- Hon Chris Bishop
The Government has announced a series of immediate actions in response to the independent review of Kāinga Ora - Homes and Communities, Housing Minister Chris Bishop says.
"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.
"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 makes two broad findings. First, Kāinga Ora is underperforming and not financially viable without significant savings as well as funding and financing changes. Second, 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.
"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.
"We have today appointed Simon Moutter as the new Chair of Kāinga Ora. Mr Moutter has extensive change leadership experience as the Chief Executive at Powerco, Auckland International Airport, and then Spark NZ, where he won the Deloitte Top200 NZ CEO of the Year in 2017. He will step into the role on 4 June," Mr Bishop says.
"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.
"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."
"We thank Sir Bill English, Ceinwen McNeil and Simon Allen for their important and thorough work."
Note to Editors:
Supporting this Press Release are:
- The independent reviewers' report (attached)
- Fact sheet (attached)
- Cabinet paper (attached)
- Proactively released documents from the Treasury and the Ministry of Housing and Urban Development
