Charities keen on new funding plan

One proposal would have prisoners build houses with Habitat for Humanity. Photo / Herald on Sunday

Government courts controversy with scheme to kick-start social programmes using private investment.

Some of New Zealand's leading charities are keen to attract private investors for social programmes such as cutting crime and addictions.

A pilot proposal for "social bonds", where private investors put up the initial capital and the Government repays them with interest if target outcomes are met, has attracted 62 expressions of interest in a tender run by the Treasury and the Ministry of Health.

Charities are keen to use bonds to reduce prisoner reoffending and drug and alcohol addictions, build social housing, run community law centres and keep people with mental health issues in stable housing and out of hospital.

The Health Ministry has also suggested using bonds to reduce teen pregnancy and domestic violence, improve housing quality, prepare pre-school children for school and help the unemployed into work.

Philanthropy NZ chief executive Liz Gibbs said her members welcomed the idea as a way to make sure their money achieved social outcomes, and to recycle it into new investments after the Government pays out on the bonds.

But Council of Trade Unions social policy analyst Eileen Brown warned the scheme could be "gamed" by agencies cherry-picking the best clients.

"We think that is offloading that activity with much lower monitoring requirements, as in charter schools," she said.

The Association of Non-Government Organisations of Aotearoa (Angoa), which ran seminars around the country for the Treasury and Health Ministry, conceded the idea was controversial.

"Right up to the Angoa co-ordinating committee, there are people who say Angoa is supping with the devil," said chief executive Dave Henderson.

But he said a wide range of groups were among the 60 interested.

Prison Fellowship director Robin Gunston said he proposed a joint venture with Habitat for Humanity to work with up to 80 people coming out of prisons in the lower North Island.

"We are looking at a scheme where prisoners might build houses, live in those houses, build up their own equity in ownership of those houses, and maybe later undertake a street improvement programme," he said.

He has talked to the NZ Super Fund and church pension funds about investing.

Salvation Army community ministries manager Major Pam Waugh said she was interested in bonds both for prisoner reintegration and for new alcohol and drug addiction centres.

Marion Blake of the Platform Trust, a mental health and addiction umbrella group, said outcomes in her sector could be keeping people in stable housing and out of hospital.

Community Law Centres chief executive Liz Tennet said bonds could be a way around constrained public funding. She has already lined up a potential investor - "an international organisation represented in NZ".

Queenstown Lakes Community Housing Trust chairman David Cole said his trust was already using a form of social bond - mortgages funded for five years by a local energy trust at 4.09 per cent interest, guaranteed by the Queenstown-Lakes District Council and converting after five years into commercial mortgages with the Southland Building Society.

"The community trust sector has $3 billion to $4 billion under investment," he said. "Their investment portfolios are scattered globally, so we are arguing that there is a rationale for some of that money to be invested in the community."

A Health Ministry spokesman said a business case for a social bonds pilot would be completed in the next two months. If the business case findings are positive, Cabinet approval for a pilot will be sought later this year.

Social bonds

Step 1: Government and agency set target outcomes for clients.
Step 2: Investors put up capital.
Step 3: Agency delivers programme for say 5 years.
Step 4: If targets met, Government repays investors with interest.

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