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Ele Ludemann writes –
That Kāinga Ora is a mess is no surprise, but the size of the mess is.
There have been many reports of unruly tenants given licence to terrorise neighbours, properties bought and left vacant, and the state agency paying above market rates in competition with private would-be buyers.
But the amount of debt it’s incurred seems to have escaped the previous government and has only come to notice with the independent review overseen by Sir Bill English.
The current government has responded with Housing Ministers Chris Bishop announcing a series of immediate actions:
“Kāinga Ora is a large and important Crown entity, with assets of $45 billion and over $2.5 billion of expenditure each year. It owns over 70,000 homes and is the country’s biggest landlord, providing accommodation to people often in great need. Its performance has a material impact on the Crown’s fiscal position,” Mr Bishop says.
“We must never forget that Kāinga Ora’s performance also has a huge impact on the people it is there to serve. Over the past six years, even while billions of dollars were poured into it by the previous government, Kāinga Ora left thousands of social houses sitting vacant, tenants were left to rack up enormous rent arrears, and threatening, abusive tenants were permitted to continue living in Kāinga Ora homes despite the terror they inflicted on their neighbours. And despite all this, the waiting list for a social house quadrupled.”
Not only that, it spent money it didn’t have artificially boosting house prices and shutting would-be buyers out of the housing market.
“The incoming Government had significant concerns about the financial performance and governance of Kāinga Ora. These concerns have been borne out by the independent review commissioned in December last year.”
The review found Kāinga Ora is underperforming and not financially viable without significant savings as well as funding and financing changes; and that the wider social housing system is not delivering the results New Zealand needs, and is lacking in transparency and accountability, coupled with a poor understanding of tenant outcomes.
“The review makes it clear that Kāinga Ora’s financial situation is very worrying. 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 $4,000 for this activity.
“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.”
That sounds a lot like a lot of what was permitted under Labour from 2017 to 2023.
“We are also concerned about the findings in the review about the governance of Kāinga Ora. The review noted evidence that there has not been a clear separation between the board’s governance role and operational management, and that they saw evidence that the board has been acting more as an advisory function rather than governing.
“We were alarmed to learn, for example, that in the May 2023 board budget pack, there was no Statement of Financial Position, the budget assumed that new lending of several billion dollars from the Government would be approved, the build pipeline included a line entitled “Zero Net Growth” describing disposals of an indeterminate kind of over 3,000 homes per year, and did not provide a budget scenario where Kāinga Ora is limited to the funding agreed by the Government.
“The review has made seven major recommendations to the government which propose significant changes to Kāinga Ora and the wider social housing system.”
Cabinet has agreed to four of the recommendations today, which are:
- Recommendation 4(a): Aligning contractual arrangements across Kāinga Ora and Community Housing Providers (CHPs)
- Recommendation 5(a): Refreshing the Kāinga Ora Board
- Recommendation 5(b): Issue Simplified Direction to Kāinga Ora
- Recommendation 6: that Ministers set an expectation that the Kāinga Ora Board will develop a credible and detailed plan to improve financial performance with the goal of eliminating losses. . .
“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.
“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. 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.”
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.” . .
The question of how Kāinga Ora got so bad has an easy answer – it was enabled by a government with too little knowledge of financial management, poor direction and poor oversight.
The agency is very expensive mess. It hasn’t helped nearly enough of the people who needed its help, has been one of the worst landlords, possibly the worst, in the country and has run up a eye-watering amount of debt in the process.
The new chair and his board have a huge job ahead cleaning up the mess and ensuring Kāinga Ora does what it ought to have been doing in helping to house the homeless.
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This article by Ele Ludemann was first published on Homepaddock.
Point of Order 
They could also change the name back to something that is understandable to most people.
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This – and everything else – got so bad because of Labour’s political philosophy of ‘wealth re-distribution’. So in this view a fair’ society’ means that every citizen has ‘economic equality’ i.e they all own as much stuff as one another. So to have a fair society, the government must play Robin Hood and steal from the rich to give to the poor.
If you think about this philosophy critically IMO it soon becomes apparent that it’s a crock. Not just wrong and stupid but unworkable in practice.
For the government to ‘redistribute’ wealth, there has to be an assumption that they have a right to do it. Since Parliament can pass any law it likes, a government just pass a law saying they have legal right to redistribute wealth. As they do when passing tax laws. This doesn’t mean they have a moral right to do it. Because the question of ownership and private property is not just relevant but critical. Who owns the wealth? IMO it’s the individuals and business groups who created and earned it. There’s no big abstract lump of wealth out there somewhere in economic dreamland.
What Labour did was not only steal from the rich – they also stole from the middle class, in fact, everyone who had any money or assets. Then they tried to solve social problems by flinging money at them. And it looks as if they didn’t do any proper accounting on where the money went. Why bother – when you believe that ‘wealth’ is something that somehow exists independently of human efforts to create it.
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