Housing mess laid bare – mediocre Wellington does not know best

Dr Bryce Wilkinson
Insights Newsletter
24 May, 2024

The Independent Review of Kāinga Ora – Homes and Communities lays bare New Zealand’s  housing mess.

Decent housing is fundamental to wellbeing. Yet successive governments have created an artificial scarcity through restrictive land use policies.

Housing scarcity hits those with the least means hardest.  Governments respond with subsidies. Subsidies drive up rents and prices. It is a mess.

Government spending on housing support is  forecast to average around $8 billion annually over the next three years, or around $4,000 per household. That is a massive increase on the $2.6 billion spent in 2018.

Taxpayers who want to believe their money is being well-spent should not read the Review. It  is a sadly familiar story of vast sums being spend poorly by well-meaning but ineffectual government.

The fancifully named Kāinga Ora has spent billions since its creation in 2019 with inadequate accountability for performance.

Its performance matters.  It is New Zealand’s largest landlord. It manages 72,000 homes that house 185,000 New Zealanders, around 4% of the population.

In 2002/23 it spent $2.5 billion for an operating deficit of $520 million. Its debt was $12.3 billion.

In 2018, its prime predecessor, Housing New Zealand, managed 64,000 properties, also for 185,000 occupants. It spent $1.2 billion with an operating surplus of $125 million. Its debt was $2.3 billion.

Kāinga Ora’s debt is projected to reach $23 billion by 2028, about $12,000 per household. Its operating deficits are forecast to be $700 million annually.

The organisations Kainga Ora replaced in 2019 reportedly had 1,223 employees, in 2023 it had 3,305 employees.

Ministerial engagement with management undermined its Board. Grandiose spending plans were based on wishful thinking about future funding increases.

Too much was paid for land purchases and construction. Kāinga Ora’s costs were indicatively $35,000 per home higher than private sector equivalents.

Tenant selection did not prioritise those in greatest need. Tenant management was deficient, with rising rental arrears and inadequate support for complex needs.

The Review rightly calls for less centralisation with greater accountability, in part through recourse to alternative providers.

Central government will still be a dominant funder and purchaser. In this role, it should continue to support building consent applications.

The government’s response this week was sensible. Act immediately to tighten the purse strings and defer, perhaps to August, decisions that need a broader context.

There is no quick fix for this social housing mess.

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