Upsized upstairs
Management of government housing agency Kāinga Ora has ballooned in two years, with its wage bill now over $100m,
Management positions at government housing agency Kāinga Ora have ballooned by more than 86 per cent in two years, and the annual cost of base salaries for managers now tops $100 million.
The Crown agency employed 319 managers in June 2020 at an annualised cost of $58m.
In June 2022 the agency employed 594 managers, at an annualised cost of $103m.
The Kāinga Ora managers’ annual pay, as of June of this year, averaged $173,400, nearly twice the average annual salary ($90,800) across the Public Service.
The Kāinga Ora figures represent only base pay; it excludes benefits like superannuation. The agency said only chief executive Andrew McKenzie receives performance pay.
The agency has a sprawling remit that includes maintaining and developing public housing as well as acting as landlord to some
186,000 tenants and their families. Ministry of Housing and Urban Development (HUD) data shows Kāinga Ora, and the community housing providers it works with, added a net 6772 public homes since the entity was formed in October 2019 (the data was current to September 2022). However, the agency recently missed a target for new builds.
The number of jobs added by Kāinga Ora at the upper end of the public service pay scale appears to be at crosspurposes with the Government’s Covid-era payfreeze for public servants earning $100,000 a year (this 2020 government guidance extends to mid-2024).
Last year, Finance Minister Grant Robertson and Minister for the Public Service Chris Hipkins extended pay-freeze guidance and noted that the purpose was to “prioritise spending” in light of the large increase in government debt related to the Covid-19 response and recovery.
“We want to see those on lower wages be the focus of any increases in pay . . . the policy will also help protect jobs by taking financial pressure off the public wage bill,” the ministers said.
While Kāinga Ora’s annual reports show the agency has expanded its total staff considerably in the two-year period, the figures show that management grew disproportionately faster than other staff.
Other staff totalled 1656 in June 2020, and that headcount had risen to 2578 by the end of June 2022. A rate of increase of 55 per cent.
Housing Minister Megan Woods said the rapid expansion of the management layer at Kāinga Ora is justified by its large public housing build projects.
Woods noted that the agency is working with builder partners in the private sector and that “any infrastructure delivery agency will be loaded with those kinds of [management] positions because they’re the positions you need when you are working as a delivery agency”.
Kāinga Ora has been expanding its capacity to build houses, a competency that was run down in predecessor agencies under the National-Act Government prior to 2017, Woods said.
Kāinga Ora was created in 2019 through a merger of Housing New Zealand, its development subsidiary, HLC, and the LabourNZ First-Green Government’s beleaguered KiwiBuild unit.
The Kāinga Ora figures were released by Minister Woods in response to written
These are the teams which are helping drive the increase in housing supply Andrew McKenzie, chief executive, Kāinga Ora
parliamentary questions put by the Act Party. Management positions were defined as roles which have staff members reporting to them.
Chief executive Andrew McKenzie said the agency has “invested in more resources, systems, programmes and people to help meet the Government’s housing priorities . . . its wider mandate and additional roles.”
The majority of staff increases have been in three regional teams supporting construction, urban development and planning, McKenzie said: “These are the teams which are helping drive the increase in housing supply and the large-scale urban regeneration of several large projects which will deliver up to 40,000 homes over the next 15-20 years.”
He said comparisons with Kāinga Ora’s predecessor entities would be misleading
State housing agency Kainga Ora’s borrowing capacity has been extended by $2.75 billion to $13b for the 2022/23 year and its funding will in future come from the Crown, not private sources.
Housing Minister Megan Woods said yesterday Cabinet agreed to increase the entity’s borrowing capacity and changed where it borrowed from.
The $2.75b would come from the Crown’s New Zealand Debt Management Office, was cheaper and gave more certainty than borrowing from private sources, she said.
“Total borrowing capacity is now $13b which includes Crown and private debt,” a spokesperson for Woods said.
Kainga Ora’s latest report declared $48.8b assets offset by total debt of $9.7b, up from $7.6b the previous year.
National housing spokesperson Chris Bishop said the debt capacity expansion reflected Kainga Ora as “a bloated, inefficient, dysfunctional organisation”.
He added: “Now that the Crown is going to be the lender, it has an obligation to ensure some discipline and efficiencies there.”
There was some merit in a lower cost of borrowing because the agency had been paying a higher premium in the private market, he acknowledged.
“But I suspect private lenders have looked at the agency and said it’s barely a going concern as an organisation because it’s riddled with debt and they wanted a higher rate of interest. So now the obligation is on ministers and the Government to get KO into shape,” Bishop said.
A Treasury spokesperson said Kainga Ora would save around $66.3m on the new lending capacity by borrowing from the Crown. The savings would take time to be realised because the current debt has an average maturity of six years.
In July, the Herald reported Woods was warned not to grant any future Budget bids to Kainga Ora for a time, after fears of unsustainable debt levels.
A leaked document from the Ministry for Housing and Urban Development showed spiralling construction costs caused a debt blowout at Kainga Ora, with fears the Government will be unable to completely repay the increase in debt over the next 60 years.
The document, dated June 17, said Kainga Ora was investigating cost-cutting measures such as pausing a programme to improve heating in homes, or retrofitting old homes with improvements making them accessible to people with disabilities.
Officials said the ideas might result in some cost savings but they will not address the root cause of the blowouts. The Debt Management Office said it was working with Kainga Ora to ensure that agency’s expenditure would be included in the Sovereign Green Bond Programme.
Kainga Ora is this country’s largest residential landlord housing more than 186,000 people in more than 69,000 properties.
But more than 20,000 are on the waiting list for housing and much existing state stock is not up to the Government’s own healthy homes standards.
So a rapid building programme has been under way for some years, demolishing older unfit-forpurpose homes on big sites and building new homes which meet the Building Code and Building Act, are warm and dry and make better use of land.
Woods said: “We are committed to ensuring New Zealanders in need have access to warm, dry homes. We have added over 10,600 additional public homes through Kainga Ora and Community Housing Providers, as well as over 4000 more transitional houses.”