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Crown housing agency may have to bid against private housing providers to secure funding for future state homes

Property / news
Crown housing agency may have to bid against private housing providers to secure funding for future state homes
housing development

The Government’s housing agency, Kāinga Ora, faces a complete overhaul after a review by former Finance Minister and Prime Minister Bill English found it would need billions of dollars in new funding to continue.

It is likely the Coalition Government will invite charities, such as the Salvation Army, and private investors, like Community Finance, to bid for housing contracts.

English’s report said Kāinga Ora had been governed poorly and was not financially viable without billions in cash infusions from the Government over the next four years. 

Treasury’s Half Year Economic and Fiscal Update forecast its operating deficit was likely to hit $700 million by 2028 due to higher interest on its debt and increased staffing costs. 

Debt levels had been internally projected to grow from $12.3 billion to $23 billion by 2028. 

This would require the Government to provide over $21 billion in cash over the next four years to cover both operating losses and capital expenditure. 

“The rapid escalation of spending and debt, along with other stakeholder issues, has raised concerns about Kāinga Ora’s performance and financial sustainability,” the report said.

While it had increased its ability to build more and better quality homes, and faced a raft of pandemic-related challenges, that didn’t fully explain the cost escalations experienced. 

“Weakened governance, access to debt and low levels of accountability have all contributed to the forecast deficits and debt mentioned above,” the report said.

Bill English and two co-authors said not only was Kāinga Ora financially unsustainable, it was also “not delivering the homes and support people need”. 

Cabinet has already agreed to replace the board, simplify the agency’s instructions, and ask for a credible turnaround plan to eliminate operating losses. 

Further recommendations made in the report will also be considered. This includes throwing open the door to other housing providers to compete with Kāinga Ora. 

This could mean the Ministry of Housing and Urban Development would contract Kāinga Ora or other housing providers based on who could offer the best value for money. 

“This will subject Kāinga Ora to greater contractual tension, with the purchaser able to apply scrutiny to Kāinga Ora funding requests. If [it] is not performing under that contract, the purchaser can allocate funding elsewhere in the system,” the report said. 

Allowing the private and not-for-profit sector into the provision of social housing would help to deliver alternative solutions and force the Crown agency to be more thoughtful. 

However, the Government would have to stop “subsidising” its operating losses in order to level the playing field with these other potential providers. 

Blue blood

Former Labour MP, Mark Gosche served as chairman of the board for the past six years but resigned in February after the Coalition Government took office.

He will be replaced by Simon Moutter, the former chief executive of Auckland International Airport and Spark NZ. The rest of the board will also be “refreshed” in July. 

This new governance team will be expected to present Cabinet with a range of options that could stem the annual losses and avoid racking up so much debt in November this year. 

Housing Minister Chris Bishop said there wouldn’t be a “mass sell off” of state houses as part of the turnaround plan but he wouldn’t commit to growing the total number.

It wanted to increase the total number of “social houses” but was agnostic about who provided these places. It could be Kāinga Ora or community organisations. 

Bishop said the agency was paying more on average to build housing than equivalent developments were costing in the private sector. 

The report said Kāinga Ora’s redevelopment costs were $35,000 per home more than developer-led acquisitions when the cost of land was excluded. 

It may also have been paying above market value for land and holding parcels which are not financially viable to develop — the cost of which has not been factored into decision-making. 

Financial forecasts presented to the board were based on assumptions that more Crown money would be provided to fund any shortfall in its cash needs. 

The report said it was “effectively banking on future government funding to bridge the gap”. 

Over the last five years, it has built on average 2,400 gross homes each year, growing the stock by a net 1,600, but that was short of its target for 4,600 new build homes each year. 

Selling state homes? 

Opposition parties were quick to suggest the Coalition was secretly planning to sell off state homes, despite Bishop saying otherwise.  

Green Party housing spokesperson, Tamatha Paul said the National-led Government was trying to create the social licence to sell down the stock of public housing

“Now they are gearing up to put public housing in the too-hard basket, with an arbitrary focus on short term finances, rather than a commitment to use public housing to end homelessness and guarantee everyone a decent place to live,” she said in a press release. 

Labour’s housing spokesperson, Kieran McAnulty said his party had added 14,000 public housing units to the total stock during the six years they were in government. 

“To do that you need funding. It is not cheap to build houses. And in order to solve the housing crisis, the Government has to put money in, they can't leave community housing providers by themselves,” he told reporters. 

Bishop said part of the problem was that Kāinga Ora had been given an “enormous number of tasks” which had distracted from its core business of housing vulnerable New Zealanders. 

He acknowledged costs incurred by the agency were part of meeting the housing crisis, but the projected $23 billion of debt would weigh too heavily on the Crown’s balance sheet. 

Finance Minister Nicola Willis has set a goal of keeping net core Crown Debt between 20% and 40% of gross domestic product — it is currently 43.5% and expected to trend downwards. 

The previous government used a different debt measure and rule but it was equivalent to keeping net core Crown debt below 50%.

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I love it how the greens never have a financial model to support their ideology beyond "tax the sh*t out of everyone" 


Wanted: everything

Financed by: someone else

*Queue long sidetrack thread string about boomers and super*



“However, the Government would have to stop “subsidising” its operating losses in order to level the playing field with these other potential providers.”

Providing social housing is not a business for profit. Have they lost their marbles??? If it was we wouldn’t have a social housing crisis now and the private sector and community providers would have solved the problem already.

Yes we need all the community housing providers involved to dig NZ out of this crisis, but they don’t have the economies of scale or regulatory powers to do more than assist.



I think you will find there numerous developers out there that are so much better at delivering than a government controlled one. Developers will benefit but as long as the tax payer does as well then that will be a win win, developers also employee people and pay tax back. But there have been many people on this site saying for a number of years how KO pays way above market rates for land and properties and have pushed the market up, so not sure how that is good use of tax payers dollars.


I have no problem KO using private developers or government also having private developers bid for funding to build social housing. We need all the help we can get. 
But the private sector would  face similar land constraints and prices as KO given the urgent need to build houses.


Yes we need all the community housing providers involved to dig NZ out of this crisis, but they don’t have the economies of scale or regulatory powers to do more than assist.

Too bad we've lost the wherewithall to do this for over half a century.


Yes, logic is not their strong point.

The issue is in NZ, that irrespective of who supplies te housing, they are all paying a multiple greater than they need to. And it does not matter whether one is more efficient than another because, in a restrictive system, any efficiency is captured by the most restrictive parts, namely the cost of land, followed by consenting issues.

The only comparison KO, Community providers, and private developers/landlords can make against each other, is one is less worse than the other, but the trend is things are getting worse over all.



“He acknowledged costs incurred by the agency were part of meeting the housing crisis, but the projected $23 billion of debt would weigh too heavily on the Crown’s balance sheet.”

what do you expect when you sell off social housing in the first place and then run unsustainable inbound immigration rates.  National simply has no clue how to run the country.


The development of new social housing at affordable rent requires a subsidy. You can choose where / when to give that subsidy. Options include:

  • Cheap discounted debt (State offered 3% mortgages for State, farm, army, employer housing for decades in NZ)
  • Long-term discounted lease of land (retained on Crown / Local Govt / iwi balance sheet) or gift of land
  • Funding for Local Govt to provide supporting infrastructure
  • Straight development grants
  • Completion bonuses
  • Long-term, guaranteed subsidies for rent

My general view is that subsidised rent should be avoided like the plague and that Govt should focus on the first few on that list. Then, by all means, make it a level playing field between KO, CHPs, etc.

The challenge for Govt though is making sure that the standards and rules are clear - what is affordable / social rent? How do you tie in a commitment to affordable rent for decades? What rules apply to waiting lists, priorities etc? How do you avoid a charity sucking up all the gifted land / subsidies in a given town and then only renting houses to a specific demographic group? 

The challenge for the housing provider is about scale and delivery. In my experience, successful social housing gets delivered when strong partnerships form over time between developers, builders, major contractors, local Govt, housing organisations and social services (getting close to vertical integration). How realistic is it in little old NZ to get several of these collaborations working in the same city / region? The major social housing orgs in the UK have 100,000+ homes and have spent decades forming the partnerships they need to get stuff done.


Anecdotally third parties like the Salvation Army and other charities currently deliver social housing cheaper than the government.

Which is kinda piss poor, the government should be able to deliver housing cheaper than anyone. They make the rules.

None of this should be beyond the government. We shut down the country for a couple of years at the snap of a finger, housing should really be an almost emergency level state response.

Good news is, it's basically the same or worse most places. Not to make excuses, we can always break from the pack.


Private landlords are far cheaper on the economy than KO, not just charities. I worked out from the statements that KO makes a 25k LOSS per year on each social house. It's absurd.


My experience with HNZ a decade ago was horrible, late payments (2-3 months) for works signed off by all parties. HNZ managers playing musical chairs with projects. Contract terms up the wazoo. Just a mess. HNZ nominated consultant costs running up to 30%+ of the total project cost.

Privately this just isn't feasible. Consultant costs need to be capped well under 8% for one offs, get a regular crew together with some volume plus a good design and you'll get those down to 3 or 4%.

Simplicity living is making a good go of it, they've delivered more housing units per dollar invested than the last Govt's did. 

Few other smaller developers also. 

HNZ needed its rotten corrupt inept useless spine ripped out years ago, and its just been fed more money to fester and grow. 







and how much does the government support private landlords , they are now paying 3 B a year in accommodation supplement (which they have called unsustainable and 725 ml a year in interest deductibility and today was revealed they are taking away the grant for first home buyers, cant have those pesky FHB competing against landlords for properties


The sad thing is, it's only $10k per person so while every little bit counts, on houses that are over $500k you're talking a couple of % towards the purchase price.

Hardly competition when Landlords can just magic up a deposit from equity and have the tenants pay for it.  


I agree with the underlying thoughts in this report. There was no accountability at Kainga Ora to review the effectiveness of the spending. Yes, social houses needed to be build desparately but not at all costs. Last year I attended a community event organized by Kainga Ora to present their in the neighbourhood I live in. Several coffee and food trucks, handing out free beverages and food, were attending the event to make sure people did turn up. Just an example off the 'at all costs thinking' at Kainga Ora. I suspect those empty lots of land in my neighbourhood will stay empty a little bit longer.

Other comment I like to make is that National should not bet too much on private developpers. Below are a couple of MSM article about Kainga Ora needed to bail them out ti protect the projects.……


Watch Simon Moutter take a knife to the HNZ staff.  I wonder how many extras HNZ took on in the last six years.


I've attend lots of meetings with KO on developments where they would turn up with internal staff who then ending up arguing with an equal number of consultants they'd brought along. Was an absolute mess and embarrassing. Gave the impression of the blind leading the blind. These people were all on high paying salaries ($150k+/yr) or contract rates ($150+/hr). This was particularly apparent in the 2020-23 period where KO and HUD were scaling up after being underfunded for the past decade. I accept KO was under resourced for a long time and had a lot of catchup to do, but Labour's (well-intentioned but irresponsible) approach of just throwing money at a problem did not fix things. Its good the new government is looking to reduce wasteful spending, but I hope they don't throw the baby out with the bath water. Its not in our collective interests to have huge swings in approach. Fingers crossed something sensible comes of this.