Housing New Zealand won't run out of money - English

Finance Minister Bill English during his Budget update presentation at Treasury in Wellington. 15 December 2015 New Zealand Herald Photograph by Mark Mitchell. WGP 26Dec15 - HBG 26Dec15 - NZH 20Fe

Finance Minister Bill English has dismissed reports Housing New Zealand is going broke, saying it has to significantly scale up its housing development and had a "complete reassurance" the Government would fund that.

A Treasury paper showed Housing NZ was due to run out of cash for development and maintenance by February.

English said that was because Housing NZ was moving from building 300 new houses a year to between 1000 and 2000.

It had previously been able to pay for its building developments out of its revenue from rental subsidies.

"If they're going to build 1000 or 2000 they'll need more money to fund it. It will probably need more support from Government to do that, just because of ramping up the building programme."

He said there was as yet no estimate of how much more Housing NZ was expected to need because they were large-scale and complex projects.

"Month by month they are now approving tens in millions in development projects and they have complete reassurance that the Government will be there to fund the growth to the extent it is needed."

He said Housing NZ would get funding from transfers of state housing stock in areas such as Tauranga.

It would also be able to raise some revenue from selling houses on redevelopments such as Northcote on the open market.

"It's a normal property development financing."

English said it did not mean Housing NZ was in financial straits.

"Housing NZ is heading into a very strong expansion mode and, like any other business, as it expands it needs cash to finance its activities.

"Housing NZ is not going broke. This is an organisation with $20 billion in assets and $3-4 billion of liabilities, there is no way it is going broke."

Earlier today, Labour MP Phil Twyford accused the Government of running the housing corporation into the ground.

"English has taken Housing New Zealand to the brink of financial ruin while at the same time publicly musing about getting it to build 30,000 extra state houses," Twyford said.

Housing New Zealand's financial situation was revealed in documents released to Labour under the Official Information Act.

The documents showed the organisation was concerned about its ability to build more houses under current funding levels.

In letters sent to English, HNZ said it could require a completely new funding model.

The rent collected from state houses was not enough to assist the tenants' "increasingly complex high needs", HNZ said.

Without changes, HNZ said it would "struggle to grow social housing supply in the areas of highest need".

An email by a Treasury official appeared to say that the corporation would run out of money by early next year.

"HNZC modelling indicates that it is likely to exhaust its cash balance by February 2017 based on its planned development activity."

This was despite the Government's decision to forgo dividends from HNZ for the next two years.

The documents showed this would no longer make a difference because HNZ was now unlikely to produce any dividends.

HNZ's financial situation was partly the result of the transfer of 2800 state houses to the Tamaki Regeneration Company, a Government-council entity, this year.

The transfer meant $1.6 billion was removed from HNZ's balance sheet and it was now collecting $34m less in rent a year.

English has been asked for comment.