Housing Minister Chris Bishop outlines Government plans to make is easier for community housing providers to get finance

Housing Minister Chris Bishop is considering getting the Government to lend directly to community housing providers. Photo / Mark Mitchell

The Government has unveiled how it’s going to make it easier for community housing providers (CHPs) to get the money required to do more of the heavy lifting in providing social houses.

Housing Minister Chris Bishop wants to “level the playing field” between the state provider of social houses – Kāinga Ora Homes and Communities – and those in the private sector who rent houses to low-income tenants.

He recognises Kāinga Ora, with the backing of the Crown, can borrow at much lower interest rates than charities and other investors that provide state housing.

So rather than continue relying heavily on Kāinga Ora to build social houses, which a Labour government would be more inclined to do, he wants to make it cheaper and easier for CHPs to secure the finance required to do more themselves.

“The last government was obsessed with state housing,” Bishop said.

“I don’t care who builds social and affordable houses, as long as they get built.”

Labour’s housing spokesperson Kieren McAnulty criticised Bishop, saying the speech he gave at an event for CHPs should’ve been titled: “We want you to build houses, but we refuse to spend money so you’re on your own.”

He took aim at Bishop for not actually committing to building more public houses, nor making a concrete commitment to providing CHPs with more funding.

The Government is considering tweaking the contracts it has with CHPs to remove some of the risk their financiers will weigh up when considering whether to lend to them.

It also wants to try to get the Reserve Bank to change the amount of capital it requires banks to hold in relation to the money they lend to CHPs. If the Reserve Bank enables banks to treat CHPs as being lower risk, CHPs should find it easier to secure lower-cost loans.

And, the Government is looking at getting directly involved in helping CHPs by lending to them or providing their financiers with guarantees.

“Kāinga Ora can borrow at a small margin above the Crown’s cost of financing, while CHPs effectively get access to finance only at commercial rates," Bishop said.

“CHPs having access to finance that is not unnecessarily restrictive will give them a stronger economic case for building more social houses, and makes progress toward CHPs and Kāinga Ora working on a level playing field to deliver social housing...

“The truth is we won’t solve our housing crisis through the Government alone.”

The details

Over the next three to four months, the Government will consider lending to CHPs, either directly or through a new Crown intermediary.

It will also consider providing lending or guarantees to private lenders.

“I have requested that Treasury, with support from the Ministry of Housing and Urban Development, report back to me early next year with details on a fulsome credit enhancement proposal for consideration next year,” Bishop said.

“Depending on what that looks like, it also may take some time to implement.”

Another avenue being explored is getting CHPs to lease new builds from private developers and investors, and rent these out to social housing tenants.

“There is already significant interest from private developers and investors in partnering with CHPs to help them deliver and operate social housing,” Bishop said.

“Over the coming months and into the new year, the Ministry of Housing and Urban Development will review and reset its framework for leasing.”

Turning to the way the Reserve Bank regulates banks, Bishop recognised the complaint from CHPs that banks put lending for social housing in the same camp as lending for other commercial endeavours.

Because this kind of lending is deemed riskier than lending to regular residential property investors, banks have to hold more capital in relation to it. They cover this cost by charging CHPs more.

Bishop said Finance Minister Nicola Willis would soon ask the Reserve Bank to review the amount of capital it requires banks to hold for different types of lending, and prioritise work on lending for social housing.

When in Opposition, governing parties criticised the Labour government for tinkering with the way the Reserve Bank regulates banks to support its policy objectives. In Labour’s case, the objective was to support first-home buyers.

The Government is also committing to changing the contracts it offers CHPs.

The Ministry of Housing and Urban Development pays CHPs an “Income-Related Rent Subsidy” to make up the difference between the rent they receive from their tenants and the market rent for their property.

Bishop is getting officials to look at ways of giving financiers more confidence this subsidy will provide CHPs secure streams of revenue over a long period.

And, he’s committing to making another subsidy (the “Operating Supplement”) for CHPs that build social houses available up front, rather than over time.

“The purpose of this upfront funding is to unlock the equity CHPs require to raise debt finance where they otherwise wouldn’t have been able to,” Bishop said.

Coming back to McAnulty, he said, “Labour delivered more than 14,000 public homes over the six years we were in government, alongside the community housing sector.

“What have we seen from National so far? Auckland set to lose 199 public homes and Canterbury set to lose nearly 100.

“This is what happens when you cancel projects and pause hundreds of others. We can’t forget the last National government ended up with 1500 fewer public homes than it started with and sucked out $576 million in dividends from Housing New Zealand.”

CHPs currently operate around 13,700 social homes across New Zealand.

There are around 21,000 people on the social housing waitlist.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in Government and Reserve Bank policymaking, economics and banking.