Bishop is concerned the agency’s books are expected to sink further into the red.
Furthermore, he said that since coming into office, he’d received worrying advice on Kāinga Ora’s finances, which he couldn’t detail due to commercial sensitivity.
More will be known about the review when its terms of reference are finalised later this week. The reviewers have been asked to report back to the Government in late March.
Bishop insisted the review wouldn’t impact Kāinga Ora’s current work programme, but would affect the agency’s future pipeline.
“It’s BAU [business as usual] for Kāinga Ora at the moment,” he said.
“Before the election, we said we’d honour existing contracts and the pipeline of work they have under way. That just carries on.
“The future scope of Kāinga Ora’s very extensive programme and activity around the country is something that is part and parcel of the review...
“Clearly, the pipeline of work around the country goes to financial management. I expect, as a result of the review, there will be changes. The exact scope of that, we will work through in due course next year.”
The previous Government allocated Kāinga Ora an envelope of funds specially to deliver 3000 additional public houses by June 2025. Bishop wouldn’t - yet at least - commit to providing it with further funds to keep expanding that programme.
A Kāinga Ora spokesperson said details about what the review meant for the agency were still being finalised.
Labour leader Chris Hipkins accused National of “trying to manufacture a crisis”.
“Kāinga Ora have borrowed more money because they’ve built record numbers of new homes,” Hipkins said.
“We wouldn’t have been in this position of needing to build that number of houses that quickly if the previous Government had actually maintained a steady house-building programme.”
New Zealand’s stock of public housing increased by a net 13,977 between October 2017 and October 2023.
Over this time, Kāinga Ora built 10,116 homes.
Nonetheless, the number of applicants on the waitlist for a home rose from 5,820 to 25,433.
Registered Master Builders Association chief executive David Kelly believed it was reasonable for the new finance minister to lift the hood on Kāinga Ora, and was hopeful the review wouldn’t slow the agency’s current rate of investment.
Kelly said the association’s members were frustrated by inconsistent terms in the contracts Kāinga Ora entered into with builders. They also felt there was a lack of certainty around the agency’s pipeline of work.
Kelly said builders needed certainty to give them the confidence to invest in people.
During economic downturns, he said governments should at the very least keep their own work going, if not invest more.
Investing counter-cyclically would insulate the building sector from booms and busts, and see the Government get good deals from builders, contractors, etc at a time they didn’t have much private sector work.
Labour’s finance spokesman Grant Robertson said he wasn’t going to speculate what the complex commercially sensitive issues Bishop was concerned about were.
“I don’t know what Chris Bishop is talking about,” Robertson said, stressing he wouldn’t have ignored alarm bells about Kāinga Ora’s finances, had they been rung while he was in government.
Kāinga Ora, in its annual report for 2022/23, said “financial sustainability” had been a key focus throughout the year.
“Last year we saw inflation, particularly in construction and maintenance costs, place considerable pressure on our budget, as cost increases exceeded rental revenue rises,” it said.
“Our net deficit after tax has increased to $520 million in 2022/23 from $344 million last year, but remains consistent with budget.”
Kāinga Ora also noted it had been working alongside the Ministry of Housing and Urban Development and the Treasury on a “Spending, Funding and Financing Review”, which was “providing a pathway to understand the service levels achievable, as well as assessing the effectiveness of current funding and financing settings”.
Bishop said the independent review would build on this work.
He said he was “deeply concerned” about Kāinga Ora’s operating deficit, noting it affects the Crown’s operating balance before gains and losses (Obegal).
National campaigned on getting the Obegal, or the Crown’s books, back in surplus by 2026/27.
The Treasury’s Half-year Economic and Fiscal Update, to be published on Wednesday afternoon, will detail Treasury’s view on whether the Government is on track to achieving this.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
