Northland Property Investors' Association

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18-02-2015

Update on social housing

(Looking for the article on Carpet Court, please go here )

As NZPIF Executive Officer, Andrew King recently attended the first of six public meetings on social housing changes in New Zealand. Further meeting dates are listed below.

Social housing changes could have an impact on the entire market. At this stage it is difficult to see if these will be positive, neutral or negative for private rental property owners.

The meeting was conducted by Social Housing Minister, Paula Bennett and Housing NZ Minister (and Finance Minister) Bill English. The purpose was to provide an overview of the reforms, including state house sales, and to discuss issues with the public and communities. At the end of March, Government will announce the areas where it is considering initial sales of state houses.

The Government will then undertake regional consultation from mid-April to the end of May, with more detailed discussions about the potential sales in each of these areas. The regional consultation, beginning in April will involve Community Housing Providers (CHiPs) and other interested groups, along with relevant iwi and hapÅ« who may have rights and interests.

This consultation will help to inform the Government whether to proceed with sales in the proposed areas and the nature of any transactions.

Ministers expect to announce areas for the first set of sales by the end of June, to be followed by commercial processes.

The Ministers first outlined the objectives of their social housing reforms. These are to:

  1. Ensure people who need housing support can access it and receive social services that meet their needs.

  2. Ensure that social housing is of the right size and configuration, and in the right areas, for those households which need it.

  3. Help social housing tenants achieve independence, as appropriate.

  4. Encourage and develop more diverse ownership of social housing, with more innovation and responsiveness regarding the needs of tenants and communities.

  5. Help increase the supply of affordable housing, especially in Auckland.

Government has already moved social housing allocation away from HNZ to Ministry of Social Development as it wanted the emphasis to be on the tenant rather than the social housing owner. Minister Bennett said that HNZ has houses in which they put people, but they want to move to a model where MSD look at the tenant’s requirements and find them the most suitable solution.

Government has also allowed registered social housing providers to charge income related rents (IRR) while topping up the rent to market levels. Previously only Housing NZ could charge IRR with Government topping this up to market levels.

62,000 households currently receive funding through IRR at an average cost of $209 per property per week. The annual cost to taxpayers is $673,816,000. Government also pays 290,000 accommodation supplements at an average $78pw, costing $1,176,240,000 per year.

Housing NZ owns 65,000 properties and leases another 3,000. Community Housing Providers (CHiPs) in New Zealand own around 5,000 properties. Currently only 131 of these properties are receiving an IRR, but this will grow. Bennett said that the cost of IRRs is also increasing as state tenants who aren't receiving an IRR are moved out and replaced with lower income families.

Any social or affordable rental housing provider may apply for registration as a CHiP, be eligible to receive IRR and bid for HNZ properties. There are currently 37 CHiPs already registered. The NZPIF met with Finance and Housing NZ Minister Bill English, who said that anyone can apply to be a registered CHiP. An evaluation panel assesses applicants for eligibility, suitability and risk.

You can see the evaluation process for registration of applicants as Community Housing Providers here: (http://www.shu.govt.nz/assets/CHRA-Documents-and-photos/CHRA-Evaluation-Process-Document-12-June-2014.pdf)

Selling state houses

The Ministers said that Government has previously focussed on the total number of state houses it has, rather than whether they are needed or not. They believe they have too many 3 bedroom properties and too many properties in provincial areas.

To correct this, Government intends to sell 1,000 to 2,000 state houses over the next year, with further sales occurring if the process is successful.

Government is looking for the best value they can get for state houses, and these will be sold by competitive tender. However there are many reasons why market rates may not be achieved for the properties.

The number of tenders will be limited as houses will only be sold to CHiPs. (Some CHiPs may choose to do this in partnership with private investors and, as indicated by the Government, it is possible for private investors to become CHiPs.)

The houses must only be used for the provision of social housing and cannot be on-sold. (Redevelopment is allowed, as long as the number of social housing properties does not decrease.)

Government has also said that the houses they want to sell are not in prime demand by social housing tenants.

Tags: social housing

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