You do not have to own someone’s house to help them - Bryce Wilkinson

Kāinga Ora's Reset Plan envisions continued ownership of 78,000 housing units, sparking debate. Photo / Getty Images

THE FACTS

• Kāinga Ora’s Reset Plan envisions continued ownership of 78,000 housing units, sparking debate.
• The report argues government ownership risks excessive costs and disempowers tenants by limiting choices.
• It suggests greater use of housing vouchers and private landlords to empower tenants and reduce costs.

You do not have to own someone’s house to help them, so why does Kāinga Ora’s Reset Plan envisage that it will continue to own around 78,000 housing units? After all, social housing can be owned by any combination of central and local government agencies, housing associations, community housing providers, iwi providers, not-for-profit charitable organisations and for-profit landlords.

The New Zealand Initiative published my report this week, “Owning less to achieve more: Refocusing Kāinga Ora”, that debated this question. Sir Bill English, who chaired the Independent Review Panel’s inquiry into Kāinga Ora in 2024, contributed the foreword.

As English succinctly explains, state ownership of social housing is not critical. More important is how to best meet people’s needs for support, including by providing the right house in the right location.

What if the Government stopped being the country’s biggest landlord? Photo / Denise Piper

The report documents why dominant government ownership puts taxpayers at risk of excessive costs while disempowering tenants by restricting their choices of housing. Political pressures cycle between fiscal profligacy and belt-tightening. We cannot expect the state to be a good landlord consistently. Even in prudent times, Kāinga Ora’s incentives to control costs are weak compared to those of a private landlord.

On the evidence in the report, Kāinga Ora’s operating costs are well on the way to being twice those of a private sector benchmark. When you add direct government subsidies paid to Kāinga Ora to these excess costs, taxpayers could be subsidising Kāinga Ora by over $2 billion annually, representing over $25,000 per unit. These calculations are based on limited published information. It would be better if Kāinga Ora provided authoritative benchmarking comparisons.

The open question is whether such assistance is the best way to help those in housing need. The report calls for greater use of the social investment approach to find which assistance programmes work best. Under the previous Government’s directions, Kāinga Ora turned operating surpluses into deficits and created a debt spiral from open chequebook purchasing. The Government expected too much from it – and interfered too much.

The report argues government ownership risks excessive costs and disempowers tenants by limiting choices. Photo / Denise Piper

Hundreds of millions of dollars have been written off. In addition to excessive costs, problems had emerged of chronic rent arrears, unaddressed intimidating behaviour by state house tenants and property damage. In 2023, only three tenancies were terminated for disruptive behaviour, despite hundreds of serious complaints monthly.

Another intractable problem is that when the Government is the landlord, difficult landlord decisions will be politically sensitive. Cost control and enforcing tenancy contracts can be sacrificed. Taxpayers will only discover the cost consequences later. Another generic problem is that government ownership creates a conflict of interest with its regulation and funding activities. It has an incentive to favour the government provider at the expense of tenants and the broader public interest.

The report does not argue that other ownership options are perfect. The ownership options should be the subject of fair-minded public debate that is informed by the diversity of overseas approaches. The Netherlands provides 75% of its rental housing through independent housing associations.

Sir Bill English backs a rethink of the Kāinga Ora model to cut costs, boost choice. Photo / Boris Jancic

These non-profit organisations receive favourable treatment through land discounts and tax arrangements, but the government does not own or directly subsidise their operations. It pays rent subsidies to eligible tenants instead.

When Britain transferred 1.7 million council homes to housing associations and tenant ownership between the 1980s and 1990s, a UK National Audit Office review found these associations largely delivered the expected benefits to tenants. Germany subsidises private provision of social housing with time-limited, low-interest loans rather than perpetual state ownership. Austria relies heavily on limited-profit housing associations. Finland delivers social housing through municipalities, non-profit associations, and limited for-profit companies rather than direct ownership.

These diverse practices show that assistance need not dictate ownership. The report commends the current Government and Kāinga Ora’s new board for a Reset Plan aimed at restoring financial stability. But, looking further ahead, without greater clarity as to the best ownership/assistance mix, the political pendulum will swing back one day to fiscal profligacy and the same problems will reoccur.

Greater recourse to housing vouchers, reliance on localised housing associations and private landlords and less hoarding of residential land offer a more sustainable approach. More choice of landlords would empower tenants. They could move if a landlord was unresponsive or the neighbourhood dangerous. Greater competition between landlords for subsidised tenants should reduce costs and empower tenants relative to a situation of dominant state ownership – and especially as regulatory reform makes it simpler to build more housing.

Both taxpayers and tenants could benefit. Taxpayers need not pay excessive costs to maintain state rental housing. Tenants could have greater choice, better-maintained homes, and support tailored to their circumstances. Asking whether the Government needs to own 78,000 houses isn’t uncaring. It is asking how it can help people most effectively – and the evidence shows large-scale government ownership can be excessively costly and insufficiently helpful.

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