Govt set to make immediate changes to Kāinga Ora after critical review
Monday, 20 May 2024
The Government is making “immediate” changes to Kāinga Ora, following a critical review led by former PM Sir Bill English.
“We have seen a lack transparency and accountability in the social housing system, coupled with a poor understanding of tenant outcomes,” the review states.
“We found that Kāinga Ora is not financially viable, under current settings and this is further compounded by limited attention to value for money and opaque apportionment of costs and revenue within Kāinga Ora, making it difficult to identify the underlying drivers of financial results.”
It said Kāinga Ora’s performance was deteriorating and its ability to maintain and renew its assets was at risk.
It made seven recommendations for Kāinga Ora, the Crown agency which manages public housing and provides tenancy services for those in need.
Prime Minister Christopher Luxon and Housing Minister Chris Bishop made the announcement from Parliament on Monday.
“The review found that Kāinga Ora has had easy access to debt but insufficient focus on fiscal discipline, and low levels of accountability have led to growing annual losses and a deteriorating financial situation,” Bishop said.
Bishop also confirmed National would be scrapping KiwiBuild, and the Government would be conducting a broad review of all the housing programmes the Government runs.
Asked how likely it would be that Kāinga Ora’s scope would be pulled back to just the social housing aspect, Bishop said they would be considering that in due course.
“First and foremost, it should be focused on looking after New Zealanders in need and being a good landlord and that is not the case right now.”
Among the recommendations accepted by the Government included ministers setting an expectation that the Kāinga Ora Board develop a “credible and detailed plan to improve financial performance with the goal of eliminating losses”.
Another of the recommendations included “refreshing” the board, which was expected to be in place by July.
“Ministers will then issue a new Letter of Expectations which makes crystal clear our expectations regarding Kāinga Ora’s focus on fiscal sustainability, value for money, and a ‘back to basics’ approach for their essential functions,” Bishop said.
“The first task of the refreshed board will be to present a Kāinga Ora turnaround plan to Ministers by the end of the year, which focuses on returning Kāinga Ora to financial sustainability and eliminating losses.”
Bishop said Simon Moutter has been appointed the new chair of Kāinga Ora from June 4.
“Mr Moutter has extensive change leadership experience as the Chief Executive at Powerco, Auckland International Airport, and then Spark NZ, where he won the Deloitte Top200 NZ CEO of the Year in 2017,” Bishop said.
Former chair Vui Mark Gosche resigned in March and John Duncan had been acting chair.
The Government has also promised to issue “simplified direction” to Kāinga Ora and align contractual arrangements across Kāinga Ora and Community Housing Providers.
“The other changes proposed by the review, including moving to a model where the government becomes an active purchaser that takes a social investment approach to cost-effectively improving housing outcomes, will be considered in the coming months,“ Bishop said.
“At first blush, the recommendations align with our broader social policy objectives, so we will be looking at them closely, as well as considering broader housing funding settings.”
Labour’s housing spokesperson Kieran McAnulty said in the announcement, the Government did not commit to fund the income related rent subsidy (IRRS) post 2025.
“We've got community housing providers cancelling projects because of a lack of certainty, we've got Kāinga Ora pausing projects because of a lack of certainty.
“We made that commitment before the election. The National Party promised to build more houses than we did. And so far we've hear no solution to the issues that we're facing.
“A lot of excuses and a lot of distractions and a commitment to something that was already happening in the financial review of Kāinga Ora.”
The Government in December launched the independent review into Kāinga Ora.
National’s 100-day plan included beginning the “Kāinga Ora clean-up by commissioning an independent review into the organisation’s financial situation, procurement, and asset management”.
Bishop at the time described Kāinga Ora as “the country’s biggest landlord”, with its operations having a significant impact on the Government’s books.
“I am deeply concerned about the operating deficit which is already at $520 million in 22/23 and which is forecast to continue increasing.
He said the independent review would build on work already done by Treasury and the Ministry of Housing and Urban Development and provide a report to the government by the end of March.
In March, the Government instructed Kāinga Ora to make it easier to kick out tenants displaying “persistent antisocial behaviour”.
And following The Post’s reporting that hundreds of state homes were sitting empty in Wellington - with a backlog of 1000 empty homes to fill in June and August - Housing Minister Chris Bishop had also instructed the social housing provider to fill the empty homes as “quickly as possible”.
About 20% of properties had sat vacant for more than a month, meanwhile the waitlist for a home was 25,000. And rental debt had grown - from $1 million in 2017, to the now $21m owed by Kāinga Ora tenants.
In January 2020, before the Covid-19 pandemic reached New Zealand, the Government allowed Kāinga Ora to more than double its capacity to take on debt in order to build new state houses.
Last year, the previous government agreed to increase Kāinga Ora’s borrowing capacity by $2.75 billion for the 2022/23 financial year.
Earlier in the year, a briefing by the housing ministry into the finances of Kāinga Ora, formerly Housing NZ, revealed that rising construction costs and interest rates meant it would be unable to pay its billions in debt by 2081.
At the time, the agency’s debt was expected to peak at $28.9b in 2033. By 2081, there would still be $8.9b to pay off.
Labour's housing spokesperson Kieran McAnulty at the time accused the previous National government of leaving the social housing stock “decimated”.
“Labour delivered over 14,000 additional public homes since 2017, more homes than any government since the 1950s.
“Christopher Bishop and the National Party have no credibility on public housing,” he said.