Auditor-General investigates MSD scheme which paid landlords $3k per week for 'uninhabitable' houses

Thursday, 25 February 2021

Auditor-General John Ryan will investigate an MSD scheme which saw millions paid to private landlords for the use of their homes.

The Auditor-General will investigate a scheme where private landlords were paid thousands of dollars a week by the Government so their properties could be used as emergency accommodation.

National called for the Auditor-General to investigate the scheme after a Newsroom investigation last year revealed housing quality wasn’t being checked, alleged some were being rented out without the permission of landlords, and uncovered other initiatives to extract more money out of the scheme.

Landlords were paid well above market rate for allegedly “uninhabitable” houses in Auckland – $3000 or more per week for a single house in some cases – between November 2017 and June 2020.

National’s housing spokeswoman Nicola Willis welcomed the Auditor-General’s investigation, but questioned how the scheme had been allowed to go ahead in the first place.

Nicola Willis says she has questions around why MSD went ahead with the scheme in the first place.

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The Housing Minister says there are so many different figures being thrown around - from 28,000 to 200,000 - that it's impossible to put a specific figure on it (video first published in February 2021).

“We have to ask ourselves, how was the Ministry [of Social Development] able to have the wool pulled over its eyes to this extent?

“Or was it so desperate that it was prepared to look the other way?”

Auditor-General John Ryan said more than $38 million was paid out to landlords through this scheme.

It led to property-owners in areas with high housing need, like South Auckland, pulling their houses off the private rental market to rent them out for thousands more to the Government instead.

The office of the Auditor-General will examine the way the Ministry of Social Development (MSD) picked landlords and property managers and how it assessed quality and price, but it won’t explore the policy decision to use private rentals.

The scheme was originally seen as an alternative to using motels.

The scheme was originally envisioned as an extension of existing emergency housing grants paid to motel and hotel owners.

Hotel owners are paid a room rate of $100-150 per night, extending that to private landlords meant a four-bedroom house could net the landlord up to $3000 per week.

But there were significant issues, including a lack of quality checks by MSD.

A whistleblower, Vanessa Parker, a former property manager for Harcourts Ōtāhuhu (a firm alleged to have links to the incidents reported) complained to MSD about what was happening.

Willis said it was concerning the scheme only came to an end because a whistleblower complained.

“We should all be very grateful to the whistleblower and the whistleblowers in this case.

“The reality is this scheme didn’t come to light because MSD did some digging – or because the Government thought it should check on something.

“This came to light because good people said ‘there’s something very wrong here’ and they put their own jobs and incomes on the line to blow the whistle.”

Social development Minister Carmel Sepuloni said she wouldn’t be commenting further until the Auditor-General finished his inquiry.

“Transparency is important and I welcome the Office of the Auditor General’s inquiry.”

The Government eventually cancelled the scheme after the country’s borders closed last year and extra motel space became available.

This created more problems as families had to relocate at very little notice on June 30, creating chaotic scenes in South Auckland when families had to move out en masse as the country shifted to Level 1.

While the abrupt cancellation of the scheme doesn’t appear to be within the scope of the Auditor-General’s investigation Willis said this part of the saga was also concerning.

“I’m concerned that MSD has lost touch with what we actually are trying to achieve with people when we help them with social housing.

“Because it doesn’t appear that they were treated with the dignity you would expect.”