plan, resilience plans, etc. 
  • Adequate funds for working capital, plant and equipment, and over-draft facility.
  • External non-primary production/off farm income permitted.

KEY FEATURES

  • Maximum Lending, up to $5 million dollars (indexed annually to remain commercially relevant)
  • Applicant to contribute 5% deposit, with remaining 35% guaranteed by government (if 40% deposit amount required)
  • Loan Terms, up to 30 years.
  • Maximum Deposit Guarantee, up to 35% (pending lenders equity deposit criteria)
  • Loan provider: Government lender, RIC, QRIDA, other.
  • Primary Production experience or working within adjacent agriculture industries.
  • Strong business and cash flow planning skills
  • Resilience and preparedness planning
  • One time loan facility: Option to exit the scheme, once refinanced or land sale.

ELIGIBLE PROPERTIES

  • Agricultural land, suitable for and used for primary production as a going concern.

PROPERTY PRICE THRESHOLDS (if applicable)

  • Limited to the lending threshold of $5 million dollars

DEPOSIT AMOUNT PROVIDED BY APPLICANT

Benefits of the Regional First Farm Buyers Guarantee Scheme

  • Regional investment by Government into regional areas and communities
  • Aligned to Regional Development programs to divest populations out of urban to regional areas.
  • Transfer of knowledge from older generation to new entrants, ensuring preservation of regional area knowledge.
  • Supports new generation of farmers and agricultural producers that are connected to regional areas at grass roots.
  • The Government guarantee of first farm deposit difference, up to rural equity loan deposit criteria
  • Builds on the First Home Buyers Guarantee Scheme (FHBG), refer to appendix 2 and 3.
  • Excludes greater capital city areas, must meet definition of regional area, (refer appendix 1)
  • Honors the responsible lending obligations of commercial/government lending institutions.

Definitions:

What is a regional area?

Definition 1

To confirm whether you live in a regional area, and where you may be able to purchase, you can access the Regional Checker at nhfic.gov.au or designated regional areas for home dwelling: Home Guarantee Scheme regional checker (nhfic.gov.au)

A regional area is defined as: the Statistical Area Level 4 (ASGS SA4 2016) areas in a State or the Northern Territory that are not a capital city of that State or Territory; and Norfolk Island; or the Territories of Jervis Bay, Christmas Island or Cocos (Keeling) Islands as defined in the version published by The Australian Bureau of Statistics (ABS) in July 2016.

Definition 2

Regional Designated Areas, by postcode, as defined by Department of Home Affairs: Designated regional areas (homeaffairs.gov.au)

The regional definition is comprised of 3 categories and offers regional incentives for skilled migrants who migrate to locations classified as Category 2 'Cities and Major Regional Centres' or Category 3
'Regional Centres and Other Regional Areas'

  • Category 2 – 'Cities and Major Regional Centres' of Perth, Adelaide, the Gold Coast, the Sunshine Coast, Canberra, Newcastle/Lake Macquarie, Wollongong/Illawarra, Geelong and Hobart
  • Category 3 – 'Regional Centres and Other Regional Areas (Include Designated regional area postcodes as per below table).


 


 

 


 

 

 


 

 

 


 

 

 


 

 

 


 

 


 

 

 



 

Keywords: Policy, Position, YPC, First, Farm, Buyers, Guarantee, Scheme, FFBGS, Young Producers Council,