Moteliers paid millions for housing the homeless reject claims they're onto a 'get-rich-quick' scheme

Friday, 22 July 2022

At the end of June 8802 people, just under half of them children, were in short-term emergency accommodation, usually motels.

Housing the homeless has been a lifeline for motels deprived of tourists during the pandemic, but the massive injection of state funding is also starting to distort the market.

National MP Chris Bishop has castigated the Government for spending over $1 million a day on emergency housing, and criticised the system as a “get rich quick scheme” for motel owners.

But moteliers at the sharp end of sheltering the needy say that for most operators it is far from being a gold mine.

Instead of dispensing hospitality to tourists, they have become stand-in social workers and counsellors for the dispossessed, the drug addicted and the mentally ill.

* Govt moves from paying motels to house homeless to buying its own in Rotorua

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Sue Gill-Devereux and her husband spent just over a year managing an Auckland motel apartment complex accommodating about 50 people, many with serious criminal records, and some serving home detention.

“It was more like a prison-come-mental health ward. I had one woman who told me about 10 times a day she was going to commit suicide.”

After being assaulted by a female visitor, Gill-Devereux was relieved to return to running a tourist motel on the Coromandel, and she is adamant they will never return to the emergency housing work which saw them putting in 20-hour days.

Nelson's Balmoral Motel is among those providing accommodation to the homeless through the Housing First initiative. Video first published in July 2020.

At the end of June 8802 people, just under half of them children, were in short-term emergency accommodation, usually motels.

On top of that the Ministry for Housing and Urban Development also contracts more than 100 hotels and motels nationally to provide transitional housing, and at the end of May just under 900 beds out of 5427 were in motels.

Figures released last week under the Official Information Act by the Ministry for Social Development show that from March 2020 until July, 200-plus out of 1540 commercial accommodation providers earned more than a million dollars apiece for housing the homeless, and the top 10 earned over $8m.

Gill-Devereux says some of big operators with multiple properties might be “creaming it”, but that is not the case for smaller motels where managers work extremely hard in trying conditions, coping with “feral” clients who frequently damaged units and stole property.

MSD group general manager housing Karen Hocking says the cost of emergency housing is set by the accommodation supplier, based on the market rate for immediately available motel rooms.

Emergency accommodation tenants damaged an Auckland motel apartment complex that housed the homeless in 2020.

“This is influenced by a range of factors, including supply and demand, the size of the household in need, and the region where emergency accommodation is required.”

Hocking says most clients are respectful tenants, and recipients of emergency housing special needs grants staying in motels are liable for the cost of any damage done by them, or anyone else staying with them.

A security deposit to help meet the costs of damage is capped at the equivalent of seven night’s accommodation, and is repaid back to MSD at an agreed rate.

Gill-Devereux says they had difficulty getting reimbursed, and in one instance received only $1500 when the repair bill was more than $10,000.

An industry source with experience in refurbishing units emergency housing says that returning them to an acceptable state can involve replacing everything from beds, drapes, carpets, and soft furnishings to kitchen appliances and bathroom fittings.

Belinda and Peter Mellor owners of the Balmoral Motel at Tahunanui Beach have accommodated homeless people since the first lockdown as part of the Housing First programme.

The cost for that can be up to $250,000 for a full refit of a badly damaged two-bedroom motel apartment.

Belinda Mellor and husband Peter are grateful to have had that guaranteed income from a two and a half year Ministry for Housing and Urban Development contract to provide accommodation at their 13-unit Nelson motel.

She agrees it is a tough job and says the money paid is not over the top.

“We’re getting an average room rate for mid-season, so a little more than we’d get in mid-winter, and less than we’d get in the summer, but if we have an empty room we still get paid.

“They’ve given us really nice people on the whole … we get really fond of our guests,” but she admits at times it has been distressing, and is glad to have had support from the Salvation Army for more challenging residents with alcohol and mental health issues.

“There’s been a lot of social work.”

One room needed re-carpeting after a couple of floods caused by a forgetful tenant leaving the tap running, and a room occupied by a hoarder required a complete makeover.

The motel’s contract with the ministry ends in November, and Mellor worries for tenants potentially dumped into a very tight rental housing market before Christmas.

The pandemic has seen many Rotorua motels offering housing for the homeless, and in the March quarter 2190 emergency housing special needs grants worth $5.4m were approved for the district.

“Everybody keeps assuring me nobody will be homeless, and they’ll all be accommodated, so I hope so.”

Dion Cooper helps his partner run three Taupō motels, one of which provides emergency accommodation and had received $1.8m in Government funding by the end of June.

He rejects any suggestion the scheme is a “cash cow” because, he says having longer stay emergency housing customers adds to power and gas costs because they get exactly the same services as regular guests.

He says their Executive Motel charges $165 a night for MSD clients, when the average rate in Taupō at the moment is $185 to $255, and the people they accommodate are certainly not “no hopers”.

“A big majority actually go to work every day, they’re good Kiwi people, but there’s just not a house for them.”

Cooper says they plan to stick with MSD work until international tourists return in numbers, but he says there is no guarantee the Government work will continue, so they keep the property well maintained.

“We look after it the way we do so we can turn it back into a normal motel tomorrow if we wanted to.”

Last year the Government spent $8.1m to buy the Boulevard Motel on Rotorua's Fenton St.

Rotorua has attracted considerable negative publicity over the proliferation of motels housing the homeless along what was once its tourist “golden mile” because of increased violence, vandalism and antisocial behaviour.

Stuff was told of an incident where a family arriving at a motel catering for both tourists and welfare clients were greeted by a woman who screamed “what are you looking at?” before exposing her breasts.

Rotorua Association of Motels, chairperson Nick Fitzgerald estimates of the 66 registered motels in the town, more than half are providing emergency or transitional housing.

“Maybe a third of those emergency housing providers are mixing [tenants with guests], and those are the ones that are really damaging for us as a destination.”

On the plus side, the number of motel beds occupied by the homeless has boosted business for those businesses who eschewed the emergency housing market in favour of corporate clients and domestic holidaymakers.

Fitzgerald says that has helped push up hotel room rates to $182 a night from an average of $130 pre-Covid, and that flows on to other accommodation providers. “They almost set a benchmark.”

The Ministry of Housing and Urban Development has contracted a dozen Rotorua motels to provide emergency accommodation for about 200 whānau with children, and it has applied to the Rotorua District Council for five-year resource consents allowing up to 1008 people to stay at those 12 sites.

The consents were publicly notified, and the number of submissions received will be released this week, with a hearing panel of commissioners due to considering the application on a date yet to be set.

Fitzgerald says five years is “an incredibly long period” to have so many properties tied up in emergency housing, and pouring Government money into the sector is affecting motel lease values.

Under normal circumstances, rundown motels would be sold off cheaply and refurbished, “but those opportunities are not there for people any more because they’re having to pay a premium to get a substandard motel”.

“It’s unfortunate, but there are cases where really lesser quality emergency housing motels are going at a premium over tourist motels because they have that really strong business case and bottom line.”

Guaranteed Government income had prompted some motel landlords to raise their rents, and in a lot of cases Fitzgerald says there is no mechanism for a reduction if there is a big drop in income when the emergency housing income tap is turned off.

“That may lead to people walking away from businesses.”

Tourism property broker Kelvyn Coffey says valuing motels is tricky if income has been inflated by emergency housing income because it’s not sustainable if the Government pulls its business when housing stocks improve.

Some older motels have been converted into permanent rentals and Coffey says it is surprising Kāinga Ora has not bought up more freehold motels for social housing, as it did with the Boulevard Motel in Rotorua, instead of sinking money into paying operators.

“[The Government] would have an exit strategy, and from a taxpayers’ point of view it makes so much sense, but they’re just tipping money down the toilet.”