Minister of Housing Chris Bishop says his ambition for New Zealand’s social housing system is to create a level playing field between community housing providers (CHPs) and Kāinga Ora.
“I don't care who builds social houses as long as they are built,” Chris Bishop said during a speech at Auckland’s Community Housing Aotearoa Conference on Tuesday.
“I am agnostic as to whether those houses are delivered by CHPs or the Government. The simple truth is this, we will not solve our housing crisis by the Government alone.”
CHPs offer long-term social housing via private housing providers. Bishop said CHPs currently operate 13,700 social homes across the country.
In May Bishop revealed Budget 2024 had allocated $140 million to fund 1,500 new social housing places provided by CHPs. This will start from July 2025 as the previous government’s social housing funding finishes in June 2025.
On Tuesday, Bishop said as of October, around 100 social housing places for June 2025 onwards have either been approved or are in the final stages of consideration.
Three new changes to barriers faced by CHPs in the community housing sector were also announced on Tuesday. The changes will help CHPs compete with government housing agency Kāinga Ora for social housing funding.
The changes include making the operating supplement of $70 million, a funding subsidy given to CHPs for new housing developments, available upfront when contracts for new social housing are agreed upon rather than paid out to CHPs over the course of the contract.
According to Bishop, this will mean more community housing projects meeting financing criteria and lead to those projects being done more quickly.
“There is significant interest from private developers and investors in partnering with CHPs to help them deliver and operate social housing,” Bishop said.
The Ministry of Housing and Urban Development has been directed to review the use of leasing to provide social housing in cases where it provides value for money. This will only be available for newly built homes that haven’t been occupied.
The Government will also be looking at changes to contracts for new housing supply to make the revenue stream of Income-Related Rent Subsidies (IRRS) “more attractive” for investors. This includes “exploring” the removal of termination for convenience clauses and extending compensation terms.
Bishop said these new changes would help bring about “competitive neutrality” although it could take some time to implement them.
“I’m being realistic about timelines as politicians always over promise,” he said.
The Treasury and the Ministry of Housing and Urban Development will be providing advice on the changes in the new year, but no time has been set for when the changes will be rolled out.
‘Overcooked’
Bishop said the Government broadly agrees with CHPs on their issues with the Reserve Bank’s risk weight rules for social housing.
Due to banks viewing CHPs as investors, banks tend to lend to CHPs via commercial lending requirements instead of residential. Business lending carries higher risk weights and capital requirements compared to residential lending, meaning higher interest rates.
“Broadly, we agree with you and think the risk weights may be overcooked for lending for social housing,” Bishop said.
He said Minister of Finance Nicola Willis will be requesting the Reserve Bank undertake a review of standardised risk weights, including prioritising work on lending for social housing. (This follows the Commerce Commission's banking market study).
“Over time, and as the social housing sector grows, there is the potential for changes through that review to increase competition and place pressure on the cost and terms of debt financing,” he said, adding banks are not the only source of debt financing for CHPs or their partners.
“In other jurisdictions, financing for the operating phase tends to come from lenders that can be more flexible to meet the needs of the sector, such as capital markets. This is an area where I am seeing a lot of opportunities and potential for innovation.”
‘All talk’
Following Bishop’s announcement, Labour Housing spokesperson Kieran McAnulty said Bishop was “all talk when it comes to housing”.
He said there had been no commitment to build any more public homes, no further support for CHPs and no increases to Income-Related Rent Subsidies (IRRS).
The Ministry of Housing and Urban Development pays IRRS to public housing landlords to cover the financial gap between the market rent for the property and what a public housing tenant pays in rent.
“Everyone was hoping the Government would at least announce it would guarantee loans for the newly established community housing funding agency to make them cheaper. But again, no commitment from the Minister,” McAnulty said.
According to McAnulty, Labour delivered more than 14,000 public homes over the six years it was in Government from 2017-23, alongside the community housing sector.
60 Comments
“I am agnostic as to whether those houses are delivered by CHPs or the Government. The simple truth is this, we will not solve our housing crisis by the Government alone.”
Reading between the lines, "I don't know what to do and there is no plan."
Which is why Aotearoa will never achieve what S'pore or Japan did 60+ years ago.
Both Teams Red and Blue are beholden to neoliberalism so no we won’t ever get anything like what those countries did…
Some scholars argue that Japan's societal values reflect a blend of socialist ideals, particularly in areas such as social / public housing, public transport, healthcare and education, which are viewed as public goods rather than commodities. This has led to claims that Japan embodies characteristics of socialism despite its capitalist economy.
Of course those areas should be viewed as public goods and receive appropriate (and intelligent) government support. The best societies manage to find the right balance between capitalist and socialist principles, properly integrated together. Neither socialism nor capitalism alone can deliver good outcomes across society as a whole.
Japan is very nationalist, but in a way it seems like it has lead to a much more even distribution of wealth. Like Japan's GDP per capita is $56k NZD (2023) and NZ is $82k for the same period (keep in mind this is not evenly distributed in NZ). I visited Japan last year and I couldn't believe we had a higher GDP per capita. Everywhere I went in Japan I got a sense that there was more wealth in the country, and your average seemed to be better off than here quite noticeably. Then I realised, it's because they have a much more even distribution of income than we have here, and so even though it is considered a basket case in terms of slow economic growth now, it's like who cares... I'd rather have a more even distributing existing pie than a growth that benefits a small percentage of people the most.
I'm agnostic, but not in favour of sole Government delivery - sooo, not really agnostic then.
Also, didn't like Govt purchasing privately built units. So, again not agnostic.
Does he know know the meaning of the word? He does seem to have some fixed views on things
"Agnostic" is such a cop out. One option is better than the other. No social housing provider is a charity in that they can afford to loose large sums of money each year subsidising social housing places. So either way the GOVT is paying to cover the cost. Either through HUD funding of social providers or funds to KO.
As a Taxpayer I would far prefer that after all the money has been hosed, we still have an asset at the end of it. Social housing providers is just a black hole of weekly payments for eternity.
When saying who builds them I think the implication is also who owns them in that comment Nzdan.
Yes, the builders are quite often the same but KO has an amazing ability to have their costs even higher than inflated private contract pricing. Yes, KO has paid over the odds to private developers in many instances. That does not make KO better developers.
Are their costs higher because they insist on paying more? Or is it what's being quoted by the private sector and if they want the work done that's the price?
I'm reminded of the CHCH Rebuild, where subbies were putting on a f**k Fletchers tax on their work.
Not giving KO a free pass, but I guarantee you many of these builders would smugly gloat about how they rip off the tax payer.
Can't say I've ever met another tradie who's gloated about getting KO work.
Their costs are higher, because they've got a terrible approach to commissioning and project managing construction. They could write a decent book on how not to build houses.
Having worked on social housing for them, and charitable organisations, there's almost a night and day difference in overall approach. KO will have two extra layers of project management, and considerably more requirement and rules. And they'll be poorly organized and require a good 20+30% more time to do the same task. If a tradie put their standard prices to a KO job, they'll be under water by the time the jobs done.
The charity will be accustomed to doing more with less, and aren't incumbered by governments need for a high degree of compliance, at the sake of expediency.
I have been through two cycles of civil servant incompetence. First in the 1980s and then in the 2020s.
What seems to happen is the politicians want more housing. So the civil servants do full crazy getting it done. Spray money everywhere with no control. Both on their own owned projects and with every dodgy social housing provider they can find. There are no limits and a trail of destruction is left.
I have no faith in the current government department nor in it's selected social providers. Both dodgy and unrealistic as hell.
I spent my time in the 1990s sorting out the mess left by one active guy who set up a trust and sold it masses of rotting unsuitable buildings. He made a killing and the civil servants loved it. They would throw any money he wanted at the project. Madness. In the end we had a sensible activity. It took a dozen years.
I would not go near such again.
I have friends who worked in KO in various capacities through 2021-2022ish and they said that quotes were barely being checked, just approved. The contractors knew this and piled on and on. Now we are in this predicament where everyone expects the same payout and nobody is willing to admit they creamed it unnaturally well for a while and have to come back to reality.
Labour increased the waiting list for those requiring a State House by something like 500%!
The ones that they claim they built was a drop in the bucket compared to the damage they caused.
They also paid far too much for most of them and created so much more debt for the country.
Failure on both counts
Labour did not increase the waiting list, those that wanted a house did. You can't say they achieved nothing just because the net result was a bigger waiting list. They achieved a record housing build that wasn't enough to meet demand. Credit where it's due.
Bishop was on RNZ early in 2023 saying he was going to deliver more social housing than Labour. If he does that, he too can have some credit.
In case you missed it, during that period it was the only way to buy anything. Developments would sell out in days, off the plans, and they were having to stuff people in motels at a much greater expense than just closing their eyes and writing a cheque. In 50 years they'll still be housing people and seem a fantastic deal in retrospect.
I tried to engage people to build me a house in 2021 and they weren't interested because it wasn't big enough to be worth their time.
KO
1. They need to be far less pedantic about their specs. Some are mind boggling when trying to supply warm, dry homes efficiently and cost effectively.
2. They need to be consistent in their demand and even have an over supply at some points would be ideal. The private sector and back scratching takes president over effiency when it goes from feast to famine every 30 sec.
3. The KO and private landlords structure needs to change because at the moment if you become a social housing tenant you are stuck there for life. No private landlord can get a reference from a social housing provider so no property manager can take a tenant or even a chance on one.. if they do the are stuck with them.
4. KO needs to find a way to place consequences in their tenancies. Every other facet of life has consequences but KO you can trash, not pay rent, smoke meth, run as gang pads and "oh the children we couldn't possibly hold the parents to account". Sod nieghbours, expecting better from the parents, some social responsibility for the tax payer supplied housing.
No one in the private sector with any common sense would be building houses to rent out as social housing.
Just not worth the effort for the amount out laid with borrowed money compared to rental return less costs, snd the type of tenant that it often brings!
Why do you think KO are not going to be building like they were, just a very costly exercise.
That is why the private landlords in NZ should be far more respected and looked after better for the service that they are providing in NZ.
I can assure you that it is not as easy as many think it is and Landlords generally deserve the capital gains that they receive or why would they be bothering?
They won't be building like they have because national has removed the funds, even though KO was making shedloads in capital gains.
We would be better off getting people in their own houses rather than being people farmed by landlords.
We used to have almost 75% homeownership, but as finance has become easier to obtained for landlords this has dropped to round 63% percent. You've pushed 600k people out of a home. Respect.
Of course they have removed funds for building as it is not financially fiscal to be building new and making it pay.
That is my point, you would be losing money doing it so that is why private landlords need to be looked after rather than tormented like Robertson did.
Rents are going to increase continuously if tenants are wanting a roof over their heads, our rents are all bring increased and tenants will be happy to pay.
Landlords havent pushed anyone out of a home at all, owner occupiers pay more than investors.
It is still very achievable to own a home in ChCh but so many want more than they can afford.
The heavily leveraged landlords are the ones to be weeded out. Encourages borrowing more (house price go up), rent overly affected by interest rates rather than the home quality, higher chance of tenants having their home sold from under them, and is more likely to be flicked off when economy slows, which is happens to be the worst time for tenants to be forced to move out.
I understand the hoops landlords have to jump through but I've been on both sides and the balance has always been in favour of the landlord. Having a larger tax bill is in no way comparable to facing the prospect of having nowhere to live.
even though KO was making shedloads in capital gains.
Please advise how, if KO overpays for units and housing, and the market drops between when they shell out, and when they actually get a project completed, they have made any capital gain at all. I'd lean more towards capital loss.
The simple truth is this, we will not solve our housing crisis by the Government alone
...unless said Government stops pumping population via immigration.
There is significant interest from private developers and investors
Great that they'll be doing it from the goodness of their hearts and the public won't end up paying for their service.
on their issues with the Reserve Bank’s risk weight rules for social housing
So we could change them to favour owner occupiers over investors too if we wanted to eh Chris. Anything to help grow debt, come on charities, do your bit and leverage up!
We have a problem with social housing as the rent does not cover costs. The 25 percent of income must increase. KO has gone for high cost housing that are costing 1m per build with q 1 percent return and a 6 percent finance cost. Every house build costs 1000 a week in finance for ever.
There is a reason for the corporate finance is that with social housing the government pays the 75 percent above the income. Someone on 1000 an be in a 800 a week home paying 250 a week with 550 week govt top up.
Social housing get govt subsidy and market rent guaranteed by govt
Zoom out and see the whole picture!
interesting thing about social housing is that it is a way of avoiding more costs down the road, especially health from living in poor conditions, and precarious renting, forcing people to relocate. It sounds like contract management has been an issue, but in the context where they were trying to get jobs completed in a time when overall services demand was high, and materials pricing was highly unstable, they have delivered some high-quality builds (not in terms of fit out spec like fancy kitchens but actual construction, insulation etc. ) that will mean lower running costs, and better living conditions than most renters ( or homeowners who refuse to invest in their own homes).
with the current doldrums in construction, if KA was carrying through on the previous build plan the average build cost across the whole portfolio would be coming back down, instead we have killed it off and now we are back in the boom and bust cycle, housing overcrowding, and more people on the streets, in the hospital wards, or in the cells.
Having witnessed first hand the absolutely stupid prices KO were paying for houses on the market, the private sector couldnt possibly do any worse, and the competition between them should help keep prices down. KO was out of control, and its highly likely that it will be near impossible to get rid of the thousands of idiots within the organisation that enabled that ridiculous overspend they have been on for the last 6 years.
Hi KW, sure they were trying to buy at the wrong time, but they were buying specific locations, and able to overpay to be able to knit together sections and make progress on increasing density in these locations that would not be happening if it was a private developer. political pressure was to build more housing at scale and to do this you need the land. Sure a better option would have been to follow the Singaporean model and compulsorily acquire the land, and if Labour had the cojones in their last term when they had a clear parliamentary majority perhaps they could have passed such a law? imagine the pearl-clutching then!
https://www.nlb.gov.sg/main/article-detail?cmsuuid=153040f3-9475-444a-b…
https://sso.agc.gov.sg/Act/LAA1966
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