0:05

Kia ora, I'm Chelsea Daniels and this

0:08

is The Front Page, a daily podcast

0:10

presented by The New Zealand Herald. It's

0:17

been five years since social housing in

0:19

New Zealand was put under the banner

0:21

of Kaeanga Ora. Over that

0:23

time, questions have been asked about the

0:25

financial stability of the organisation and

0:28

the loaded remit Kaeanga Ora has

0:30

to also lead and develop urban

0:32

renewal projects. The government

0:34

made it a priority to investigate the

0:37

state of the agency, ordering a review

0:39

led by the former Prime Minister, Sir

0:41

Bill English, that painted a stark image

0:44

of its fiscal situation. With

0:48

housing minister Chris Bishop processing the

0:50

recommendations from the report, some are

0:52

wondering what the future holds for

0:54

the agency responsible for over 70,000

0:56

public homes.

0:59

Today on The Front Page, NZ Herald

1:01

Deputy Political Editor Thomas Coughlin joins us

1:04

to discuss his recent reporting into the

1:06

future of Kaeanga Ora and social housing

1:08

in New Zealand. Thomas,

1:14

if we start a little broadly for

1:16

those unsure exactly what Kaeanga Ora is,

1:18

what does the

1:20

organisation cover? Because it's not

1:22

really just a social housing provider, is

1:24

it? No, it does many things.

1:26

So the main job, as you say,

1:28

is a landlord basically. It

1:30

has the majority of the 80,000 public

1:33

houses in New Zealand which house people

1:36

who need government support for

1:38

housing. Well, it owns the majority of them and

1:40

it rents them out. But however,

1:42

it also does a lot of other stuff.

1:44

And this is quite controversial because it got

1:47

a lot of these jobs fairly recently. So

1:49

it runs a shared equity scheme. So it

1:51

actually owns, I think, slightly over $100 million

1:53

worth of other people's houses. So

1:56

it's a shared owner of private homes with

1:58

first home buyers. The

2:00

lot of other hand schemes which are

2:02

aimed at getting people into a third

2:04

time's the first time buyers brand recently

2:07

scrapped and administer that. And. Then

2:09

it's also didn't developer so saw

2:11

these large haven't developed. And.

2:17

They actively by Kyle run in that

2:19

respect to something quite different. To.

2:21

What? Housing Zealand or other

2:24

And. Story. House.

2:31

Scaling. It's of development ambition that

2:33

time aura or has of the moment. Sinensis.

2:36

Tie into the income related rent

2:39

who supports housing or the I

2:41

R s the sort. Who

2:43

were the final run Makes it's money.

2:45

It has to make his money by

2:47

reaching our houses Now because it's tenants

2:50

are people who can't afford housing on

2:52

the private market. the rules for social

2:54

housing and then you cannot buy more

2:56

than twenty five seemed of you or

2:58

your income and rent for can't read

3:00

and in the government pops up the

3:02

remainder with the being com um read

3:04

some sleep. The only difference being fire

3:07

or and and other commercial landlords is

3:09

that Via or I can only. Pass.

3:11

On a certain amount the cost, the actual tenant.

3:14

And mean it seems the bill for the risk

3:16

that to the government and some you have time

3:18

or the cows. Your. To big revenue

3:20

streams coming in. One. Of them

3:22

it's from tenants and the other is from

3:24

the Ministry Thousand and In And which. Alaska.

3:33

Online at for as it doesn't really

3:35

good enough funding to do that. And.

3:38

So many jobs Kiara

3:40

does subsidize. Main

3:43

job which is a landlord. And.

3:45

Kiara has some time I've been asking minister

3:48

to say well as if you want us

3:50

to do these other site and see the

3:52

other jobs any kind of neat I am

3:55

today them. An. Image. That's how we

3:57

are with some of these problems are. Actually,

3:59

The way that the rings the market in general not

4:01

just the government side of it up a whole Orlando

4:03

is. Often there isn't actually a lot

4:05

of money to be made and renting out

4:07

the house and the testifies you don't I

4:10

see make the money. Citing the house so

4:12

much with a real money is often nine

4:14

on their rental market and New Zealand. Hangs.

4:19

Out financing my me on tax

4:21

museum. And. The summer Solstice click on

4:23

or other his to my could say a

4:25

stakeout and cat just brought up a lot

4:27

of housing I've had that money to it's

4:29

bottom line at needs to continue join the

4:32

housing does it's job is to. Find.

4:34

That housing and rings not too subtle. House and

4:36

given say that. All. Those difficult.

4:39

As. It travels going on inside. His

4:41

accounts are not contributor to the financial

4:43

people that Time over has found itself.

4:47

And review, It's just that hasn't

4:49

provided. It sounds as it's easy

4:51

to lose, all sold over the

4:53

past six years to twelve billion

4:56

dollars and business as usual without

4:58

savings or significant investment. Mint kind

5:00

order needed to twenty one billion.

5:02

Dollars. It doesn't that money. As it moved

5:04

forward, The school

5:06

we really feel nothing about Four

5:09

thousand all speech to kick time

5:11

or guns. Soon.

5:14

As you walk us through the kinds of

5:16

housing support people get. There. Are too

5:19

kind of bisect. Almost benefits that

5:21

the government provides. One. Of

5:23

them as public housing funded by

5:25

the and com related rent subsidy

5:27

sides and few really and quite

5:29

dire need of a house and

5:31

the be really really components you

5:33

might be evicted, you might be unable

5:35

to get any has on a

5:37

private market you're gonna such thousand

5:39

one last I mean hopefully eventually you'll

5:42

you'll be I allocated a public

5:44

house so most of these are

5:46

on hold by chi or I've been

5:48

by find more up sometimes I

5:50

run by community has provided or

5:52

temps. see has been chimp but for

5:54

all intents and purposes as a tenant

5:56

me might not know the difference that

5:58

community housing place is still subsidised by

6:01

this income-related rent subsidy. The only difference

6:03

is that the government sends the money

6:05

to the chip rather than sending the

6:07

money to Kai'oara. So if

6:09

you're in really bad need, then eventually,

6:12

hopefully you'll get one of these pulses. You've

6:14

obviously got emergency housing, which has been in the news

6:17

recently, motels and stuff. That

6:20

is for people in quite a new acute need who

6:22

are unable to get a permanent place just yet,

6:24

because obviously there is that weight loss. And

6:27

people in those houses get an average of

6:30

$18,000 a year in government support for

6:32

their housing. So that's how much that

6:34

income-related rent subsidy is generally

6:36

on average worth. In the

6:38

past, we've talked about state housing, for

6:41

example. This is the modern version of

6:43

what that looks like. And we've got

6:45

roughly 80,000 households that

6:47

are in that boat at the moment. And there's

6:49

about 25,000 households that are

6:51

on the weightless for a place. There's

6:54

another form of support, which has been around in

6:56

some forms since the 70s and really

6:58

accelerated in the 90s. And

7:00

that's called the accommodation supplement. There

7:03

are more than 300,000 people who received this. And

7:06

this is a payment that goes to people who are

7:09

in the private rental market but need some

7:11

help paying the rent. It varies

7:13

depending on where one is. Obviously, rent's

7:15

varied throughout the country. And

7:18

this is substantially less generous. It's worth about $5,000 a year

7:20

per person for the people who

7:22

get it. It gets paid out like

7:24

a benefit does. And it's meant to help people

7:27

whose incomes are not high enough

7:29

to pay the rent. It's quite

7:31

controversial because really

7:33

this money goes from the government's

7:35

checkbook into the hands of

7:38

private landlords. It rolls up high

7:40

rents in the country because the

7:42

more governments pull you give to the rental

7:45

market, the more landlords will logically take. We

7:47

know the kind of research done

7:49

by the Ministry of Housing and Treasury and

7:51

the Reserve Bank kind of recently showed

7:54

that rent prices typically

7:56

mirror people's incomes. So benefit

7:59

by the accommodation. which most people's

8:01

incomes will allow landlords to boost

8:03

their rents as well. So it's

8:05

quite controversial and it creates almost two

8:07

different classes of housing support for

8:09

people because one group

8:12

gets very generous, or

8:14

I mean you don't want to say too generous

8:16

because obviously it's not quite the

8:18

life of luxury living in a social

8:20

house but relatively speaking it's quite a

8:22

lot of support if you're in a

8:24

publicly funded public housing place and

8:27

then you vote another group of people that which gets

8:29

substantially less support and is left to

8:31

fend for themselves on the private rental market and it

8:34

creates a massive problem because it incentivises

8:36

people to get into a public house and

8:38

stay in that public housing system and not

8:40

come out of it and try their luck

8:42

on the private rental market again. That basically

8:44

means that there is a one-way direction of

8:46

travel towards public housing which is putting immense

8:49

pressure on it when it's such a scarce

8:51

resource. Again there are about 80,000 places and

8:53

25,000 people on the waitlist and

8:57

it's a massive waitlist considering the

8:59

overall size of the portfolio. If

9:13

it is such a good deal, Thomas, how

9:15

does the government urge people on? So those 25,000 do

9:17

get a chance to move in. Well,

9:22

the last government built a lot of

9:24

houses and that's probably the

9:26

best thing to do. It just builds

9:28

a lot of houses. Historically you

9:31

can pull any number of

9:33

statistics out there and

9:35

you need to build more public houses. You

9:37

also need to build more private houses because

9:40

the reason people need social housing is that

9:42

they can't afford private housing and the reason

9:44

why they can't afford private housing is that

9:46

the private rental market is absolutely cooked. Unfortunately

9:48

the incentives are absolutely cooked at the moment.

9:51

We've got construction costs are actually

9:53

plateauing a little bit at the moment. They might

9:55

even be coming down but for a long time

9:57

construction costs were going sky high. We've got high

9:59

end. interest rates, which means that if you want

10:01

to build some houses to rent, you've got to

10:03

borrow money, which costs a pretty penny at the

10:05

moment, and then you've got to pay people to

10:07

build it. At the moment, it's very expensive to pay

10:10

people to do that. It's

10:12

really not a good time. But the

10:14

secret to fixing this is

10:16

to actually ensure that private housing is

10:18

affordable and public housing

10:21

is accessible. Right now, both

10:23

of those things aren't happening. You

10:25

can't get into a public housing place. The waitlist

10:27

is very long, and the waitlist

10:29

is long, partly because the private rental market

10:31

is so expensive and people can't afford it.

10:34

The new government commissioned a report

10:36

into Kaeunga Order and was chaired

10:38

by former Prime Minister, Serbil English.

10:41

What does that report look into, and what

10:43

are the headline findings from it? It

10:45

looked into the financial state of Kaeunga Order. The

10:49

Labor government was aware that Kaeunga Order financially

10:51

was in a bit of a state. Kaeunga

10:55

Order basically got caught out. It

10:57

arguably fired excessively. It grew to

10:59

be a very big organization. It

11:03

did that urban development stuff that we

11:05

were talking about earlier. It wasn't adequately

11:07

remunerated for that urban development stuff. It

11:10

asked for money to be able to do that. It

11:12

said, look, if you want us to

11:14

be a massive urban developer, you're going to need

11:16

to pay us for it. We can't subsidize it

11:18

through selling assets and then our other rental work.

11:21

We knew that there was a problem there. Serbil English was

11:23

commissioned to look into it. He

11:26

saw that Kaeunga Order had forecast

11:28

large deficits going into the future. It had

11:31

a very large debt. There were

11:33

a number of reasons for this. The staffing obviously was an

11:35

issue. He thought that Kaeunga

11:37

Order sort of did gold-plated

11:40

bills. I guess

11:42

he would know that it

11:44

was slightly distracted by things

11:46

like modular construction and new

11:49

green energy standards. It

11:51

probably should have been focused

11:54

on building as many houses as possible for the

11:56

lowest sort of cost. There were

11:58

other issues about the number of works. progress that are

12:00

head on and the amount of money it costs

12:03

to have such high borrowings before you actually

12:05

could bring the houses that you had borrowed

12:07

money to build to the market. Obviously,

12:10

if you're going to build 3,000 houses, you borrowed the money to build those

12:12

3,000 houses. When

12:16

it starts to cost you, the day you borrow

12:18

that money, you'll pay an interest on it, and

12:21

you don't actually make money for those 3,000 houses

12:23

until those houses are ready to be lived so

12:26

client order had massive borrowings but

12:28

didn't necessarily have the rental income

12:31

to sustain those massive borrowings. Client

12:33

order, just like anyone who's dabbled in the

12:35

housing market recently, has borrowed

12:37

a lot of money and is being

12:39

caught out by punishing the high interest rates.

12:42

That's really a story that is taking

12:44

place across the New Zealand housing market,

12:46

across the housing markets of the developed

12:48

world. There are a lot of people

12:50

who are up to

12:52

their eyeballs in debt and paying very high interest

12:54

rates to service it, and

12:57

for client order, that's a really big

12:59

problem. I can

13:01

rule out a mass sell-off of state houses.

13:03

We're not there with a mass plan to

13:05

sell off state houses. What we are there

13:07

to do is actually increase the stock of

13:09

social housing. It's like they've only just realised

13:11

it costs money to build houses. They

13:13

talked about the increase in debt. They didn't

13:15

once talk about the increase in assets. How

13:22

does the government respond to this report? One

13:26

of the findings we didn't mention was that

13:28

billing was very critical of the organisation's governance

13:31

and I argued it hadn't really had enough

13:33

of a focus on the financial implications of

13:35

what it was doing. The government responded by

13:38

really accepting that recommendation and

13:41

is pivoting towards using

13:43

more community housing providers and set

13:45

a client order to provide public housing

13:47

places and features. The government is committed

13:49

to the ongoing provision of public housing

13:52

and is committing to growing the number

13:54

of places that people

13:56

who need housing support can

13:58

give. How have we been? It has

14:00

nothing to do with a different method

14:02

which is community housing providers. Now

14:05

these are private, well,

14:07

not-for-profit organisations based on

14:09

the same kind or not by

14:12

the government and they also must not

14:14

charge more than 25% of someone's income in

14:16

rent and they also receive the

14:18

income-related rent subsidy from the government to provide

14:20

that. Basically the sort of

14:22

short answer is the government really isn't

14:24

that impressed with kind or or is

14:27

governance and has therefore decided to shift

14:29

the emphasis of new places, new housing

14:31

places to these community housing

14:33

providers for now. And Thomas,

14:35

from the people that you've spoken to, does

14:37

it seem like kind or not can be

14:39

fixed or are the issues just too far

14:42

gone? There is some acceptance of the

14:44

fact that the financial position is worrying.

14:47

There is still a lot of dispute over whose

14:49

fault it is, whether it's been asked

14:51

to do so much like this urban

14:53

development thing. There's also a question as

14:56

to whether it's kind or is fault

14:58

or whether the whole model is broken.

15:01

You know, kind or is run

15:03

like a really big landlord. The models

15:05

of being a landlord is broken. You

15:08

know, the only way to make money from being

15:10

a landlord is to sustain your

15:12

debt payments through rent and then

15:14

make your money when you sell the properties,

15:16

make your money through capital gains. So

15:19

there's a question as to whether the model

15:21

that or any

15:23

public housing provider operates on. There's

15:25

a question as to whether

15:27

that is sustainable for anyone, let alone

15:30

a government entity. A question

15:32

of whether it can be fixed is actually, is it worth

15:34

it to want a secondary question, but which or which one

15:36

keeps it at the bottom of it? It's

15:38

not whether it's broken. People have said that it's broken.

15:40

But the question of why it's broken is the one

15:42

that people are still litigating. Thanks for joining

15:45

us, Thomas. That's

15:51

it for this episode of The Front Page. You

15:54

can read more about today's stories

15:56

and extensive news coverage at nzherald.co.nz

16:00

The front page is produced by Ethan

16:02

Sills with sound engineer Patti Fox. I'm

16:05

Chelsea Daniels. Subscribe to

16:08

the front page on iHeartRadio or wherever

16:10

you get your podcasts and tune in

16:12

tomorrow for another look behind the headlines.