The future of Kāinga Ora and social housing under the microscope

and develop urban renewal projects. The government made it a priority to investigate the state of the agency, ordering a review led by the former Prime Minister Sir Bill English that painted a stunk image of its fiscal situation. With Housing Minister Chris Bishop processing the recommendations from the report, some are wondering what the future holds for the agency responsible for over seventy thousand public homes.

million dollars worth of other people's houses. So it's a shared owner of private homes with First home buyers, runs a lot of other schemes which are aimed at getting people into their first homes. The First home Buyers grant

recently scrapped. It administered that. And then it's also an urban developer, so some of these large urban developments that you see in Auckland, and in particular Auckland, they are kind of led by klient Aura in that respect is something quite different to what Housing New Zealand or other

historic government social housing providers have done. They have built a lot of houses obviously, but none of them have quite had the scale I guess of development ambition that client AURA has at the moment.

the remainder with the income related rent subsidy. The only difference between paying it or and other commercial landlords is that client Ura can only pass on a certain amount the costs of the extual tenant and then it sends the bill for the rest of it to the government. And so when you look at clime aura's accounts, there are two big revenue streams coming in. One of them is from tenants and the other is from the Ministry Housing and Urban Development, which tops up to their rent.

Where things get challenging is that when it comes to stuff like this urban development ambition that the government are the last government labor had for it, it doesn't really get enough funding to do that, and so many of these other jobs that klim Aura does have to be cross subsidized through its main job, which is as a landlord.

And KLi and Aura has for some time been asking ministers to say, well, look, if you want us to do these other things, so that are other jobs, then you kind of need to pay us to do them. And that's kin where some of these problems are actually the way that the rent market in general, not just the government side of it, but for all landlords. Often there isn't actually a lot of money to be made

in renting out the house and the cash flow. You don't actually make the money from renting the house so much where the real money is often made in the rental market in New Zealand, that is selling the housing through capital gains, which are famously mainly untaxed in New Zealand. And that's something that's also difficult for cime Aora because you know, to make its figures stack up, it can't just flog off a lot of housing and add that

money to its bottom line. It needs to continue to own the housing because its job is to own that housing and rent it out to social housing tendents. So you've got all those difficult treads going on inside these accounts and that's contributed to the financial pickle that climb Order has found itself.

you'll be allocated at public house. So most of these owned by Kying or a run by clying, or sometimes they run by Community Housing Providers or chips CHP CHIP. But for all intents and purposes as a tenant. You might not know the difference. A community housing place is still subsidized by this income related rent subsidy. The only difference is that the government sends the money to the

CHIP rather than sending the money to caying AURA. So if you're in really bad need the then eventually, hopefully you'll get one of these places. You've obviously got emergency housing, which has been in the news recently, motels and stuff, and that is for people quite a new acute need who are unable to get a permanent place just yet. Because obviously there is that weight list and people in those houses get an average of eighteen thousand dollars a

year in government support for their housing. So that's how much that income related rent subsidy is generally on average worth. In the past, we've talked about state housing for example. This is the modern version of what that looks like, and we've got roughly eighty thousand households that are in that boat at the moment, and there's about twenty five thousand households that are on the weightlist for a place. There's another form of support. It's been around in some forms.

It's the seventies really accelerated in the nineties and that's called the Accommodation Supplement. There are more than three hundred thousand people who receive this, and this is a payment that goes to people who are in the private rental market but need some help paying the rent. It varies depending on where one is. Obviously, rents very throughout the country, and this is substantially less generous. It's worth about five thousand dollars a year per persons to the people who

get it. It gets paid out like a benefit does, and it's meant to help people whose incomes are not high enough to pay the rent. It's quite controversial because really this money goes from the government's checkbook into the hands of private landlords. It props up high rents in the country because the more government support you give to

the rental market, the more landlords will logically take. We know e kind of research done by the Ministry Housing and Treasury and the Reserve Bank are recently showed that rent prices typically mirror people's incomes, so benefit like the Accommodations, which boosts people's incomes, will allow landlords to boost their

rents as well. So it's quite it's quite controversial, and it creates almost two different classes of housing support for people because one group gets very generous or I mean, you don't want to say too generous, because obviously it's not quite the life of luxurally living in a social house,

but relatively speaking, it's quite a lot of support. And if you're in a publicly funded public housing place, and then you've got another group of people which gets substantially less support and is left to fend for themselves in the private rental market, that creates a massive problem because it incentivizes people to get into a public house and stay in that public housing system and not come out

of it and try their luck on the private rental market. Again, it basically means that there is a one way direction of travel towards public housing, which is putting immense pressure on it when it's such a scis resource. You know, again, there are about eighty thousand places and twenty five thousand people on the weightlist. There's a massive weightlist considering this the overall size of the of the portfolio.

market's absolutely cooked. Unfortunately, the incentives that are absolutely cooked. At the moment, we've got construction costs are actually plateauing a wee bit at the moment, they might even be coming down, but for a long time, construction costs we're going sky high. We've got high interest rates, which means that you know, if you want to build some houses to rent, you've got to borrow money, which costs a pretty penny at the moment, and then you've got to

pay people to build it. And at the moment it's very expensive to pay people to do that, so it's really it's really not a good time. But the sort of secret to fixing this is to actually ensure that private housing is affordable and public housing is accessible, and right now, both of those things aren't happening. You know

that you can't get into a public housing place. The weightlist is very long, and the weight list is long partly because the private rental market is so expensive and people can't afford it.

asked for money to be able to do that. Said, look, if you want us to be a massive urban developer, you're going to need to pay us for it. We can't subsidize it through selling assets and then are other sort of rental work. So we knew that there was a problem there. So Billing this was commissioned to look into it. He saw that Clian Aura had forecast large deficits going to the future. It had a very large debt. There were a number of reasons for this. The staffing

obviously was an issue. He thought that they that Client Order sort of did gold plated builds. I guess he would argue sorry that it built, that it was someless, slightly distracted by things like modular construction and new green energy standards. Wouldn't really it probably should have been what should have been focused on building as many houses as

possible for the largest sort of cost. There were other issues about the number of works progress that it had on and the amount of money it cost to have such high borrowings before you actually could bring the houses that you had borrowed money to build to the market. Obviously, if you're going to build three thousand houses, you've borrowed the money to build those three thousand houses, well, it starts to cost you the day you borrow that money.

You're paying interest on it, But you don't actually make money for those three thousand houses until those houses have really to lived in. So Client Order had massive borrowings but didn't necessarily have the rental income to sustain those massive borrowings Client Order just like anyone who's dabbled in the housing market recently has borrowed a lot of money and is being caught out by punishingly high interest rates.

And that's really a story that has taking place across the New Zealand housing market, across the housing markets of the developed world, there are a lot of people who are up to their eyeballs and dead and paying very high interest rates to service it. And for Client Order, that's a really big problem.

housing places in future. So the government is committed to the ongoing provision of public housing and it has committing to growing the number of places that people who need housing support can get. However, it is looking to do

that through a different method, which is community housing providers. Now, there's a private, well not for profit organizations that are basically the same as Kyle Auora, but they're owned not by the government, and they also must not charge more than twenty five percent of someone's income and rent, and they also receive the income related rent subsidy from the

government to provide that. Basically, the sort of short answer is the government really isn't that impressed with kin or As governance and has therefore decided to shift the emphasis of new places new housing places to these community housing providers for now.

of being a landlord is broken. You know. The only way to make money from being a landlord is to sustain your debt payments through rent and then make your money when you sell the properties, make your money through capital gains. So there's a question as to whether the model that CI or or any public housing provider operates on. There's a question as to whether that is sustainable for anyone,

let alone a government entity. The question of whether it can be fixed is actually it's one that's almost the secondary question. The question which we still don't get to the bottom of us is not whether it's broken. People except that it's broken, but the question of why it's broken is the one that people are still litigating.