Former Prime Minister Bill English has been put in charge of reviewing the Crown housing agency Kāinga Ora’s finances and operations.
The National Party promised an independent review of the agency’s financial situation, procurement and asset management, as part of the new Government’s 100-day plan.
Housing Minister Chris Bishop said he was “deeply concerned” about Kāinga Ora’s operating deficit, which was $520 million last year and is forecast to grow.
“This deficit has a direct impact on OBEGAL and continues to put pressure on the return to OBEGAL surplus,” he said in a statement.
Kāinga Ora is the country’s biggest landlord with $45 billion in total assets, annual expenditure of $2.5 billion, and $12.3 billion of debt.
Bishop said ministers had received “worrying advice” about the financial situation of Kāinga Ora, since taking office in November.
“We are not releasing that information at this time as it is commercially sensitive, but it confirms that an independent review is the right course of action at this time”.
English was National’s finance minister and was responsible for Housing New Zealand between 2008 and 2016.
He will lead the review with former investment banker Simon Allen and engineering consultant Ceinwen McNeil.
“It is critical that Kāinga Ora is focused on efficiently building social houses for people in need while also delivering value for taxpayers’ money, and this review will be able to provide recommendations to ensure that these objectives are being met,” Bishop said.
In the year ended June, the Crown agency invested $3.5 billion, completed 2,893 homes, and had another 6,600 under construction.
Gareth Stiven, Kāinga Ora’s finance manager, said construction and maintenance costs had increased faster than rental income, putting “considerable pressure on our budget”.
The agency had developed a more efficient process to cut costs and was working on its own review of its asset management and maintenance system.
House prices have fallen significantly over the past two years and the value of Kāinga Ora’s portfolio dropped to $45.1 billion, from $48.8 billion in June last year.
Still, it had $30.3 billion net assets and was looking to take on additional debt.
“We are monitoring our capital position alongside our operating environment to ensure the pace of our investment is manageable within our overall financial parameters,” Stiven said.
S&P Global Ratings and Moody’s have both given the Crown agency an AAA rating within the past year, but only due to it being underwritten by the New Zealand Government itself.
Kāinga Ora’s “stand-alone” rating from S&P was downgraded to an A- in February and noted its gross debt and interest costs will grow substantially by 2025.
“In our view, the ratios are generally weakening as debt and interest expenses rise and EBITDA compresses,” the rating agency said
78 Comments
We might find out just how must damage they did when competing for limited resources.
There $/sqm were massively inflated, well above what they just could have purchased the end product for.
Will all the c-suite be axed for incompetence? Probably not because Labour were signing it off.
This was purchased as "end product"
https://www.stuff.co.nz/national/131135304/unique-purchase-sees-kinga-o…
Agree with the sentiment. To be expected. Plentiful precedent. For instance post 2017 the good Dr Cullen on tax. Used to enjoy junket actually. Came out in a big panin the dining hall at school. Nutmeg sprinkled on top, haphazardly on which detectable, multitude of finger and thumb prints. Usually accompanied by preserved plums. No one died though.
Jobs for the boys alright. English spent most of his time parliment trying to sell off the nation's social housing, so you already know what his conclusion will be.
I'm always far more impressed when the government reaches across party lines for such appointments, e.g. labour's use of Boldger.
Of all the people they could have picked, I'm glad it's Bill.
He developed a social conscience, and was pulling the right left, especially towards the latter part of his long tenure.
Also, if you want to see Bill English being punched, you are welcome.
Bill English vs. Ted Clarke (Fight For Life Boxing 2002) - video Dailymotion
While I often agree with you, in this statement you have shown the quintessential kiwi flaw in our mentality. We love the idea of being charitable and housing those in need, but only as long as it isn't next door to us. This, in turn, comes back to the expectation of never ending capital gains. Wouldd you think differently if house prices were flat for the last 20years I wonder?
A good friend of mine worked for KO until about a year ago. $120k per annum to try and appease disgruntled neighbour's once they were told what was about to be built. The developments already had consents before the neighbours were informed, so literally no benefit to anyone.
That particular friend couldn't stomach it and now has a job that actually does some good.
I couldn’t care. Either step up and treat the house and neighbours with respect or piss off. Live under a bridge, buy a tent. Got kids then the children should be uplifted.
Intergenerational use of a house needs to stop. It’s a short term fix for emergencies. But hey, got 3 kids and you’re not working, pop out a 4th and just get some more money courtesy of me and others who take self responsibility as a moral and civic obligation.
Very kind. But as Te Kooti will tell you ‘I’m a POS…..racist.’
Too many skeletons in my closet.
NZ is screwed by one simple thing. A lack of personal and social responsibility. The damage and costs incurred by a minority strains our fabric-social welfare, judicial etc.
It comes back to the post WWII recovery period where there wasn't govt handouts and people had to band together to prosper. Volunteer work was common, community engagement was high and this was the norm. Today we have a society where we don't have to interact with others i person if we choose not to, we have technology that has lessened the attention span of a generation or more and results in higher levels of anxiety, depression, and withdrawal from society, as well as mass consumerism being rife and seen as an achievement. What we need is national pride and identity that has taken a large hit since 2020.
Maybe less landlords and higher house ownership levels would help? Why would people treat their neighborhood or house with respect if it is transient and exists to line the pockets of the already wealthy.
Yet, all over this forum people pat themselves on their back for buying up property they don't need, to make tax free capital gains on a GST free service, while locking others out of home ownership.
We want people to take ownership of their neighborhoods, but still pay rent, allow periodic inspections of their bedroom, and leave their home when we say.
Maybe lets buy the nice big new ferry for NZ that wont cause a looming maritime disaster and let the landlords go without their tax relief dignity for a couple of years?
I'd have to agree. More home ownership at affordable levels means more affordable to have a family, means more families able to provide better for themselves and their children and more community activity for the kids. I'd hate to be turfed out of a rental every year because the landlord is selling up or 'selling up'. The stress, the insecurity, the impact on the kids etc.
I wouldn't necessarily have them living under a bridge. But if someone is that much of a scum bag they're evicted from a KO property, the lowest rung in society, maybe we need to house them in some semi-detached purpose built facility next to prisons.
Build them cheap from shipping containers. Communal kitchen, bathroom, toilets. Wouldn't force them to live there, but "here you go here's your new home". Either like it or here's a tent. Give society a break from these buffoons.
Ah, so house all those poor people with anti-social tendencies together in one place, with unhealthy housing. Gotcha.
For every time we look at our politicians, and think they are a bunch of dunce's that can't see predictable effects of their actions, remember, it could be worse, it could be this guy.
How about we move some in next door to you then? Like the Nomads gang member down the road from me. Thankfully far enough away that if we're inside the house we can barely make out the shouting at any time of the day, and the constant starting up/bouncing off the rev limiter of his clapped out Harley Davidson.
But we do frequently witness him hoofing it along at, if I were to guess, 90 - 100kmh + in his Nissan Prairie. You're really advocating for hard working people to put up with that bullshit where they live? All evicting him will do is move the problem to someone else's neighborhood.
Yes it is. But doesn't it come with a bit of responsibility too? I suppose if we put all of the individuals who struggle to act in a socially responsible manner in the same KO development, it eventually becomes a fast-track to prison.
How then, to teach these individuals about their responsibilities without removing their rights?
"Adequate" housing is a human right under the UN Universal Declaration 1948, which NZ supported. No one then defined what was adequate & global stds varied immensely, as have NZ accommodation changes over the last 75 years.
Since then the world population has trebled.
And there is no one in NZ that doesn’t have a right to housing morepork. I think you are not differentiating between the right to a house, and not being able to afford one. Having the right to housing doesn’t imply that someone else has to pay for your house. Doh.
They need to set up a tip line, so we can call and tell them about the obscene amounts of money that KO overpaid for houses and land. I've got a few stories.
I think KO has a mission to install as many drug addicts and gang members in to prime housing in wealthy suburbs in the belief that this will enhance "equality of outcomes". It is not an efficient use of taxpayer money.
First off, there are more social development sites in poorer areas than wealthier areas, so any perception of undue placement is just near-sightedness.
Also, If you think they are genuinely acting with malice - have a read. Hanlon's razor - Wikipedia
Is it possible that KO housing whilst based primarily in lower socioeconomic deciles by absolute number, is actually over represented in middle-upper income areas ie if 10% of suburbs are ‘wealthy’ do KO have a heavier weighting here? Premise not statement.
KO have been clear they want to integrate tenants into neighbourhoods. Porirua is already a slum maybe KO are sharing the love and becoming upwardly mobile.
Possible, but not accurate.
The previously available maps of HNZ sites (there was a Linz link floating around) showed they are 10:1 more predominant in poorer areas, by any measure. There was a rare sprinkling in upper (and even middle class) areas, and huge swathes in poorer areas.
This is the case for at least Wellington and Auckland.
PS - Really keen to get feedback on my earlier question to you about any societies that actually did well removing the social safety net.....
There aren't any.
But sometimes it's hard to filter - the histories are mostly about the Elite, and written for, if not by, them.
Then every now and then, there a Bastille-storming. Or a MAGA. Or just riots. Beyond a certain point, the wealth-pump goes into reverse - but the Elite seldom anticipate that.
Wrong, they have the gargantuan task of discovering all the excess spending by the previous government which was let go too far and now they have to reign it in. You see it in business all the time with larger organisations. Costs trend up over time until the clients or providers get a crackdown then costs drop immediately to manageable levels and over time they creep up as providers/clients find ways to invoice that doesn't get caught, rinse and repeat. Happens across all govt departments really, however with the huge increase in land and building cost accompanying all of this, this is why they have to reeeally crack down and demand value for money.
The housing market is driven by the money which the banks create as credit and then lend out as mortgages. Around $350 billion created by them out of thin air and lent out on housing. Money Creation in NZ https://www.rbnz.govt.nz/-/media/518b0156a77949d08cfee13723f98974.ashx
I would consider the land and building cost for KO to be the biggest factor, let alone the level of staffing and salaries they were dishing out over the last 3 years (have friends who worked there in 120-150k roles, left as they got bored of the lack of challenge despite the salary). The level of credit creation isn't the primary factor in land cost which have increased exponentially for a variety of factors.
watched a podcast where BE said if we don't get our policies right on housing and lower the entry cost for owner occupiers then it is inevitable that we will end up with a capital gains tax as the amount of people that see the system is unfair grows to outnumber the owner class, i thought we got close this election so i am guessing two more elections as auckland already contains the lowest number of OO and is the biggest voter base. it always amazes me when right wing politicians leave the system suddenly move left or are they just showing their true nature and don't have to worry about getting votes anymore.
What most folk don't realise, is that energy underwrites society.
And the quality of that energy, is diminishing.
So housing will be valued, more and more, by how energy-efficient it is - probably how good it is in passive-solar terms. Brick and tile don't do well in that regard, typically.
I had the frustrating experience of ending up in a bidding war with Kāinga Ora for a family home we were keen to buy. They had no issues going above market valuation which was hugely frustrating as my tax dollars were being used to outbid me. They should have no ability to offer above market valuation.
That's not how a governments finances actually work despite the constant misinformation that we are given. Taxation doesn't finance anything, it only returns money back to the government to be cancelled after it has been spent. We spend the governments money and it doesn't spend ours. If you are American where do you suppose that all of those trillions of US Dollars came from but the government itself and the same with the NZ Dollar, it comes from the government when it spends and makes payments and so your tax dollars were not outbidding you.
Levy Economics Institute, can taxes and bonds finance government spending? https://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-…
Kainga Ora will be sold. The outcome is assured.
National and ACT didn't get all those 'donations' from real estate interests for nothing. This is probably the worst kept secret among National and ACT policy makers ever. Just about everyone knows.
Enjoy your tax cuts. Once again, the poor will pay for them.
Bishop said ministers had received “worrying advice” about the financial situation of Kāinga Ora, since taking office in November.
“We are not releasing that information at this time as it is commercially sensitive, but it confirms that an independent review is the right course of action at this time”.
I call b.s. Bishop.
The fact that you are not releasing anything to confirm your maths - which has been proven wonky, repeatedly! - simply confirms it.
There are three fundamental flaws in how Kainga Ora operated.
1) Public entities are less efficient than private ones, especially since the economies of scale which you would think would mean they are more efficient is actually a U-shaped curve and not linear, ie after a certain point size becomes less efficient.
2) As others have pointed out, they were just in competition with every other private builder for a limited resource and they had an open checkbook.
3) Since the cost of living is not enough to cover an increasing number of people's living costs, including housing for those in lower economic cohorts, regardless of being a private or public landlord, then a subsidy is needed to bridge the deficit. And of course, Kainga Ora's main focus is this demographic.
Thus the question that Bill English will be looking at, is not that there is a deficit, but how big should it be per unit built?
It's for other parts of the economy to be working well enough that the total number of houses required to be built by Kainga Ora is as low as possible, and this also includes housing that is needed to be supplied by councils and 'not-for-profits' (which is an oxymoron).
I guess back in the day the government actually Built the house, now they have hundreds if not thousands of staff pushing paper around trying to work out where, how to build the house, then they hire a builder after the paperwork has changed hands thousands of times to do the work. Too many middle people, the private sector cuts these out as quickly as they can or they would'nt survive.
That's been the philosophy of the last forty years, to get the government out of doing anything for us and then the free market will then solve all of our problems, the trouble is that it hasn't worked and now the new government seems preoccupied with continuing this failure.
Meanwhile, back in reality...
https://twitter.com/musicalchairs14/status/1728870962022822244
Means little unless you factor in the full context. For example, before the GFC unemployment was 3%. From 2008 to 2015 unemployment peaked at 7% and stayed consistently above 5%. So the % of public sector jobs would increase as ratio of total jobs IF it's the private sector laying people off.
Meanwhile, we've gone from 5% UE in 2016 to 3% in 2022, and yet that public sector % graph is still spiking up. Which suggests the public sector hiring frenzy is likely soaking up unemployment?
https://www.macrotrends.net/countries/NZL/new-zealand/unemployment-rate
I looked KO’s annual report a f by ew years ago. I added total declared rent plus total annual subsidies just for income related subsidies then divided that figure by the number of their rentals. It was easy to see that their tenants are receiving four times the amount of rental assistance than my beneficiary tenants. Government financial assistance should be based on people’s needs not who their landlord is. I know of some CHP’s who are laughing all the way to the bank.
Before BE lost the general election MSM were all over him and the Nat govt about a housing crisis. I'd have rated it as a serious issue, not a crisis. Unfortunately BE went around with his trademark grin as if there was no problem. Don't even recall him having acknowledged the problem, or at the very least saying National were mitigating the issue by doing such and such.
Someone with a better memory can amplify or modify my recollection.
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