Kāinga Ora announces new hard line on non-paying tenants

Tuesday, 11 February 2025

Kāinga Ora is taking a harder line on tenants with rent arrears, some of whom owe tens of thousands of dollars in months of unpaid rent.

Tenants who agree to repay the debt faster will be eligible for “partial forgiveness” of their debt, with the amount they must repay limited to 12-weeks of unpaid rent.

From now on, Kāinga Ora will take swifter action on tenants falling behind in rent, with warnings being issued sooner than they have been in the past.

A new policy by Kāinga Ora came into effect on Tuesday, seeing it taking a harder line on tenants who owe rent arrears, as well as getting the 2000 tenants who owe more than 12 weeks rent debt to enter faster repayment plans.

Work on the policy by the public housing landlord began more than a year ago, and pre-dated the “turnaround plan” announced by Housing Minister Chris Bishop last week.

Kāinga Ora has about 75,000 homes around the country.

Around 90% of tenants were up to date with their rent by the end of January, but there were 7500 who owed about $16.17m in rent arrears.

Since the beginning of last year, Kāinga Ora has taken steps to reduce the amount owed in rent arrears. It has dropped significantly since January 2024, when the amount owned stood at $21.6m (in December 2019 it was just $3.4m).

But the debt has not fallen as much as Kāinga Ora would like, so a firmer line is going to be taken in order to manage the debt and speed up repayments.

The issue faced by the organisation is that the debt incurred by some of these non-paying tenants has reached an amount that they have no realistic chance of repaying.

The debts run into the tens of thousands, with the highest sitting at just under $40,000.

Kāinga Ora chief executive Matt Crockett told Stuff that the organisation was taking a pragmatic view and had chosen a method by which tenants could have part of their debt forgiven provided they made genuine attempts to get back on track with repayments.

He said the Kāinga Ora board decided that realistic amount of debt that a tenant could repay was the equivalent of 12 weeks rent.

Most Kāinga Ora tenants pay income-related rent, which is set by the Ministry of Social Development and reviewed each year. Typically a Kāinga Ora tenant will pay no more than 25% of their income in rent.

Presently there were nearly 2000 tenants who owed more than 12 weeks in rent debt.

Under the policy, these tenants will, if they choose, be eligible to enter an agreement to start repaying what they owe in return for a partial forgiveness of some of their debt.

“Under this approach, close to 2000 more tenants could repay what they owe within 2.5 years, making it more achievable for them to get on top of their financial circumstances,” Crockett said.

Some of the debts were in the tens of thousands.

“You can imagine someone on a low income, usually in challenging circumstances, staring at that and going ‘why bother trying to deal with it’. A big part of what we are doing with the forgiveness is giving an incentive to get them on a repayment plan and give them a fair chance within a reasonable time period to be able to pay off that debt,” Crockett said.

“It’s very difficult when it’s $30,000 or $40,000 plus. Even $5000 or $10,000 plus amounts owing is very difficult for these people to get on top of.

“We will only reduce the rent debt of tenants who owed more than 12 weeks’ worth of rent debt at the start of February 2025, who are consistently paying their rent and making reasonable payments to reduce their debt”.

“This will provide clear incentive to tenants who are not currently meeting their obligations to change their behaviour and begin repaying what they owe. If they consistently do this, they will be eligible to receive a partial forgiveness of their rent debt. But if they do not, we will take steps to end their tenancy,” Crockett said.

“We will continue to support households who fall on hard times but are making genuine attempts to get back on track with their rent. We’re a social housing landlord so that’s the right thing to do.

But, Crockett said, “We are drawing a line on how patient we can be. We don’t want to end tenancies, but we will if tenants are not meeting their obligations to reduce their rent debt, are skipping rent payments or refusing to work with us.”

The policy will also see Kāinga Ora taking steps to tackle non-payment of rent earlier than it has in the past.

“In the past, particularly through that challenging Covid period and while we were responding to the government of the day’s policy on ‘sustaining tenancies’, it was kind of a bit amorphous where the process would start,” Crockett said.

“A key thing we’re doing here is making the boundaries clearer so that everyone can manage to them. When we say ‘starting the process earlier’, what we don’t want is tenancies ending with more than 12 weeks rent debt and we want to give plenty of warning to tenants and plenty of time to get them help to avoid that.

“The exact timing of when that will be will be somewhat situational specific, but we will be engaging with the tenant earlier, and looking to get support. If they’re not paying then we will be giving formal warnings earlier so that we’ve exhausted those opportunities before we get to the 12 week mark.

He said there hadn’t been a clear policy boundary in the past and “I don’t think we were being as firm as we should have been in hindsight and we’re really focussed now on the go forward and making sure it’s very clear and that we’re firmer with our tenants, while continuing to be supportive in trying to help them avoid breaching the policy and ending up in a troubling situation.

“I can tell you, because I personally sign off on any enforcement [around rent arrears and disruptive behaviours], and in most cases the tenants have refused to engage and have done for some time. If they’re refusing to engage or take up the offers of assistance, then we’ll move more quickly into more formal notices and the tenancy tribunal.”

Crockett said the large amount of debt had occurred due to a range of reasons, including “social and economic events over the past five years and the steps Kāinga Ora took to respond to government policy, particularly during the pandemic”.

“We’re also conscious that during the pandemic the steps we took to respond to government policy meant we didn’t chase debt in the way we normally would, so we carry a measure of responsibility,” he said.

He said up to $8.3m of the $16.1m debt was expected to be forgiven.

“A large portion of the accumulated debt is most likely not collectable and pursuing it will be resource intensive, unlikely to be successful, and cause significant stress for our tenants,” Crockett said.

“We would be better off focusing those resources on preventing future rent debt and connecting Kāinga Ora tenants with support to address the underlying issues that cause them to fall behind on their rent in the first place.”

Forgiving the tenants debt would not have an effect on Kāinga Ora’s financial performance as the debt is already treated as doubtful debt and was fully provided for in the accounts of Kāinga Ora.