Wellington City Council is going back to the Government over the state of its social housing arm, which the mayor says is "bleeding to death".
City Housing is in financial trouble and forecast to be insolvent by June 2023. It has 1927 properties and 3200 tenants.
Mayor Andy Foster said the numbers were "painfully" crystal clear.
"Our housing business unit is bleeding. Effectively it's bleeding to death and our tenants are hurting as well."
To the frustration of city councillors and other local authorities across the country, councils do not have direct access to something called the Income Related Rent Subsidy.
Under the scheme low-income tenants pay no more than 25 per cent of their income on rent.
At the moment, the subsidy is only available for new tenants going into Kāinga Ora or Community Housing Provider (CHP) social housing.
If City Housing was eligible for the subsidy, it would have an operating surplus of $5m instead of a deficit of $6m.
It would make a significant difference to rental affordability for tenants as the majority of them pay more than 25 per cent of their income in rent. As many as three quarters pay more than 35 per cent.
There was nothing in Budget 2021 to help Wellington City Council, so councillors have today decided to go back to the Government to try again.
At a Social, Cultural and Economic Committee meeting councillors' noted their disappointment the Government did not commit to implementing IRRS for City Housing tenants.
Councillors unanimously agreed for the mayor and council chief executive to write to the Housing and Finance Ministers seeking to enter formal negotiations over the subsidy.
Councillor Fleur Fitzsimons said City Housing has been a crisis bubbling under the surface without a clear plan to address it.
She said having access to IRRS would be a "game changer".
Fitzsimons noted there have been a number of meetings between politicians and officials around councils gaining access to it.
But she hoped this latest direction from councillors would provide a level of formality.
"I think we've got the best chance of finding that sweet spot between the Government's concerns about lack of housing supply and our concerns about the sustainability of City Housing."
Labour has previously said on the issue that its focus has been on increasing public housing supply when considering more housing funding, including increased supply from CHPs.
Councillor Diane Calvert has also been a strong advocate for councils having access to the IRRS.
"I don't understand why our tenants should be treated any differently to somebody else in a Kāinga Ora home. It just seems completely inequitable to me"
Negotiations with the Government would involve amending a Deed of Grant signed between the council and the crown in 2007 agreeing to a $400m upgrade programme for the City Housing portfolio.
The Government agreed to fund the first half of the upgrades, $220m, and the council agreed to meet the cost of the second half, $180m.
But the upgrades cost more than first thought. The council has used $69.5m of its own money and all of the Government's money just to upgrade half of the stock.
The remaining upgrades, plus routine asset maintenance and renewals, amount to $446m over the next 10 years.
While the mayor and chief executive try to get negotiations going with the Government, council officials have been instructed to undertake an initial report on establishing a CHP.
CHP's have access to the IRRS, although many councillors have voiced concern about handing over City Housing to a different entity.
A sustainable funding model for the looming upgrades, like a special purpose vehicle, is also being looked into.
Foster said he wanted the council to ensure it has housing for the city's vulnerable people.
He said the council needed to face up to the financial situation.
"We need to act and we need to act now. We can't keep kicking the can down the road."