Housing Minister Chris Bishop unveiled Kāinga Ora’s turnaround plan to focus on building and managing social housing.
The plan includes selling 900 older homes annually, with new builds ensuring no net reduction in state houses.
The changes aim to reduce deficits by $190 million this year and $354m by 2027/28.
Housing Minister Chris Bishop has unveiled Kāinga Ora’s turnaround plan, which he believes will refocus the agency on building and managing social housing after a period of “financial strife”.
It includes the sale of about 900 homes a year, though the minister says these will be older properties notfit for purpose and the practice is in line with normal Kāinga Ora operations. Overall, the number of state houses would not reduce over time due to a programme of new builds, Bishop said.
He revealed the plan during a press conference in Auckland on Tuesday morning alongside agency chairman Simon Moutter and chief executive Matt Crockett. It was the result of a refreshed board appointed following an independent review of Kāinga Ora, led by Sir Bill English.
Kāinga Ora, which currently owns about 75,000 houses, will have a narrowed scope “in line with the back-to-basics approach”, Bishop said. He was critical of additional tasks given to the agency under Labour, including managing infrastructure funds and KiwiBuild underwrites.
The result of the changes being made through the plan will be a net reduction in deficits of about $190m in this financial year and a reduction of $354m in 2027/28 compared to the pre-election update presented in 2023. Debt is forecast to be $1.8 billion lower in 2027/8 compared to that 2023 forecast.
The plan has five main components:
Kāinga Ora to be refocused on its core mission: building, maintaining and managing quality social housing, and being a supportive, but firm landlord.
Improved tenant and community management.
Improved housing portfolio and build management - better managing the existing Kāinga Ora assets and building or renewing homes as efficiently as the market, including simplifying social housing building specifications and using all available building delivery channels.
Improved organisational performance: a focus on cost effectiveness - reducing high overheads and leveraging buying power more effectively.
A more persistent and sustainable approach to funding and associated settings.
Housing Minister Chris Bishop released the plan on Tuesday. Photo / Marty Melville
“The Kāinga Ora turnaround plan means that from 2026/7 onwards, Kāinga Ora will be involved in around 1900-2000 construction events a year, made up of approximately 1500 newly built homes and 400 retrofits of existing homes.
“This will be offset by demolitions associated with redevelopment activities, and sales of around 900 homes per year. This means the number of KO social houses will not reduce over time, and existing older or unsuitable housing stock is refreshed.”
The agency will focus on selling older properties in high-value areas, with Bishop saying proceeds will go to other units in different areas.
“The sales programme will also focus on houses which are not fit for purpose, where the typology is ill-suited to the particular area, or which are simply uneconomic to maintain or redevelop.”
Clearly anticipating criticism from the Opposition, Bishop said the divestment of properties to manage stock is routine for Kāinga Ora.
“In the past five years, they have sold, demolished or ended the lease on more than 5000 properties as part of their normal stock renewal process. The plan allows them to do more of this so the old, unfit housing stock can be renewed more quickly.”
Bishop said at the press conference that previously Kāinga Ora was given “huge amounts of money” and asked to go on a building spree, but many of the houses were in the wrong place or did not meet the needs of Kiwis.
For example, he said 50% of people on the social house waiting list (about 10,000 people) needed a one-bedroom house, but only 12% of Kāinga Ora’s stock is one-bedroom. He said this was a “mismatch”.
Another example Bishop gave was that Kāinga Ora owned about 200 houses worth more than $2m each, mostly in Auckland. Bishop said a better use of that capital could be to divest them and reinvest in denser, more affordable environments.
He said this would not be a “fire sale”, but a divestment from a high-value area or a sale of houses that are no longer fit for purpose. He said there came a time where there was no point in holding some houses. Bishop said the sale of houses was not new, but the agency would now accelerate the process.
The plan also commits the agency to delivering new builds at costs in line with or better than market rates, after advice found it had been building homes previously for about 12% more than market comparisons.
“Ministers are clear that Kāinga Ora should be building or acquiring simple, functional warm and dry houses, as quickly and efficiently as possible.”
As for the agency’s narrowed scope, Bishop said it would be taking a back-to-basics approach.
“Cabinet has agreed that residual KiwiBuild underwrite activity will be transferred to the Ministry of Housing and Urban Development, administration of the Infrastructure Acceleration Fund will transfer to the new National Infrastructure Funding and Financing Agency and the Kāinga Ora Land Programme will be wound down. Legislation will also be progressed this year to amend the Kainga Ora Homes and Communities Act.”
Bishop said ministers had been impressed by the new board and executive’s ability to work their way through a complicated set of issues. He said Cabinet was proud to endorse the plan, which he believed was balanced between investing in new, warm homes while also looking after older stock.
“Today’s plan is a big step in the right direction for Kāinga Ora and I would like to thank chairman Simon Moutter and the rest of the board for their hard work. The Government will be closely monitoring progress as the plan is implemented.”
Moutter said this was a pivotal point for the agency.
The agency had gone through a period of significant growth in the past five years, delivering 13,000 new homes and completely refurbishing 3400 homes, he said.
Unfortunately, some of that growth has been unsustainable, and the focus would return to the agency’s core mission to ensure long-term financial sustainability.
The biggest driver of financial performance and the level of debt was the volume of construction activity, he said. These volumes would step down over the coming financial years and would be stabilised at about 1900 to 2000 constructions events, focused on renewing older stock.
Moutter believed the stock would stabilise at about 78,000, unless the minister decided to instruct the agency to add to the overall stock. The agency would also be looking at reducing unit building costs and using a wider range of sourcing and replacement options funded by more sales of unsuitable stock.
He said Kāinga Ora had 190,000 tenants and improving tenancy management was a big focus. It wanted to better understand the tenant base to provide more targeted support to them, but tenants need to pay their rent and treat neighbours with respect. If they don’t meet those obligations, they were putting their tenancy at risk.
The Green Party reacted to the announcement by arguing it showed the Government had given up on growing the country’s public housing stock.
“In the past, our country’s leaders made a conscious decision to house everybody and grow public housing stock at scale,” said housing spokeswoman Tamatha Paul.
“We can make that decision again and we must resist the sale of public housing at all costs because it will have consequences for generations to come.
“Public housing is a crucial part of ensuring we don’t have gentrified, segregated communities, and that our neighbourhoods reflect the make-up of our wider society, culturally and economically.”
Labour’s Kieran McAnulty said the Government needed to build more homes.
“If the best that he can come up with is the number of overall homes won’t go backwards, then it shows their priority is cutting spending, not housing people,” the MP said.
“He says a lot of words about how the private sector will step in, yet figures out today from Statistics New Zealand shows overall building consents for new homes are down nearly 10% for 2024. Chris Bishop completely missed out the words that matter – a commitment to building more public houses."
After taking office in 2023, the Government commissioned an independent review of Kāinga Ora after raising “significant concerns about the financial performance and governance” of the agency.
That review, led by English, made two significant findings — that the agency was “underperforming and not financially viable without significant savings as well as funding and financing changes” and that the wider social housing system was not delivering as needed.
Jamie Ensor is a political reporter in the NZ Herald Press Gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub Press Gallery office.
