The Government is initiating a significant overhaul of Kāinga Ora following the release of a report that is highly critical of its financial situation, procurement and asset management.
The Government-commissioned report highlighted the public housing agency’s significant debt, and annual deficits that are forecast to grow to more than $700 million.
Housing Minister Chris Bishop has also announced that the First Home Grants scheme will be scrapped, with applications no longer accepted – effective immediately.
Our Commercial Property team has the necessary experience to assist both developers and Community Housing Providers (CHPs) navigate these changes. We can advise on bespoke social housing leases and social housing developments generally, and are well equipped to act on all facets of housing development from inception to completion. We have recently acted on several different developments throughout the country.
The review
The independent review’s goal was to identify ways to improve Kāinga Ora’s performance and value for money. Also to manage the impacts of Kāinga Ora on debt and OBEGAL – the difference between government revenue and spending, before gains and losses.
When the review was announced in December 2023, Minister Bishop said he was “deeply concerned” about the Crown agency’s financial position and forecasted deficits.
The resulting review was led by former Prime Minister Sir Bill English, supported by investment advisor Simon Allen and strategy advisor Ceinwen McNeil.
Key Findings
The review made two broad findings:
“First, Kāinga Ora is underperforming and not financially viable without significant savings as well as funding and financing changes. Second, the wider social housing system is not delivering the results New Zealand needs, and is lacking in transparency and accountability, coupled with a poor understanding of tenant outcomes,” Minister Bishop said.
Recommendations
The final report provides seven recommendations that propose significant change for both Kāinga Ora and the social housing system.
Cabinet has accepted four of the recommendations immediately:
- 4(a): Aligning contractual arrangements across Kāinga Ora and CHPs.
- 5(a): Refreshing the Kāinga Ora Board.
- 5(b): Issue simplified direction to Kāinga Ora.
- 6: Ministers set an expectation that the Kāinga Ora Board will develop a credible and detailed plan to improve financial performance, with the goal of eliminating losses.
Recommendation 7 provides a timeline for relevant milestones, which has been accepted by the Government.
A new board is expected to be in place in July. Simon Moutter has been appointed as the new Chair, with his term starting on 4 June. He has a wealth of experience as the Chief Executive at Powerco, Auckland International Airport, and then Spark NZ
Consideration is currently underway regarding who the remaining board members will be.
“The first task of the refreshed Board will be to present a Kāinga Ora turnaround plan to Ministers by the end of the year, which focuses on returning Kāinga Ora to financial sustainability and eliminating losses,” Minister Bishop said.
The remaining recommendations due to be considered in August are:
- 1: Consolidate government funding for housing outcomes under the Minister of Housing.
- 2: Minister of Housing directs HUD to become an active purchaser that takes a social investment approach to cost-effectively improving housing outcomes.
- 3: Government policy and investment builds on place based and specialised approaches to increase local decision making.
- 4(b)(c) and (d): Address barriers to increasing provision of social housing, ensure the funding model incentivises delivery where needed and is responsive to the different needs of tenants, and implement alternative delivery models.
- 5(c): Consider options to narrow the scope of Kāinga Ora, including repealing the Kāinga Ora – Homes and Communities Act 2019 and designating Kāinga Ora as a Crown company.
First Home Grants scrapped
Minister Bishop confirmed that changes to the First Home Grants scheme will not impact applicants with existing approvals, and pre-approvals will still be valid for six months from the application approval date.
He also confirmed that the First Home Loan scheme would be retained, saying the evidence they had seen suggests that it is a more effective approach towards supporting buyers over the deposit barrier.
Budget 2024 will allocate $140 million in new funding for 1,500 new social housing places to be provided by Community Housing Providers (CHPs) – not Kāinga Ora. They will be funded by savings found by ending the First Home Grant scheme.
Author: Paige Sullivan
