NZ’s two-tier social housing
Council housing is a sinking enterprise, and thousands of tenants are paying the price. Who is to blame, and can it survive? Ethan Te Ora reports.
Debbie Port is less equal than other social housing tenants. The 45-year-old feels that injustice deep in her bones, like she does the penetrating cold at her flat. She feels the sting each week, in her bank account, when the rent comes out.
And she is far from alone in that predicament: there are thousands of people in social housing, potentially more than 10,000, on the wrong side of an arbitrary policy line.
In 2013, the National government passed the Social Housing Reform Act, rejigging who was eligible to receive the income-related rental subsidy, otherwise known as the IRRS. The current Labour Government, since taking power in 2017, has kept those settings in place.
Anyone who gets the IRRS pays no more than 25 per cent of their income on rent, while the Government tops up the rest. The subsidy was already available to tenants of Housing New Zealand, since renamed Ka¯ inga Ora.
But those 2013 regulations extended the IRRS to new tenants of community housing providers (CHPs), at the expense of council housing tenants, who were explicitly cut off.
Numerous housing experts fear that decision has set council housing on an unstoppable path to oblivion. In the meantime, some of the poorest people in the country are paying the price.
Port pays $199.50 a week for her flat in a rundown block owned by Wellington City Council. That is equivalent to 59 per cent of her income; $336.65 a week from a supported living payment. (Port has several health conditions, which mean she cannot work.)
Yet if she moved into an identical flat, on the same street in Berhampore, with exactly the same income, but her landlord was Ka¯ inga Ora, her weekly rent would be $84 –
$115 cheaper than it is now.
The change of landlord would make her eligible for the IRRS, meaning her rent would be capped at
25 per cent of her income, with the Government covering the rest. Alternatively, if her landlord was one of 90 accredited community housing providers (CHPs) around the country, her rent would also be $115 cheaper.
Wellington City Council agrees her rent is too high. Its own rent review found tenants were paying more than they could afford. Yet the council has signalled its intention to set Port’s rent even higher, with an increase of $20 a week from September 6. That will effectively wipe out a recent $20 benefit increase she received.
Port receives an accommodation supplement of $84, reducing the gap between her rent and a Ka¯ inga Ora equivalent to $31.
When her rent increases in September, the supplement will too. But that extra assistance maxes out at $105 for people in Wellington, meaning the next time her rent increases to match market rates, the supplement won’t.
Otago University Associate Professor Nevil Pierse says that spectrum of inequality gets worse.
‘‘Thirty-one dollars sounds at the low end of that. I’ve seen much bigger examples. I’ve spoken to people who have become homeless due to the increase in rent.’’
Wellington City Council agrees. It estimates about 85 per cent of tenants would be eligible for the IRRS, based on incomes. That’s almost 3000 people. The scale of the issue balloons out even more when you consider there are thousands more tenants in council housing around the country, as well as many historic CHP tenants, who also can’t access the subsidy.
In 2007, Wellington City Council entered into a $400 million memorandum of understanding with the government for upgrades to its housing portfolio over the following 20 years, including insulation and double-glazing. But, as costs increased, the second stage of that plan stalled – including upgrades to the Granville Flats.
‘‘It’s like walking into a freezer,’’ Port says of her one-bedroom apartment. ‘‘If I had a choice, I’d be gone.’’
Her rent is based on market rates in her area. The council charges its tenants 70 per cent of that rate, and discounts the rest.
Because of these discounts, its housing operations run at a yearly $6m deficit. Access to the IRRS would reverse those fortunes dramatically, resulting instead in a $5m surplus each year. That extra money could be used to upgrade the council’s outdated housing stock and build more houses.
‘‘The answer lies in the hands of the Government,’’ says Wellington Mayor Andy Foster.
Why doesn’t the council discount its rents more?
It cannot afford to charge less. The current discount is bleeding its housing unit dry. And, unless something changes, the secondbiggest landlord in the country, responsible for some 3500 tenants across 1931 properties, will be insolvent by June 2023.
This fiscal bind is part of a larger trend for councils around the country. At their peak, in 1991, councils maintained a combined 15,000 properties. Those portfolios
had been built up since the late 1930s, in partnership with the government, which funded the developments through interestfree loans.
That partnership, however, came to an end in 1991, when the government withdrew financial support without warning. Most councils provide social housing on a rates-neutral basis, meaning they have struggled to find money for housing ever since.
If council housing was already dying, the 2013 regulations have driven nails into the coffin. The latest stocktake, from the Ministry of Social Development in 2018, counted 12,000 council-owned properties. If you remove properties that have instead been leased to other providers, the number drops to about 9000.
Foster says there is a simple solution to this problem: the IRRS. ‘‘I had to explain to them [council housing tenants] the way our rents are set, and that, at the moment, they are not eligible for the IRRS. That puts them in a position where they can’t afford their rents, and we can’t afford to run our portfolio.’’
Ashok Jacob, an advocate with Wellington Renters United, says the 2013 changes were written without reason. ‘‘For no reason other than the government said it should be more expensive for them [councils] to do it than community housing providers.’’ The effect, though, was housing became unsustainable for councils, tilting the balance towards privatisation, he says.
Couldn’t councils register instead as community housing advisers to access the subsidy?
In lockstep with the decline of council housing, CHPs have flourished. At the time the subsidy was extended, there were an estimated 10,000 people in community housing across 52 CHPs. Today, there are an estimated 30,000, spread across the portfolios of 90 CHPs.
The law explicitly forbids councils from registering as CHPs. But in practice, several councils have found ways to do this.
Christchurch City Council led the way. In 2016, it leased its 1900 properties to the O¯ tautahi Community Housing Trust.
The council’s historic tenants still weren’t eligible for the IRRS. Since then, 41 per cent of that tenant base has turned over, with the new tenants able to access the subsidy. There are still 1235 people who cannot.
In the meantime, the cash injection from the IRRS had allowed the provider to invest in its housing. But life isn’t all rosy, with the trust recently tearing up the award-winning garden of a tenant, and ongoing complaints over violence.
Christchurch City Council officer Bruce Rendall says the inequities in rents remain pronounced, too. ‘‘You can have two neighbours in the same complex – one paying 25 per cent of their income, the other paying 65 per cent of market.’’
Auckland Council devised a similar solution, partnering with the Selwyn Foundation to establish Haumaru Housing as a CHP, in 2017, which now manages its 1400 rental units. Former deputy mayor Penny Hulse, who chaired the
committee that made the decision, says ‘‘the whole change was to deal with the barrier of the IRRS’’.
Hamilton City Council sold its
344 housing units for $23.5m in
2015. Councillor Martin Gallagher was one of two councillors to oppose that move at the time.
‘‘It is a tragic lost opportunity,’’ he says. ‘‘We could’ve maintained control, developed those units into different forms of community housing.’’
Tauranga City Council decided to sell its 246 units in
2018, with Ka¯ inga Ora likely to be the buyer. The council referred to ‘‘climbing an uphill battle’’ without access to the IRRS.
Wellington City Council remains in a holding pattern; lobbying the Government to receive the IRRS, and weighing up whether to adopt a version of the Christchurch model by establishing a CHP.
The second option could take up to three years – and meanwhile the council is running out of cash. It has proposed to fund the housing unit through debt and cash reserves, which stand at $50.6m.
What does the Government say?
The Government hasn’t ruled out revisiting policy around the IRRS, but has said little on the issue.
Housing Minister Megan Woods says diverting IRRS funding to council tenants would
result in fewer people being housed in the public housing programme. That scenario would need to be ‘‘carefully weighed’’.
There are ‘‘ongoing discussions’’ between the Government and Wellington City Council about social housing. ‘‘Because
council tenants are already adequately housed, they do not fit the criteria for accessing IRRS, which is funded through the Budget process,’’ Woods says.
But economist Shamubeel Eaqub says that logic has holes in it. ‘‘In that case, it would be better for us to kick them out. Then they would be inadequately housed, then they would qualify [for the IRRS].
‘‘Why would we do that? Why wouldn’t we strike a deal to see them through? It’s just a ridiculous situation.’’
National MP Nicola Willis says there is an ‘‘obvious inequity’’ between social housing tenants who can access the subsidy and those who cannot.
‘‘But there’s also a really obvious inequity between the person who’s living in a Ka¯ inga Ora house right now, and the person who is on the social
housing waiting list, who has the same need.’’
Councils had a ‘‘bad track record’’ when it came to providing housing. Instead, the answer was to ‘‘build more affordable houses’’.
Will council housing still exist in 30 years?
Eaqub says the ‘‘ship has already sailed’’. And while a strong thirdsector presence in social housing is important, churches, iwi and not-for-profit organisations are well-placed to pick up the slack from councils.
‘‘That’s happening under the current model; community housing providers are very good. If you look at the services provided at places like the Salvation Army, they’re pretty amazing.’’
Councils still have a role to play, in some form, as they provide a buffer between central government politics and local needs, he says.
Pierse, however, does not foresee the demise of council housing. ‘‘I think you’re seeing conspiracy where there’s plain old incompetence.’’
He believes councils will always play a role in housing, albeit a diminished one. They set rules around where houses can be built, and can make exceptions for social housing.
But their role as direct providers is likely to be limited. ‘‘No matter what way we do it, in 30 years’ time, all social housing will be on the IRRS, or it will cease to exist. There’s no other long-term financial model.’’