Kāinga Ora underperforming, not financially viable – Sir Bill English

The country’s social housing system isn’t financially sustainable or delivering the homes people need, an independent review has found.

Former prime minister Sir Bill English was commissioned to look into Kāinga Ora’s financial situation, procurement and asset management last year.

His report, released on Monday, found the agency wasn’t financially viable, had limited attention to value for money and opaque transparency around internal costs and revenue.

It made seven recommendations, four of which the coalition government is moving to implement immediately.

Cabinet has agreed to align contractual arrangements across Kāinga Ora and Community Housing Providers and refresh the Kāinga Ora Board.

It’s also agreed to issue simplified direction to Kāinga Ora and that Ministers will set an expectation the new board develop a robust plan to improve financial performance.

“The review makes it clear that Kāinga Ora’s financial situation is very worrying,” Housing Minister Chris Bishop said.

“The operating deficit at the time the review was undertaken was forecast to grow from $520 million in 2022/23 to over $700 million in 2026/27, driven by interest on the debt-financed capital investment programme.

“Debt is forecast to increase to $23 billion. Kāinga Ora’s forecast cash requirement from the Crown is $21.4 billion over the next four years. This is equivalent to every New Zealander paying about $4000 for this activity.”

Bishop told Checkpoint the first task for the new board would be developing a turnaround plan to eliminate losses by November.

“We are expecting and we’ll be demanding significant savings … hundreds of millions,” he said.

Simon Moutter, former chief executive at Powerco, Auckland International Airport and Spark NZ, would begin as the new chair of Kaīnga Ora from 4 June, said Bishop.

“Further consideration of the Board composition is ongoing with a refreshed Board expected to be in place in 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 houses currently being built by Kāinga Ora were more expensive than the private sector.

“There’s a range of different reasons, one of them is that there are bespoke developments that Kāinga Ora puts on developers.”

Bishop said an example he heard recently was from a builder who told him there were different designs for 20 Kāinga Ora houses he was building and for some the doors were in different places.

“At the end of the day we’re just trying to build houses and every time you change the typology or design of the house, that raises the cost. So you can’t mass produce them in a cost-effective way.”

Bishop ruled out any mass sell-off of state houses.

“I do not see a scenario where the government does not own state houses, I want to be really clear about that.

“This is not about destroying state housing in New Zealand, this is about making social housing better.”

In the post-Cabinet press conference today, Bishop also said Kāinga Ora had been operating based on the assumption that they could simply get more funding if needed.

“Every year they would ask for money and they got given a lot of money and got access to a lot of easy debt, firstly on the private financial markets and then … eventually even the last government realised things were getting out of control and they took the debt in-house.”

He said the housing agency had been operating like this since its creation in 2018.

When asked whether he was flabbergasted to hear about Kāinga Ora’s assumptions, Bishop said, “Almost every week that goes by, we turn over a new leaf … and discover a nasty little scorpion running around with a nasty little surprise for the government.”

Other changes proposed in English’s review will be considered in the coming months, with Bishop saying the recommendations align with the coalition’s broader social policy objectives.