The Government agreed to four of the recommendations with the remaining three under consideration. It recommended a significant consolidation of funding for delivering housing into the hands of the Housing Minister and the Ministry of Housing and Urban Development, the policy agency that sits above Kāinga Ora. It said the minister would then tell the ministry to become an “active purchaser” of housing services using a “social investment” model.
What this would mean is that private providers, likely to be charities, would be paid by the Government to provide housing services on behalf of the Government.
The last National-led Government transferred thousands of homes owned by the state into the hands of community housing providers (CHPs) who received government money in the form of the income-related rent subsidy (IRRS) to provide a public house, much like Kāinga Ora would.
Bishop said the “state is not stepping away from building houses in New Zealand” and that the “state will always own state houses in New Zealand”.
The report noted that “continued reliance on Kāinga Ora has made it harder for CHPs and other organisations to provide social housing, meaning less choice for tenants and the purchaser, and less diversity in social housing and other alternative tenures”.
It said Kāinga Ora has “access to cheaper debt than other providers” and that “losses are implicitly underwritten by the Government, and greater certainty of funding compared to the CHP sector”. These advantages underwrote Kāinga Ora’s dominance.
Meanwhile, CHPs were constrained because they faced much higher funding costs. One problem is that major banks considered lending to CHPs to be business lending, which tended to be more expensive than mortgage lending. The review thought this was unfair as what CHPs were doing was little different to residential mortgage lending: borrowing money to build and own a house.
The report said banks should account for the fact that CHPs had “government-guaranteed, long-term” revenue in the form of rent subsidy from the Government.
The report even pointed a finger at the Reserve Bank for not considering “the treatment of CHP and alternative tenure lending”.
The report said the ministry should “consider changes” to its contracts to give CHPs “more cash-flow certainty, and potentially reduce borrowing costs”.
Bishop summarised the report’s findings saying Kāinga Ora was “not financially viable without significant savings as well as funding and financing changes”.
The report found that operating deficits at Kāinga Ora were forecast to grow from $520 million in 2022/23 to over $700m in 2026/27.
“Debt is forecast to increase to $23 billion. Kāinga Ora’s forecast cash requirement from the Crown is $21.4 billion over the next four years. This is equivalent to every New Zealander paying about $4000 for this activity,” Bishop said.
“The review found that Kāinga Ora has had easy access to debt but insufficient focus on fiscal discipline, and low levels of accountability have led to growing annual losses and a deteriorating financial situation,” he said.
The report was highly critical of the expanding remit of Kāinga Ora, which grew from being a state landlord to a developer and the provider of schemes to help first-home buyers.
“We are conducting a broad review of the housing programmes the Government runs,” Bishop said.
Labour’s housing spokesman, Kieran McAnulty, said the review “distracts from the fact they haven’t put any more money up to fund public housing”.
“Kāinga Ora and community housing providers are hitting pause on more builds because the Government won’t commit to funding public housing places through the income-related rent subsidy past June 2025,” McAnulty said.
“In fact, the Housing Minister refused to rule out scaling Kāinga Ora back. We have seen this before - the last National Government ended up with 1500 fewer public homes than it started with and sucked out $576m in dividends,” he said.
Bishop also released years’ worth of documents from Treasury showing the former Government was aware of criticisms from officials of Kāinga Ora’s financial management and had undertaken its own review after concerns were raised in 2022. Bishop released Treasury’s damning assessment of Kāinga Ora’s performance when it briefed Finance Minister Nicola Willis on the situation in December.
Treasury warned Kāinga Ora’s performance would contribute $4b towards the Government’s overall obegal [operating balance before gains and losses] deficits over the four-year forecast period and $13.2b to its debt position.
Those documents show Treasury warning Willis that despite spending billions of dollars each year, it was “unclear that value-for-money [was] being achieved from Kāinga Ora’s operating activities”, and that Treasury considered Kāinga Ora’s forecasting of its own debt to be inadequate and intransparent.
The documents found there had been “significant growth in the operating costs of providing public housing” including a 145 per cent growth in staff at Kāinga Ora, but “little assessment of the impact or value of the increased investment in tenancy services”.
But there were some positives too. Kāinga Ora’s inability to accurately forecast its own debt meant that the “amount of debt required to deliver existing commitments is $1.136 lower than what was anticipated during the Budget 2023 process”, officials said – although they cautioned Willis against getting too excited, noting the savings had already been booked.
Bishop announced Cabinet had agreed to four recommendations, including an immediate refresh of the agency’s board. Former Powerco, Auckland International Airport and Spark NZ chief executive Simon Moutter was appointed Kāinga Ora board chair, with his term beginning on June 4.
The board has been without a permanent chair since former Labour minister Vui Mark Gosche resigned in February.
Gosche told the Herald he had not seen the report before its publication. He had expected it to be critical of the organisation because the new Government had been critical of Kāinga Ora in opposition.
“You would expect the report would be critical... the Government was very critical of the organisation,” Gosche said.
He said the annual reports published by Kāinga Ora when he was chair spoke for themselves.
“All I can say is that there were annual reports for the time that I was on the board and I’ll leave them to speak for themselves,” he said.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
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