Kāinga Ora spent $20m purchasing a vacant Albany site on Don McKinnon Drive seven years ago. The land is still sitting bare and will now be sold as part of the agency's 'reset'. Photo / Alex Burton
Kāinga Ora spent $20m purchasing a vacant Albany site on Don McKinnon Drive seven years ago. The land is still sitting bare and will now be sold as part of the agency's 'reset'. Photo / Alex Burton
Kāinga Ora is axing hundreds of social housing projects because they “no longer represent value for money”.
The state housing agency concedes that canning the projects means it will take a hit of up to $180 million that has already been spent on scoping and planning work.
Kāinga Ora hasalso decided to offload 20% of its vacant land following a review of its operations because the land is no longer deemed necessary for social housing.
The Herald revealed last year that taxpayers had forked out an additional $1m on consultants, architectural services, legal advice, valuations, arborists, geotech reports and council rates for the property on Don McKinnon Drive.
Today’s announcements come as part of a major “reset” the agency is undertaking after concerns emerged that it had lost focus on its core role as a social housing landlord and veered too far into the role of property development.
This followed a review led by former Prime Minister Sir Bill English that found the agency’s debt had jumped from $2.7 billion in 2018 to $12.3b by June 2023, and was set to increase to $23b by 2028.
Kāinga Ora chief executive Matt Crockett. Photo / Marika Khabazi, RNZ
In a statement today, Kāinga Ora chief executive Matt Crockett said the agency had made “another critical step” in its reset by completing a review of its social housing delivery pipeline and land holdings.
“These reviews were essential to ensuring we only progress new housing projects that make commercial sense and that we sell land which is surplus to our requirements so we can get on a more financially sustainable footing,” Crockett said.
The decisions made would allow the agency to move forward with confidence into the next stage of its reset, but required Kāinga Ora to make one-off accounting write downs of between $190m and $220m.
Crockett said making the write downs was “the financially responsible thing to do”.
“Our reviews have highlighted an abnormally high number of projects and land holdings that no longer make sense for Kāinga Ora if we want to get ourselves in a better financial position.
Artist impression of the proposed Kaina Ora social housing complex for seniors to be built at 9 Osterly Way, Manukau.
“This is also about getting best value for money for the houses we’re delivering and supplying them in the areas of greatest need.”
The exact amount being written down wouldn’t be known until Kāinga Ora’s end-of-year financial accounts were audited.
But it included an estimated $150m to $180m of capital spent on housing projects that would now not go ahead “because they no longer represent value for money, or they are not in the areas where the agency needs to deliver new homes”, Crockett said.
The estimated write downs also included $40m for land that had fallen in value since Kāinga Ora purchased it.
“Like other prudent developers, we always make provision for some write downs but this year we’re going to exceed our budget for write downs,” Crockett said.
“We need to bite the bullet on this. There is often some short-term pain that comes with the resetting of past decisions, but it needs to be done.”
Kāinga Ora spent $20m purchasing a vacant Albany site on Don McKinnon Drive seven years ago. The land is still sitting bare and will now be sold. Photo / Alex Burton
Crockett said the agency had assessed more than 460 building projects across the country to decide which ones would deliver social housing in the areas most in need more cost-effectively.
“Some 254 projects are going ahead, while 212 that no longer stack up financially or are not in the right locations will not proceed at this stage.
“The write downs represent the costs that were sunk into the initial scoping and planning phases of social housing projects which are either not proceeding or have been re-thought,” Crockett said.
Meanwhile, a review of Kāinga Ora’s vacant land holdings had determined which plots were worth keeping for “commercially responsible development”, and what land could be released “for others to develop”.
“Our current intention is to sell about one-fifth (roughly 36ha) of the vacant land we own because we no longer need it for either social housing projects or for urban development work. Selling this land opens opportunities for others to increase the country’s housing supply.
“We will hold onto the rest of the land we own for now for possible future development.”
The land earmarked for sale had a book value of about $132m. Proceeds from any land sales would either be reinvested in new housing or used to help reduce debt, Crockett said.
‘Not fit for purpose’
Housing Minister Chris Bishop. Photo / Calvin Samuel, RNZ
Housing Minister Chris Bishop said his government had “inherited a financial basket case”.
Today’s news was part of the new Kāinga Ora board’s actions to get the agency back on track and return it to financial sustainability.
“The previous government poured billions of dollars into Kāinga Ora, with debt on its balance sheet rising from $2.3b in 2017/18 to $16.5b in 2023/24.”
Bishop said operating deficits had also blown out, as had debt forecast figures ($24.8b by 2026/27) and staff numbers (from around 2000 in 2020 to around 3477 by the end of 2023).
“All this at a time when the social housing waitlist grew to over 20,000 applicants.”
National commissioned the Bill English review in 2023, which made it clear that Kāinga Ora was in “considerable financial strife”, Bishop said.
“The Government appointed a refreshed board which is working to return the agency to financial sustainability, and to refocus it on its core mission of building, maintaining and managing social housing.
“As part of this reset, Kāinga Ora is selling some homes and vacant land where they are not fit purpose, where the typology is ill-suited to the particular area, or when they are simply uneconomic to maintain or redevelop.”
The sales would mean there were more funds available to build homes in places where they were most needed.
“Meanwhile, over the next two years, Kāinga Ora is delivering over 2000 additional social homes as well as a big refit programme to bring older social homes up to scratch.
“In addition to this, our Government has so far funded over 2000 more social homes to be delivered by Community Housing Providers, 400 affordable rentals, and has established a housing flexible fund which will enable up to 650-900 more social homes and affordable rentals.”
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