The Kāinga Ora review was led by former Prime Minister Sir Bill English. Photo / Andrew Warner
The Kāinga Ora review was led by former Prime Minister Sir Bill English. Photo / Andrew Warner
Kāinga Ora has pushed back against the findings of the Sir Bill English review, saying the housing agency is financially sustainable and that engagement with the panel during the review was limited.
It also said the review panel had conflated concerns about the performance of the wider social housing system with Kāinga Ora’s performance, and that some of the draft findings were inaccurate and incorrect.
The review found Kāinga Ora exploited its easy access to Government credit, bingeing on borrowing without giving sufficient heed to the fiscal discipline taking on such immense debts would require.
Operating deficits were forecast to grow from $520 million in 2022/23 to over $700m in 2026/27, the review found.
Former Prime Minister Sir Bill English. Photo / Mark Mitchell
In its response to the draft version of the English report, released under the Official Information Act, Kāinga Ora’s board defended itself and said some of the findings were based on anecdote rather than proper assessment.
“There was relatively limited engagement with our organisation, leading to some review conclusions appearing to be based on analysis informed by anecdotes rather than independently covering the performance of the organisation,” the board said in a 14-page letter addressed to English.
“This kind of evidence does not necessarily recognised the complexity of the system.”
The board believed the organisation was “financially viable” after actions taken over the past three years had reset its key financial drivers, particularly construction and maintenance costs.
Describing Kāinga Ora as not financially viable failed to recognise that it retained a strong balance sheet with fungible assets and “very strong current and projected rental flows”, it said.
Prime Minister Christopher Luxon and Housing Minister Chris Bishop make an announcement about Kāinga Ora at the post-Cabinet press conference at Parliament in Wellington on May 20. Photo / Mark Mitchell
“Our longer-term financial modelling demonstrates the situation improves dramatically.”
It said prices were increasing far quicker than incomes, construction cost inflation was outpacing wage inflation and this meant “more and more people are being priced out of access to housing and are requiring some form of subsidy from the Government.
“We were being asked to [deliver] unprecedented volumes of new homes at a time where construction cost inflation was running at around 18 per cent and interest rates were also increasing at a much faster rate than our rental streams.
“Against that backdrop, we were directed not to back away from delivery, and that meeting housing delivery targets remained paramount.”
The current financial model for Kāinga Ora as set by the government included 100 per cent of the cost of new housing being financed through debt. This capital was invested into new assets and Kāinga Ora charges rent for them, it said.
“We use this rent to meet all our operating cost obligations and to service the debt. This means our level of debt is directly related to the numbers of houses we are asked to deliver.
He said Kāinga Ora was an asset owner that looked after vulnerable people but also had many other roles. However, it needed to focus on its core job of being a “good landlord”.
Kāinga Ora drove record public housing construction under the previous Government, financed by allowing the agency to borrow under its own name and through capital injections from the Crown.
But this has saddled the agency with immense debts, which the report found to be unsustainable.
“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 $4000 for this activity,” Bishop said.
