Mounting opposition to Govt plans to sell off up to 2000 state houses after Salvation Army pulls out of negotiations to buy

The Government's trumpeted "social housing reform" policy is coming under fire.

The Salvation Army has dealt a big blow to the proposed plan to sell up to 2000 state houses this year by saying it won't be a buyer. The Labour Party says the sale plan is "turning to dust".

Finance Minister Bill English, however, denied on Radio New Zealand today that the withdrawal by the Salvation Army would torpedo the Government's plans and he said the Government would be going into more detailed discussions with groups over coming months about the proposed housing sales.

But later in the day the group representing community housing groups put out a statement saying the government focus needed to shift from asset sales to investment in families and healthy communities. And the Property Institute urged a rethink on the Government's policy.

Community Housing Aotearoa director Scott Figenshow said the Salvation Army’s announcement was no surprise. 

“Many in the sector have been saying that the only way they can make the sums work is if they are transferred at close to nil value. This will provide equity to the sector from which it can leverage regeneration, and deliver better outcomes for tenants and families.  Our members are very concerned about the families they work with, and are only interested if they can do a better job than HNZC.

“At the moment the sums simply don’t stack up.  Last month the Government confirmed $1.2 billion of deferred maintenance on the state housing stock.  Why would a provider want to purchase a liability?”

'Destined to fail'

Property Institute chief executive Ashley Church said that the planned Government policy has ‘tremendous merit’ but that the Salvation Army rejection should not come as a surprise – warning that the program is destined to fail if the Government presses ahead and tries to implement the policy it in its current form.

He says that social agencies will have concerns around tenancy issues, maintenance obligations and the cost of servicing loans and that these concerns will be enough to scare off the very agencies that the Government will want to partner with.

“If a large, credible, social agency like The Salvation Army thinks that the current proposal is too risky – it’s unlikely that any other group is going to be any more willing to pick it up”.

A statement from the Salvation Army said it did not believe the lives of tenants would be sufficiently improved by such a transfer. Neither did it have the expertise, infrastructure and resources to successfully manage any social housing transfer of size.

'Robust study'

This decision came after the Army undertook what it termed "a robust external study" testing its capacity to become a major social housing landlord.

The Salvation Army’s social housing spokesperson Major Campbell Roberts, said the organisation had "taken very seriously" the opportunity to be the recipients of a Government housing transfer.

"However, we are not convinced that on our own The Salvation Army can offer a service that would markedly improve the lives and living conditions of State tenants."

“The Salvation Army is supportive of the Government’s intentions to have community organisations involved in the management of social housing, but at the moment it is beyond our capacity to become involved. People’s lives and futures are our priority, and we must do the right thing by them.”

Pursue other models

Roberts said the organisation was keen to pursue other models of housing partnerships between itself, Government and other groups—including Iwi—that could potentially provide additional social and affordable housing.

It was also open to providing supportive community services for other social housing providers.

“We would welcome the opportunity to discuss this further with Government and other possible providers,” Roberts said.

He said the Salvation Army would continue to provide and expand its social housing services.

It currently delivers a range of social housing services in New Zealand, including 293 houses for elderly people, 198 supportive accommodation beds, and seven emergency houses.

In partnership with Government and other community housing providers, The Salvation Army has built 39 homes for the elderly in Mangere and West Auckland.

It is also in a housing development partnership in the Christchurch suburb of Hornby with four other community organisations. As part of this development, The Salvation Army will provide an additional 10 houses suitable for families. The Salvation Army also has plans to develop further social housing in Auckland.

A complicated policy

The proposed sale of state houses has looked complicated from the start. I tried to get to grips with the issue in this recent opinion piece.

Prime Minister John Key gave some broad brush statements of intention on the state asset house sale programme in a speech at the back end of January, followed up on the same day with a joint announcement from Key and Social Housing Minister Paula Bennett and another statement from Bennett and Deputy Prime Minister Bill English.

Then there was some information on social housing numbers and a question and answer paper.  Additionally there's also a series of Cabinet papers, with this one in my view, providing the best summary, while there's also this "engagement presentation" outlining some of the proposed steps.

This has been the Government's proposed timetable:

February-March: public engagement on social housing transactions

Late March-early April: selection of specific transactions

April: Information release about Ministry of Social Development’s social housing purchasing intentions

April-May: regional consultation on specific transactions – "this is where we talk to you about your rights and interests"

July: market sounding – testing regional interest

September: Expressions of interest

Late 2015-mid 2016: request for proposals→preferred bidders identified

November 2015: Cabinet review of progress and next steps announced

Labour Party leader Andrew Little says the announcement from the Salvation Army is a "devastating blow".

“The Salvation Army has gone through the Government’s policy with a fine tooth comb and found it to be fundamentally flawed.

“They don’t want a bar of it because they don’t believe it will deliver a better service for New Zealand’s poorest and most vulnerable families.

“This underlines that for National this has all been about ideology. When Labour asked Social Housing Minister Paula Bennett for the evidence behind the policy, she replied that no such documentation exists.

“The Prime Minister earlier said he would be ‘amazed’ if the likes of the Salvation Army were hesitant to get involved if they saw a way to make money off the investment. This shows how badly John Key misjudged his state house sell-off and the Salvation Army.

“If the Salvation Army doesn’t have the resources or the capacity to take over Housing NZ’s responsibilities, who does?

“The Government’s housing policy is a fiasco. House prices are skyrocketing, first homebuyers are locked out of the market and not enough houses are being built.

“And to add to National’s list of housing failures, its big plan for state housing is now turning to dust,” Little said.

Here is the statement from Community Housing Aotearoa:

The group representing community housing providers says the government focus needs to shift from asset sales to investment in families and healthy communities.

Community Housing Aotearoa director Scott Figenshow says the Salvation Army’s announcement today that it no longer looking at purchasing state houses is no surprise. 

“Many in the sector have been saying that the only way they can make the sums work is if they are transferred at close to nil value. This will provide equity to the sector from which it can leverage regeneration, and deliver better outcomes for tenants and families.  Our members are very concerned about the families they work with, and are only interested if they can do a better job than HNZC.

“At the moment the sums simply don’t stack up.  Last month the Government confirmed $1.2 billion of deferred maintenance on the state housing stock.  Why would a provider want to purchase a liability?”

Scott Figenshow says it’s a sign of maturity for the sector that the Salvation Army had the resources to conduct a very thorough analysis. 

“There is enough information now for the government to adjust its financial approach to one based on delivering good quality homes and strong, healthy communities,” he says.

CHA’s members have been saying for some time that they are interested in delivering improved outcomes for families and communities. 

“What the sector sees is it growing from roughly 5,000 homes to say 60,000 homes – and as a sector, it would be of equivalent size to Housing New Zealand. That would double the amount of social and affordable housing across NZ.  The community housing sector would be delivering across the housing continuum – everything from emergency housing, to secure tenure, affordable rental with wrap around services, and on to rent to buy and shared homeownership.”

In order to achieve that the Government needs to partner with the community housing sector, and that means investing in the sector.

“In Housing New Zealand’s Statement of Intent, it will pay $112 million in income tax and $108 million in dividend to the Crown in July. The government says it’s not about the money, so why can’t that $220 million be invested into growth of the community housing sector, each year for the next 20 years?” he says.

“We need a partnership with government based on delivering better outcomes for families and communities.  That is the dividend we should be measuring, not a financial dividend to the crown.  We need certainty of a 10-20 year pipeline of resources – including for support services- that we can match in order for partnerships to work.”

Scott Figenshow says Budget 2014 did not provide any funding to increase affordable or social housing supply. It introduced $10 million for the year to start 1 July 2015- $10 million a year reduced from $47 million a year. We have not heard of confirmation how this will be delivered.

There was also a promise that instead of capital grant funding the community housing sector would have access to both Income Related Rent and capital in the form of stock transfers. 

“While access to Income Related Rents has occurred, there have been no stock transfers at all. And while we do see the Ministry of Social Development trying to modify the income related rent subsidy to work better, it will need matching from other capital funds to work, especially in high cost markets like Auckland,” he says.

Scott Figenshow says what is required is a cross party agreement on housing, and a 20 year strategy to back it up.  “We need to see a community housing sector of equal size to HNZC – not a reshuffling of the current houses.”

Here's the media statement from the Property Institute:

Property Institute of New Zealand Chief Executive, Ashley Church, is urging the Government to review the way in which it proposes to transfer state houses to the voluntary sector following a decision, by the Salvation Army, not to participate in the program.

Earlier this year the Prime Minister spelled out plans to sell up to 8000 state houses to approved community housing providers or iwi by 2017 in order to:

·      increase the number of social houses provided by either Housing New Zealand or other providers

·      ensure that those houses better meet the needs of tenants

·      deliver Government assistance in a way that stimulates housing supply

·      help more New Zealanders into housing independence when they are capable of making that transition.

But the Salvation Army will not be taking part in the program citing a lack of "expertise, infrastructure and resources to successfully manage any social housing transfer of size".

Mr Church says that the policy has ‘tremendous merit’ but that the Salvation Army rejection should not come as a surprise – warning that the program is destined to fail if the Government presses ahead and tries to implement the policy it in its current form.

He says that social agencies will have concerns around tenancy issues, maintenance obligations and the cost of servicing loans and that these concerns will be enough to scare off the very agencies that the Government will want to partner with.

“If a large, credible, social agency like The Salvation Army thinks that the current proposal is too risky – it’s unlikely that any other group is going to be any more willing to pick it up”.

However, Mr Church believes that a few tweaks to the policy would address the concerns of community housing providers while allowing the aims of the Government to still be met.

He is proposing:

·      that the Government slow down the sale program and first allow community housing providers to enter into ‘Management Contracts’ - with clear protections around property maintenance costs and unreasonable commercial risk.

·      that both parties agree to a timetable for the future transfer of social housing at an acceptable price and in a timeframe within with the community providers are comfortable.

·      that expertise, infrastructure and resources are shared between Housing New Zealand and community housing providers until such a time as community providers are ready to assume overall responsibility for their portfolio.

Mr Church says that these changes would give community housing providers confidence and certainty around the ‘riskier’ aspects of the program and would allow them to take possession of these properties at a time of their choosing.

“The risks would be largely removed and the Government would still achieve its social housing goals”.