Te Toi Mahana takes over struggling housing portfolio

Wednesday, 16 August 2023

Angelique Jackson, centre, the chief executive of the council's new community housing provider Te Toi Mahana. Pictured at the Rintoul St Flats with staff members Tyrin Hohaia, left, and Marley Vito.

One tenant could pay $295 in rent while their new neighbour pays $84 — just one of the problems faced by the new management of Wellington’s council flats as it tries to turn around the struggling housing portfolio.

Te Toi Mahana, the independent trust which has taken over management of the Wellington City Council’s portfolio of 1900 homes, had its first day of operations on August 1.

It was “not the greatest timing” said chief executive Angelique Jackson, when the trust sent out letters increasing rent in its first week.

For two out of the past three years, due to Covid-19 and the cost of living crisis, the council had decided to freeze rent. Te Toi Mahana could not afford to continue the freeze, Jackson said.

The new trust could not magically solve the financial problems of the council’s housing portfolio, which was last year losing $30,000 a day.

Angelique Jackson says the council housing department was about to fall off a “financial cliff”.

But it did provide a way forward, where Te Toi Mahana could access grants and donations, and new tenants from the Ministry of Social development waiting list would gradually move in and bring with them the Government’s income-related rent subsidy (IRRS).

It’s not a quick fix. Jackson and board chairperson Andrew Turner both said it will be a long road to financial sustainability, before government subsidies and grants could make a difference to the bottom line of council housing.

“To put it bluntly the options were closing it down, selling it off, or this,” Jackson said. Council housing was about to “fall off a financial cliff”, becoming insolvent this year if nothing changed.

The disadvantage of the new trust is that existing tenants in council flats are unable to access the rent subsidy which their new neighbours from the Ministry of Social Development waiting list will receive, which caps rent at 25% of the tenant’s income.

Former Christchurch deputy mayor Andrew Turner is the chairperson of Te Toi Mahana, Wellington’s new community housing provider.

From now on, a tenant on Jobseeker Support moving into one of the housing units could pay about a quarter of the rent existing council tenants pay — $84 a week compared to $295 a week for a one-bedroom flat. (Other tenants could pay more depending on income, for example a superannuitant would pay $124 a week.)

“Understandably our existing tenants are really upset. And we agree with them, we’re sorry,” Jackson said. She had tested several options to see whether existing tenants could get any access to the subsidy, but nothing had worked.

The good side of the subsidy is that while the rent charged is limited to 25% of the tenant’s income, Te Toi Mahana will receive the remainder of the market rent.

It can stay financially viable without charging high rents, a balance which the council could not achieve without government support. Campaigns to get access to the subsidy for council tenants like IRRS 4 ALL have been going for years, but nothing changed, leading the council to establish the trust.

The Rintoul St Flats are one of the many council flats now managed by Te Toi Mahana instead of the council.

Later in the year, the council will vote on gifting Te Toi Mahana with $10 million of property — yet to be decided — and $23 million of funding, to complete the set-up of the trust.

Christchurch faced the same dilemma about 10 years ago, with financial peril and instability in its housing portfolio.

Turner, now the board chairperson of Te Toi Mahana, was on the Christchurch City Council when it decided to set up the Ōtautahi Community Housing Trust and was on the trust’s board for three years.

“I think setting up the trust was absolutely the right thing for Wellington to do, and I say that informed by my Christchurch experience,” he said.

At some point, Turner said, the council had to focus on working within the political environment — which was governments showing no appetite to extend the IRRS to council tenants — “rather than trying to reinvent the environment that we're working in”.

Though it would take a while to get up and running, the trust had a “workable” but tight budget for the first few years. “We can make this work,” Turner said.

As well as improving the finances, the trust board was “very keen” to look at collaborations with developers on building new social housing.

Even with the new model it’s hard to say when council housing will become more stable.

Turner said there had been a lot of complicated modelling going on behind the scenes, but the big question was how quickly IRRS tenants would be able to move into the council houses.

Turnover of tenants is very low, at about 8%, which will slow the process down.

Tenants have a guarantee that they can live in a council flat for life if they choose, to provide stability and community, said Jackson. Unfortunately that means it could “take years and years” to get enough tenants with the subsidy to make a financial difference.

Clarification: The IRRS depends on income and not all new tenants will pay $84 a week. The housing portfolio was losing $30,000 a day last year, but since moving to the new trust its deficit has changed. (Updated on August 16 2023, at 10.45am)