City Housing will be insolvent by June 2023 if nothing changes. Photo / Mark Mitchell
City Housing will be insolvent by June 2023 if nothing changes. Photo / Mark Mitchell
Wellington City Council has delayed publicising options to plug its social housing arm's $400 million shortfall until after the Government has announced Budget 2021.
City Housing, which has 1927 properties and 3500 tenants, is forecast to be insolvent by June 2023.
The council is discussing options with the Government including immediate access to the Income Related Rent Subsidy (IRRS) scheme, establishing a community housing provider, and funding capital costs through the Crown's Infrastructure Funding and Financing tool.
Council papers on the matter were scheduled to be released on Friday and discussed in a meeting this Thursday, but were pulled at the last minute.
Mayor Andy Foster said the papers would now be considered in the first week of June.
"Both council and our central government agency partners will be much clearer about the options that can be recommended once the Government's Budget announcements are made later this month."
Budget 2021 will be delivered on Thursday 20 May.
Wellington City councillor Diane Calvert. Photo / Mark Mitchell
A spokesperson for Housing Minister Megan Woods said it was a matter for the council to make a proposal to the Government.
Councillor Diane Calvert, who is also chairwoman of the council's Finance, Audit & Risk Committee, has raised concerns over the delay.
At the moment the council has not budgeted for the $400 million shortfall, which is the subject of a qualified opinion from Audit New Zealand.
The council wants to wait and see what comes of its discussions with the Government first.
Calvert said councillors must have a reasonable understanding of the level of investment required for City Housing so it can be included in Long Term Plan deliberations scheduled for the end of the month.
"If we don't, then I think we've failed our duty to our ratepayers in making sure we are managing our budget in an adequate fiscal manner."
She said it was surprising Budget Day was a factor in the delay considering the date has been well signalled.
Calvert is a strong advocate for councils having access to the IRRS scheme, which she said would result in the majority of City Housing tenants paying less rent.
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.
At the moment, it's only available for new tenants going into Kāinga Ora or Community Housing Provider social housing.
In March council officials estimated about 85 per cent of City Housing's current tenants would be eligible to receive the IRRS.
If the council could have accessed this subsidy from January 1 it would increase income from $26 million to $37 million based on the current year.
That difference equates to City Housing having an operating surplus of $5m instead of a deficit of $6m.
Wellington mayor Andy Foster. Photo / Mark Mitchell
But the council doesn't just need to keep the lights on, it's also locked into an agreement to make serious capital investment.
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 council has already spent the $220m it got from the Government, which was enough to upgrade just half of the housing stock.
City Housing only has 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.
Social housing portfolio leader councillor Fleur Fitzsimons said any options for the future of City Housing would likely have a minimum lead-in time of 12-18 months and would involve renegotiating the Deed of Grant.
"We will certainly be in a much better position to make decisions once we know what's in the Budget and what the Government's response is to a different structure for City Housing."
