Bill English to lead review of Kāinga Ora

Public Policy / news

The Government asks former finance minister Bill English to review its housing agency, which faces climbing construction and debt servicing costs

18th Dec 23, 4:10pm by Dan Brunskill

John Key watches Bill English deliver the 2016 budget: social investment was central to their welfare policy. Getty Images.

Former Prime Minister Bill English has been put in charge of reviewing the Crown housing agency Kāinga Ora’s finances and operations.

The National Party promised an independent review of the agency’s financial situation, procurement and asset management, as part of the new Government’s 100-day plan.

Housing Minister Chris Bishop said he was “deeply concerned” about Kāinga Ora’s operating deficit, which was $520 million last year and is forecast to grow.

“This deficit has a direct impact on OBEGAL and continues to put pressure on the return to OBEGAL surplus,” he said in a statement.

Kāinga Ora is the country’s biggest landlord with $45 billion in total assets, annual expenditure of $2.5 billion, and $12.3 billion of debt.

Bishop said ministers had received “worrying advice” about the financial situation of Kāinga Ora, since taking office in November.

“We are not releasing that information at this time as it is commercially sensitive, but it confirms that an independent review is the right course of action at this time”.

English was National’s finance minister and was responsible for Housing New Zealand between 2008 and 2016.

He will lead the review with former investment banker Simon Allen and engineering consultant Ceinwen McNeil.

“It is critical that Kāinga Ora is focused on efficiently building social houses for people in need while also delivering value for taxpayers’ money, and this review will be able to provide recommendations to ensure that these objectives are being met,” Bishop said.

In the year ended June, the Crown agency invested $3.5 billion, completed 2,893 homes, and had another 6,600 under construction.

Gareth Stiven, Kāinga Ora’s finance manager, said construction and maintenance costs had increased faster than rental income, putting “considerable pressure on our budget”.

The agency had developed a more efficient process to cut costs and was working on its own review of its asset management and maintenance system.

House prices have fallen significantly over the past two years and the value of Kāinga Ora’s portfolio dropped to $45.1 billion, from $48.8 billion in June last year.

Still, it had $30.3 billion net assets and was looking to take on additional debt.

“We are monitoring our capital position alongside our operating environment to ensure the pace of our investment is manageable within our overall financial parameters,” Stiven said.

S&P Global Ratings and Moody’s have both given the Crown agency an AAA rating within the past year, but only due to it being underwritten by the New Zealand Government itself.

Kāinga Ora’s “stand-alone” rating from S&P was downgraded to an A- in February and noted its gross debt and interest costs will grow substantially by 2025.

“In our view, the ratios are generally weakening as debt and interest expenses rise and EBITDA compresses,” the rating agency said

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

78 Comments

by HughJorgan | 18th Dec 23, 4:27pm 1702870025

We might find out just how must damage they did when competing for limited resources.

There $/sqm were massively inflated, well above what they just could have purchased the end product for.

Will all the c-suite be axed for incompetence? Probably not because Labour were signing it off.

by JohnfromtheTron | 18th Dec 23, 4:49pm 1702871381

This was purchased as "end product"

https://www.stuff.co.nz/national/131135304/unique-purchase-sees-kinga-o…

by kwbrn | 18th Dec 23, 4:29pm 1702870140

More sales.

https://www.interest.co.nz/property/84753/bill-english-and-paula-bennet…

by powerdownkiwi | 18th Dec 23, 4:32pm 1702870336

Jobs for our mates. It's OUR turn.

Goes with Hodgson resigning; what's the bet Nat are lining Woodhouse - that well known champion of public health - to replace.

Junket - I used to think of it as a food,

by Foxglove. | 18th Dec 23, 4:57pm 1702871874

Agree with the sentiment. To be expected. Plentiful precedent. For instance post 2017 the good Dr Cullen on tax. Used to enjoy junket actually. Came out in a big panin the dining hall at school. Nutmeg sprinkled on top, haphazardly on which detectable, multitude of finger and thumb prints. Usually accompanied by preserved plums. No one died though.

by The Person | 19th Dec 23, 4:40pm 1702957218

Jobs for the boys alright. English spent most of his time parliment trying to sell off the nation's social housing, so you already know what his conclusion will be.

I'm always far more impressed when the government reaches across party lines for such appointments, e.g. labour's use of Boldger.

by Officebound | 18th Dec 23, 4:44pm 1702871083

Of all the people they could have picked, I'm glad it's Bill.

He developed a social conscience, and was pulling the right left, especially towards the latter part of his long tenure.

Also, if you want to see Bill English being punched, you are welcome.

Bill English vs. Ted Clarke (Fight For Life Boxing 2002) - video Dailymotion

by skip-- | 18th Dec 23, 11:31pm 1702895464

My only gripe with this is that he wasn’t reserved for something more meaningful like water reform.

by JamesM | 18th Dec 23, 4:49pm 1702871366

I have had a number of commercial dealings with KO over the last 6 years.

I am not surprised that a review has been kicked off. I suspect that if the average Kiwi had any idea of the waste and professional incompetence they would be horrified.

by kwbrn | 18th Dec 23, 5:01pm 1702872116

Enlighten us. From what I can see it is a difficult task as no one wants state housing in their neighbourhood.

by kiwikidsnz | 18th Dec 23, 5:21pm 1702873284

No one wants or deserves their most significant financial asset significantly devalued at a whim by an out of control Govt bureaucracy.

Class action is justified.

by JimboJones | 18th Dec 23, 7:16pm 1702880196

So the government can no longer build social housing?

by kiwikidsnz | 18th Dec 23, 7:41pm 1702881678

Don't try to put words in my mouth, you know that I didn't say or suggest that.

by interesting1234 | 19th Dec 23, 8:47am 1702928849

While I often agree with you, in this statement you have shown the quintessential kiwi flaw in our mentality. We love the idea of being charitable and housing those in need, but only as long as it isn't next door to us. This, in turn, comes back to the expectation of never ending capital gains. Wouldd you think differently if house prices were flat for the last 20years I wonder?

by Middleaged | 18th Dec 23, 5:55pm 1702875327

A good friend of mine worked for KO until about a year ago. $120k per annum to try and appease disgruntled neighbour's once they were told what was about to be built. The developments already had consents before the neighbours were informed, so literally no benefit to anyone.

That particular friend couldn't stomach it and now has a job that actually does some good.

by morepork | 18th Dec 23, 4:53pm 1702871616

This government would do well by bringing English back into the party fold somehow, he has the expertise that the current lot lack

by IT GUY | 18th Dec 23, 8:25pm 1702884350

its just happened are you not watching......

by Cheetahlegs66 | 18th Dec 23, 5:05pm 1702872351

State housing is taken as a ‘right’ by a large group of tenants. Time to evict those who abuse the privilege and free up accommodation for those genuinely in need.

by Officebound | 18th Dec 23, 5:26pm 1702873574

Then What?

by Cheetahlegs66 | 18th Dec 23, 7:30pm 1702881056

I couldn’t care. Either step up and treat the house and neighbours with respect or piss off. Live under a bridge, buy a tent. Got kids then the children should be uplifted.

Intergenerational use of a house needs to stop. It’s a short term fix for emergencies. But hey, got 3 kids and you’re not working, pop out a 4th and just get some more money courtesy of me and others who take self responsibility as a moral and civic obligation.

by Rampart | 18th Dec 23, 8:24pm 1702884246

Please run for PM. You’ve got my vote

by Cheetahlegs66 | 18th Dec 23, 8:54pm 1702886061

Very kind. But as Te Kooti will tell you ‘I’m a POS…..racist.’

Too many skeletons in my closet.

NZ is screwed by one simple thing. A lack of personal and social responsibility. The damage and costs incurred by a minority strains our fabric-social welfare, judicial etc.

by Officebound | 19th Dec 23, 5:58am 1702918681

Are there any societies you can reference where a full reliance on social responsibility, underpinned by jail/punishment, instead of a social safety net, has led to awesome societal outcomes?

by interesting1234 | 19th Dec 23, 8:56am 1702929371

It comes back to the post WWII recovery period where there wasn't govt handouts and people had to band together to prosper. Volunteer work was common, community engagement was high and this was the norm. Today we have a society where we don't have to interact with others i person if we choose not to, we have technology that has lessened the attention span of a generation or more and results in higher levels of anxiety, depression, and withdrawal from society, as well as mass consumerism being rife and seen as an achievement. What we need is national pride and identity that has taken a large hit since 2020.

by the Joneses | 19th Dec 23, 9:29am 1702931348

Maybe less landlords and higher house ownership levels would help? Why would people treat their neighborhood or house with respect if it is transient and exists to line the pockets of the already wealthy.

Yet, all over this forum people pat themselves on their back for buying up property they don't need, to make tax free capital gains on a GST free service, while locking others out of home ownership.

We want people to take ownership of their neighborhoods, but still pay rent, allow periodic inspections of their bedroom, and leave their home when we say.

Maybe lets buy the nice big new ferry for NZ that wont cause a looming maritime disaster and let the landlords go without their tax relief dignity for a couple of years?

by interesting1234 | 19th Dec 23, 10:25am 1702934730

I'd have to agree. More home ownership at affordable levels means more affordable to have a family, means more families able to provide better for themselves and their children and more community activity for the kids. I'd hate to be turfed out of a rental every year because the landlord is selling up or 'selling up'. The stress, the insecurity, the impact on the kids etc.

by MLSmith1 | 19th Dec 23, 10:28am 1702934908

Great post... and sentiment

by Nzdan | 19th Dec 23, 7:54am 1702925665

I wouldn't necessarily have them living under a bridge. But if someone is that much of a scum bag they're evicted from a KO property, the lowest rung in society, maybe we need to house them in some semi-detached purpose built facility next to prisons.

Build them cheap from shipping containers. Communal kitchen, bathroom, toilets. Wouldn't force them to live there, but "here you go here's your new home". Either like it or here's a tent. Give society a break from these buffoons.

by Officebound | 19th Dec 23, 10:46am 1702935995

Ah, so house all those poor people with anti-social tendencies together in one place, with unhealthy housing. Gotcha.

For every time we look at our politicians, and think they are a bunch of dunce's that can't see predictable effects of their actions, remember, it could be worse, it could be this guy.

by Nzdan | 19th Dec 23, 11:22am 1702938164

How about we move some in next door to you then? Like the Nomads gang member down the road from me. Thankfully far enough away that if we're inside the house we can barely make out the shouting at any time of the day, and the constant starting up/bouncing off the rev limiter of his clapped out Harley Davidson.

But we do frequently witness him hoofing it along at, if I were to guess, 90 - 100kmh + in his Nissan Prairie. You're really advocating for hard working people to put up with that bullshit where they live? All evicting him will do is move the problem to someone else's neighborhood.

by redheadonist | 19th Dec 23, 3:11pm 1702951891

So make them homeless and take their children.

Are you Nicola or Brooke?

by The Person | 19th Dec 23, 4:44pm 1702957464

Well then it's time to complain about all the homeless sleeping in doorsteps downtown

by morepork | 18th Dec 23, 5:36pm 1702874177

Housing is a right

by Middleaged | 18th Dec 23, 6:03pm 1702875800

Yes it is. But doesn't it come with a bit of responsibility too? I suppose if we put all of the individuals who struggle to act in a socially responsible manner in the same KO development, it eventually becomes a fast-track to prison.

How then, to teach these individuals about their responsibilities without removing their rights?

by kiwikidsnz | 18th Dec 23, 6:23pm 1702876999

"Adequate" housing is a human right under the UN Universal Declaration 1948, which NZ supported. No one then defined what was adequate & global stds varied immensely, as have NZ accommodation changes over the last 75 years.

Since then the world population has trebled.

by In Vino Veritas | 18th Dec 23, 10:37pm 1702892243

See my comment to morepork. Everyone in NZ already has the right to housing. They don’t have the right to expect someone else to pay for their house.

by In Vino Veritas | 18th Dec 23, 10:36pm 1702892172

And there is no one in NZ that doesn’t have a right to housing morepork. I think you are not differentiating between the right to a house, and not being able to afford one. Having the right to housing doesn’t imply that someone else has to pay for your house. Doh.

by powerdownkiwi | 19th Dec 23, 7:12am 1702923142

Morepork: given an unlimited - or even just overshot - population, there are NO rights. How can there be?

That's just one-species arrogance.

by Blackbeard | 19th Dec 23, 7:49am 1702925345

If you evict them, they’ll cause social unrest.

by Cheetahlegs66 | 18th Dec 23, 7:34pm 1702881262

More likely they will behave responsibly (ever do slightly) and be forced into private rentals.

NZ needs to grow a set. Tenants intentionally damaging a house (private or public) should be obliged to pay immediately or be incarcerated.

by Rampart | 18th Dec 23, 8:25pm 1702884347

That’s what jails are for. Enough of this be kind to them attitude. It doesn’t work. Play by the rules or you’re off to jail.

by In Vino Veritas | 18th Dec 23, 10:38pm 1702892328

“They” do that now Blackbeard. If they get booted out, they just won’t have a ho,e to go to to have a cold beer to celebrate.

by K.W. | 18th Dec 23, 5:10pm 1702872638

They need to set up a tip line, so we can call and tell them about the obscene amounts of money that KO overpaid for houses and land. I've got a few stories.

I think KO has a mission to install as many drug addicts and gang members in to prime housing in wealthy suburbs in the belief that this will enhance "equality of outcomes". It is not an efficient use of taxpayer money.

by Officebound | 18th Dec 23, 5:29pm 1702873779

First off, there are more social development sites in poorer areas than wealthier areas, so any perception of undue placement is just near-sightedness.

Also, If you think they are genuinely acting with malice - have a read. Hanlon's razor - Wikipedia

by Cheetahlegs66 | 18th Dec 23, 8:59pm 1702886370

Is it possible that KO housing whilst based primarily in lower socioeconomic deciles by absolute number, is actually over represented in middle-upper income areas ie if 10% of suburbs are ‘wealthy’ do KO have a heavier weighting here? Premise not statement.

KO have been clear they want to integrate tenants into neighbourhoods. Porirua is already a slum maybe KO are sharing the love and becoming upwardly mobile.

by Officebound | 19th Dec 23, 8:19am 1702927142

Possible, but not accurate.

The previously available maps of HNZ sites (there was a Linz link floating around) showed they are 10:1 more predominant in poorer areas, by any measure. There was a rare sprinkling in upper (and even middle class) areas, and huge swathes in poorer areas.

This is the case for at least Wellington and Auckland.

PS - Really keen to get feedback on my earlier question to you about any societies that actually did well removing the social safety net.....

by powerdownkiwi | 19th Dec 23, 9:01am 1702929695

There aren't any.

But sometimes it's hard to filter - the histories are mostly about the Elite, and written for, if not by, them.

Then every now and then, there a Bastille-storming. Or a MAGA. Or just riots. Beyond a certain point, the wealth-pump goes into reverse - but the Elite seldom anticipate that.

by BeeBop | 19th Dec 23, 9:22am 1702930923

Singapore when it decided not to join with Malaya.

by The Person | 19th Dec 23, 4:49pm 1702957784

That the same Singapore where 70% of the population live in social housing?

by MLSmith1 | 18th Dec 23, 6:59pm 1702879180

Be interesting to see what happens here… a lot of businesses relying on KO

by KH | 18th Dec 23, 8:39pm 1702885171

"..... slot of businesses relying on KO....". Yes. And much of it is because of civil service madness as they littered the place with cash in irresponsible ways.

Where spending was the KPI.

by 1689 Baptist | 19th Dec 23, 7:06am 1702922810

Have K.O. as a client. They have never once questioned a quotation or negotiated down the price. It is a niche service so I doubt they have prices from other competitors. This is for transactions in the range of 50 to 100k.

by IT GUY | 18th Dec 23, 8:37pm 1702885073

I think the there will be a reduction of spend....

by KH | 18th Dec 23, 8:42pm 1702885331

So pleased it's Bill. Not just for the money side, but his post election work in analysis of the actual benefit.

To often the spend has been to make us feel good. Actual benefit not apparent.

by Hastings | 18th Dec 23, 8:52pm 1702885956

A long winded pantomine and the ultimate goal for this miserable government…package and privatise. Give the plebs some loose change and let them eat cake.

by interesting1234 | 19th Dec 23, 10:28am 1702934924

Wrong, they have the gargantuan task of discovering all the excess spending by the previous government which was let go too far and now they have to reign it in. You see it in business all the time with larger organisations. Costs trend up over time until the clients or providers get a crackdown then costs drop immediately to manageable levels and over time they creep up as providers/clients find ways to invoice that doesn't get caught, rinse and repeat. Happens across all govt departments really, however with the huge increase in land and building cost accompanying all of this, this is why they have to reeeally crack down and demand value for money.

by treadlightly | 19th Dec 23, 11:00am 1702936830

The housing market is driven by the money which the banks create as credit and then lend out as mortgages. Around $350 billion created by them out of thin air and lent out on housing. Money Creation in NZ https://www.rbnz.govt.nz/-/media/518b0156a77949d08cfee13723f98974.ashx

by interesting1234 | 20th Dec 23, 8:46am 1703015189

I would consider the land and building cost for KO to be the biggest factor, let alone the level of staffing and salaries they were dishing out over the last 3 years (have friends who worked there in 120-150k roles, left as they got bored of the lack of challenge despite the salary). The level of credit creation isn't the primary factor in land cost which have increased exponentially for a variety of factors.

by sharetrader | 19th Dec 23, 6:45am 1702921515

watched a podcast where BE said if we don't get our policies right on housing and lower the entry cost for owner occupiers then it is inevitable that we will end up with a capital gains tax as the amount of people that see the system is unfair grows to outnumber the owner class, i thought we got close this election so i am guessing two more elections as auckland already contains the lowest number of OO and is the biggest voter base. it always amazes me when right wing politicians leave the system suddenly move left or are they just showing their true nature and don't have to worry about getting votes anymore.

by 1689 Baptist | 19th Dec 23, 7:12am 1702923120

The average EBITD for K.O per dwelling is $2000 p.a. For a private landlord it is around $30000. Over 80000 social houses.means that Kainga Ora is losing the taxpayer, 2.4 billion a year compared to private landlords.

by Nzdan | 19th Dec 23, 7:58am 1702925937

Great. Now run the math on our other state social services such as Health and Education.

Are you expecting K.O housing, predominately occupied by beneficiaries, to be a profit center?

by Officebound | 19th Dec 23, 8:02am 1702926162

Which is about a sixth of what we spend on pensions right?

by Officebound | 19th Dec 23, 8:03am 1702926237

Also, lets not forget the private landlords earnings are subsidised by the taxpayer (Accom supplement, Pensions, Benefits)

by Sluggy | 19th Dec 23, 8:26am 1702927580

Accom supplement 1.5b a year.

The entire rental (housing) market is an overpriced debacle

by mja | 19th Dec 23, 8:27am 1702927649

I have always thought a good first step, regarding long term maintenance. Would be to only buy brick and tile properties. To avoid the need repaint the exterior every 10 years or so.

by powerdownkiwi | 19th Dec 23, 9:04am 1702929856

What most folk don't realise, is that energy underwrites society.

And the quality of that energy, is diminishing.

So housing will be valued, more and more, by how energy-efficient it is - probably how good it is in passive-solar terms. Brick and tile don't do well in that regard, typically.

by USKiwi | 19th Dec 23, 9:28am 1702931334

I had the frustrating experience of ending up in a bidding war with Kāinga Ora for a family home we were keen to buy. They had no issues going above market valuation which was hugely frustrating as my tax dollars were being used to outbid me. They should have no ability to offer above market valuation.

by treadlightly | 19th Dec 23, 10:51am 1702936296

That's not how a governments finances actually work despite the constant misinformation that we are given. Taxation doesn't finance anything, it only returns money back to the government to be cancelled after it has been spent. We spend the governments money and it doesn't spend ours. If you are American where do you suppose that all of those trillions of US Dollars came from but the government itself and the same with the NZ Dollar, it comes from the government when it spends and makes payments and so your tax dollars were not outbidding you.

Levy Economics Institute, can taxes and bonds finance government spending? https://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-…

by GetFeeling | 19th Dec 23, 10:14am 1702934068

Kainga Ora will be sold. The outcome is assured.

National and ACT didn't get all those 'donations' from real estate interests for nothing. This is probably the worst kept secret among National and ACT policy makers ever. Just about everyone knows.

Enjoy your tax cuts. Once again, the poor will pay for them.

by GetFeeling | 19th Dec 23, 10:18am 1702934280

Bishop said ministers had received “worrying advice” about the financial situation of Kāinga Ora, since taking office in November.

“We are not releasing that information at this time as it is commercially sensitive, but it confirms that an independent review is the right course of action at this time”.

I call b.s. Bishop.

The fact that you are not releasing anything to confirm your maths - which has been proven wonky, repeatedly! - simply confirms it.

by Dale Smith | 19th Dec 23, 10:36am 1702935372

There are three fundamental flaws in how Kainga Ora operated.

1) Public entities are less efficient than private ones, especially since the economies of scale which you would think would mean they are more efficient is actually a U-shaped curve and not linear, ie after a certain point size becomes less efficient.

2) As others have pointed out, they were just in competition with every other private builder for a limited resource and they had an open checkbook.

3) Since the cost of living is not enough to cover an increasing number of people's living costs, including housing for those in lower economic cohorts, regardless of being a private or public landlord, then a subsidy is needed to bridge the deficit. And of course, Kainga Ora's main focus is this demographic.

Thus the question that Bill English will be looking at, is not that there is a deficit, but how big should it be per unit built?

It's for other parts of the economy to be working well enough that the total number of houses required to be built by Kainga Ora is as low as possible, and this also includes housing that is needed to be supplied by councils and 'not-for-profits' (which is an oxymoron).

by FCM | 19th Dec 23, 11:11am 1702937463

I guess back in the day the government actually Built the house, now they have hundreds if not thousands of staff pushing paper around trying to work out where, how to build the house, then they hire a builder after the paperwork has changed hands thousands of times to do the work. Too many middle people, the private sector cuts these out as quickly as they can or they would'nt survive.

by treadlightly | 19th Dec 23, 12:58pm 1702943936

That's been the philosophy of the last forty years, to get the government out of doing anything for us and then the free market will then solve all of our problems, the trouble is that it hasn't worked and now the new government seems preoccupied with continuing this failure.

by FCM | 19th Dec 23, 1:41pm 1702946461

Maybe but increasing the Public sector employment force has'nt exactly worked in the last 6 years has it.

by redheadonist | 19th Dec 23, 3:50pm 1702954219

Meanwhile, back in reality...

https://twitter.com/musicalchairs14/status/1728870962022822244

by Nzdan | 19th Dec 23, 4:05pm 1702955108

Means little unless you factor in the full context. For example, before the GFC unemployment was 3%. From 2008 to 2015 unemployment peaked at 7% and stayed consistently above 5%. So the % of public sector jobs would increase as ratio of total jobs IF it's the private sector laying people off.

Meanwhile, we've gone from 5% UE in 2016 to 3% in 2022, and yet that public sector % graph is still spiking up. Which suggests the public sector hiring frenzy is likely soaking up unemployment?

https://www.macrotrends.net/countries/NZL/new-zealand/unemployment-rate

by Property Leader | 19th Dec 23, 12:46pm 1702943168

I looked KO’s annual report a f by ew years ago. I added total declared rent plus total annual subsidies just for income related subsidies then divided that figure by the number of their rentals. It was easy to see that their tenants are receiving four times the amount of rental assistance than my beneficiary tenants. Government financial assistance should be based on people’s needs not who their landlord is. I know of some CHP’s who are laughing all the way to the bank.

by nigelh | 19th Dec 23, 2:02pm 1702947752

Before BE lost the general election MSM were all over him and the Nat govt about a housing crisis. I'd have rated it as a serious issue, not a crisis. Unfortunately BE went around with his trademark grin as if there was no problem. Don't even recall him having acknowledged the problem, or at the very least saying National were mitigating the issue by doing such and such.

Someone with a better memory can amplify or modify my recollection.