Senior Wellington journalist Georgina Campbell's fortnightly column looks closely at issues in the capital.
Wellington City Council's social housing arm will be insolvent by June 2023 if nothing changes- a reality that calls into question whether the council should be a provider at all.
The council has 1927 propertiesacross the city, housing about 3500 tenants. It is one of the largest social housing providers in New Zealand and it's in trouble.
City Housing's annual operating deficit is forecast to be $8.7 million in the first year of the council's draft Long Term Plan and is set to increase further over the ensuing decade.
There are cash reserves of $50.6m, which will allow the council to complete Healthy Homes upgrade requirements and meet the operating deficit and basic asset renewals for two financial years.
From then on the council's draft budget provides for the operating deficit to be debt-funded until a sustainable solution is agreed on.
It's a measure to keep City Housing's head above water while the council goes back to central government for help.
In 2007, the council signed a Deed of Grant with the Government committing it to remain as a social housing provider until at least 2037 and to upgrade its portfolio to modern standards.
The Government stumped up $220m and it was thought the council would invest rental income to uphold its end of the bargain.
Fast-forward to the current reality and that $220m has already been spent.
Meanwhile, rents set at 70 per cent of market rate are no longer fully covering operating costs, let alone upgrades.
Issues including rising costs due to insurance and the volatility of the construction industry have put pressure on council finances.
This has resulted in only half of the housing portfolio being upgraded.
The full cost of maintenance needs and the capital upgrade programme over the next 10 years amounts to $446m.
In short, the council has a gaping hole of $402m in its budget.
So it is now discussing options with central government, including immediate access to the Income Related Rent Subsidy (IRRS) scheme.
The subsidy means low-income tenants will pay no more than 25 per cent of their income on rent, with the Government paying the difference between that and market prices.
Wellington City mayor Andy Foster. Photo / Mark Mitchell
At the moment, it's only available for new tenants going into Kāinga Ora or Community Housing Provider (CHP) social housing.
For that reason, the council is also looking at establishing a CHP and funding capital costs through the Crown's Infrastructure Funding and Financing tool.
All this is happening while Wellington City Council's waitlist for social housing has ballooned to 500 new applications as of March 31 and 36 transfer applications.
Meanwhile, the council is undertaking a safety review of its social housing policies after a woman was found dead at a Mount Cook property on Saturday. A 42-year-old man has been charged with murder.
Wellington mayor Andy Foster has been relatively tight-lipped about what he says publicly on the financial issues while he is appealing to the Government.
But a written parliamentary question from Wellington National list MP Nicola Willis reveals Foster was a late apology for an important February meeting with ministers regarding the council's social housing problem.
This is after Housing Minister Megan Woods received an invitation from Foster himself and social housing portfolio leader, councillor Fleur Fitzsimons, to discuss the issue.
It is an extraordinarily bad look that Foster didn't show up to a meeting with Woods and Wellington Central MP and Finance Minister Grant Robertson to discuss a $402m hole he wants the Government to help plug.
The Herald asked Foster why he didn't attend the meeting.
He didn't provide a reason but did say the current long-standing Government policy discriminated against council-owned social housing.
Foster said in advocating for a resolution to the housing issue, he has met with agencies and Government representatives. He noted the frustration at getting action on a timely solution.
Housing Minister Megan Woods. Photo / George Novak
A qualified audit opinion was issued over this social housing dilemma, which basically said the council couldn't omit the costs from its budget on the basis of a conversation with the Government.
But if Foster plugs the hole through a reworking of the council budget, he doesn't exactly have much bargaining power for help from the Government.
Wellington City Council is essentially asking for a second Government bailout after kicking the can down the road.
It is unfair the council does not have access to the IRRS scheme, but the looming financial problems with its social housing stock have been known for several years.
Instead of dealing with the situation proactively, it seems to have been put in the too-hard basket.
No one is going to begrudge money spent on providing suitable housing for some of the city's most vulnerable people.
There is, however, a genuine question as to whether the council should be the one in charge of these assets.
The whole thing reads like an al-too-familiar narrative, and more than one person has said the social housing issue feels like the council's water infrastructure crisis all over again.
