The Wellington City Council's bleeding social housing arm has paid almost $16 million in rates back to the council since it was bailed out by the Government.
Councillor Fleur Fitzsimons says that money should be refunded to City Housing.
This would act as a starting point for addressing the portfolio's financial woes and for the council taking responsibility for the state it's in, Fitzsimons said.
The council is currently exploring two options in parallel to solve City Housing's bleak financial trajectory of becoming insolvent by June 2023.
It's lobbying the Government to gain access to the Income Related Rent Subsidy for its tenants as well as working on a "Plan B" to lease its assets to a Community Housing Provider (CHP).
The IRRS is already extended to CHPs so the alternative plan is a roundabout way of getting council tenants access to the subsidy.
The Wellington City Council's chief financial officer, Sara Hay, calculated City Housing has paid $15,851,973 worth of rates over a 13-year period.
This is the period from when the council signed a deed of grant with the Crown in 2007.
The Government agreed to bail out the council to the tune of $220 million to upgrade the city's housing stock, with the council liable for $180 million.
But the first half of the upgrades went over budget and costs for the second half, which is yet to get under way, have blown out by more than $100 million.
Fitzsimons said City Housing should never have been charged rates in the first place and the sum should be refunded.
"This isn't going to solve all the problems, we need the Government to come to the party and work with the council as we've committed to do. But it's a great starting point and the council itself taking responsibility for the financial challenges of City Housing.
"It's the responsible thing to do."
Wellington Mayor Andy Foster said City Housing properties were like any other residential dwellings from a rating perspective.
"The people occupying City Housing are using water, parks, roads, footpaths, lighting, libraries - the same as everybody else in the city."
It was normal for one part of a business to pay the other part transparently, Foster said.
"For example, if we apply for a resource consent or a building consent then we will pay the fees to other parts of the council."
Foster said rating could be in the mix of options to help ease City Housing's financial woes, but he did not support rates being refunded retrospectively.
"What people have to understand is that if at some stage the council was not going to rate City Housing, those costs would still be incurred but they would then be spread across the rest of the ratepayer community."
National's housing spokesperson, Nicola Willis, said the $15.8 million in rates was "real papering over the cracks stuff".
"That is a drop in the ocean of what is required over the next decade to simply maintain their [the council's] existing housing stock."
A CHP should take over the council's portfolio, Willis said.
Not only because CHPs were expert organisations in the management of social housing, but because they had a proven record in developing more housing supply, she said.
"We've been here before in 2007 when the council signed a deed of grant with the Government," Willis said.
"They got a bailout then and here we are more than a decade later and they're asking for another bailout and I think the reality here is that the Wellington City Council has not proven itself an expert at asset management."
Willis said if the council actually cared about housing people, it would look at the size of its social housing waiting list and acknowledge a purposefully created provider was required.
Housing Minister Megan Woods has said the estimated cost to extending IRRS to the council was about $50m over four years.
She noted council tenants were already housed.
"Diverting IRRS funding from our current pipeline to existing council places would mean that we could not deliver all of the new public housing places under the Public Housing Plan and move people who are in need of public housing, off the housing register and into homes."
But Woods hasn't ruled out extending access to the IRRS. She said she would not be pre-determining the outcome of work under way with the council regarding its housing challenges.