Community Housing Providers say more than 500 homes 'gathering dust' during housing crisis

Construction of more than 500 houses for New Zealand's most needy families has been put on hold during a housing crisis because of a controversial Government policy change.

Most of the houses were likely to have been completed and tenanted by now if Community Housing Providers (CHPs) did not have their funding changed, the organisations say.

In some cases, the land had already been bought or secured but was now sitting bare.

"That means 500 whānau in motels and in transitional housing," said Monte Cecilia Housing Trust chief executive Bernie Smith.

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The Government defends the removal of upfront funding, saying it had to make a tradeoff to build as many houses as quickly as possible through Housing New Zealand, now known as Kāinga Ora.

It is exceeding its target of 1600 new public houses a year. But CHPs are responsible for building a third of these houses and some say that without capital funding the rate of new builds is slowing and they have few or no houses in the pipeline.

Meanwhile, the waiting list for public housing is still rising and reached nearly 14,000 households last month.

And the National Party, which wants non-government providers to play a greater role in public housing, says it will bring back upfront funding if it is re-elected.

The Government replaced capital grants for Community Housing Providers (CHPs) with generous yearly rent subsidies last year. Large organisations like the Salvation Army or Accessible Properties are still able to raise the capital to build houses but many others are not.

The Salvation Army opened a new block of 52 units in Royal Oak on Friday. In all, 800 households applied to be placed in the homes.

Rayray Connor, 37, was one of the lucky ones, securing a one-bedroom home in the complex.

"It is a dream come true," she said. "I lost a lot of hope with housing because it's so hard and it's so expensive."

She waited a year and a half to be placed in public housing. Another tenant, from Kaitaia, had waited for five years.

The Salvation Army housing was started with a $4 million capital grant - which was no longer available to providers.

Auckland Community Housing Trust chairman Richard Northey said his organisation built 33 homes for mentally ill tenants in South and West Auckland over two and a half years with the help of an interest-free loan from Government.

Interest was now being charged on the loan, and with no capital available the trust had been forced to sell seven houses to cover its costs.

"We had been steadily expanding the stock and we just had to stop expanding," he said.

"The need out there is desperate," he added. "And we are ready and able to take it on - provided capital grants are reintroduced."

Smith, from Monte Cecilia Housing Trust, highlighted the scale of the problem at a ribbon-cutting ceremony for 30 new transitional homes in Māngere last month.

"Without Government capital grants over the past two years, Community Housing Providers have over 500 property developments sitting on plans gathering dust," he said.

Asked whether capital funding could be reinstated, Prime Minister Jacinda Ardern told the Herald: "We've had to make a judgement over what gets us the most housing as quickly as possible.

"That means partnering with community housing organisations like the Salvation Army who are able to deliver these projects, and also Housing NZ who are able to do the same.

"Our goal is as many houses as quickly as possible - so that's where we're having to make these tradeoffs."

A KPMG study expected to be released soon will show whether CHPs or Housing NZ provide better value for money. The results could influence whether capital funding is restored to non-government providers.

Social Housing Minister Kris Faafoi said the Government would continue to explore options to provide ongoing support to the sector.

After coming into power, the Coalition Government stopped selling off state houses and announced plans to ramp up state house-building to 1600 a year. Under the previous Government, there was a net loss of around 1500 state houses.

However, the Coalition Government's rate of construction still falls short of demand of around 2000 households a year.