Kāinga Ora to borrow billions of dollars from Treasury division
Kāinga Ora has been given access to almost $3 billion in new loans – direct from the Treasury.
Finance Minister Grant Robertson said Treasury would be able to provide below-market financing to Kāinga Ora, which would keep the Government’s housing programme on track.
The state-house landlord and megadeveloper was returning to Robertson’s financing solutions as lending on the private market tightened.
Kāinga Ora still has thousands of developments under way. In the Auckland suburb of Māngere alone, it is overseeing up to 10,000 new builds.
Over the past five years, Housing Minister Megan Woods said Kāinga Ora had built 8370 houses and retrofitted 900 of its existing stock.
National Party housing spokesperson Chris Bishop said the Government had been forced to open new lending facilities to Kāinga Ora because it was ‘‘a basket case’’ that private backers no longer trusted.
‘‘Three months ago leaked papers indicated serious concerns about Kāinga Ora, with debt forecast to peak at $28.9 billion in 2033 before it begins to be repaid and that the new debt will not be repaid by 2081,’’ he said.
‘‘Now the Government is allowing an inefficient, bloated and dysfunctional organisation to borrow another $2.75b.’’
As New Zealand faced significant supply chain issues through the pandemic, the scale of Kāinga Ora’s construction was questioned – as many private developers struggled to buy material.
Low unemployment has also heightened cost pressures on the construction sector. With the prices of construction materials increasing, combined with the squeezed labour market, there has been a 7.3% increase for construction over the past year, according to CoreLogic’s latest Cordell Construction Cost Index.
However, Woods said Kāinga Ora’s long-term projects should offer the construction market stability as some economists predict the residential construction market will slow as inflation and rising interest rates hit.
This loan would not be a one-off, Robertson said, as he planned for Treasury to
take over financing of the state-house agency so it no longer needed to organise its own loans through the private market.
In a statement, he said Cabinet had agreed that New Zealand Debt Management (NZDM), a Treasury division that manages Government loans, could provide up to $2.75b across the 2022-23 financial year.
NZDM would continue to provide financing for Kāinga Ora into the future, so Kāinga Ora would stop issuing its own bonds and taking out loans to fund its construction projects, he said.
In a statement, NZDM said its lending should give Kāinga Ora greater financial certainty for long-term construction projects.
‘‘The cost to Kāinga Ora of private borrowing is at a premium to the borrowing cost of NZDM. This reflects the smaller investor pool and lower liquidity of the private borrowing programme,’’ it said.
NZDM would provide an update on how Kāinga Ora’s new financing would impact the Crown funding forecasts in its half-year economic and fiscal update next month.