If the likes of the Salvation Army cannot afford to buy cut-price state houses, it seems improbable that any other social services agency is in a position to do so.

That was the logical conclusion that many observers drew from last Monday's announcement by the Salvation Army that it will not be taking up the opportunity to purchase state houses from the National minority Government at what are likely to be knockdown prices.

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After initially expressing enthusiasm for the transfer of "some" state assets to community organizations like itself, the Sallies are now saying that they do not have the expertise, infrastructure or resources to cope successfully with any sudden influx of state house tenants and their abodes which would make the organisation a major social housing landlord.

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That rationale is somewhat bizarre. With upwards of 400 social housing units on their books, the Sallies are already landlords - and seemingly successful ones to boot.

The Sallies can clearly cope with the trial and triblations of renting out properties at the bottom end of the market. They initially expressed interest in picking up some Housing New Zealand tenancies as part of National's carve up of social housing.

They clearly had a change of mind - one which played neatly into the hands of Opposition parties.The Sallies are not the only dissenters. Until today, the Government had been complimenting itself that the Salvation Army was the only organisation to pull out of the scheme. But late in the afternoon the Methodist Mission Aotearoa withdrew its participation, saying it did not believe that the government's proposal to sell state housing to the social sector was in the best interest of the communities where housing was desperately needed.

Rather than focusing on a change of ownership, the collective of social services agencies proposed establishing partnerships with the Governemnt and other service providers to create new, good quality, affordable housing.

The withdrawal of the Methodist Mission Aoteroa seems to be much more ideologically-driven. The Salvation Army's decision was widely interpreted as being a rebuff to National and a vote of no confidence in Bill English's radical plan to establish a properly-functioning market for the housing of the poor and less well off.

The Army's reasons for dropping out of the bidding, however is seen by Government insiders as having a bit to do with estimates of low financial returns from wading into the uncertain waters of investing in social housing.

That did not stop the Opposition taunting English for his shake-up of social housing and his accompanying efforts to end state dominance in the sector having seemingly foundered on one of the principal players refusing to play ball.

National's attempt to "privatise" the sector was decreed to be in tatters. That is wishful thinking, however.

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English has been progressively stripping Housing New Zealand of its functions to remove its monopoly over where and how those at the bottom of the economic heap are housed.
English's Utopia would see a market which would have private sector community housing providers competing with one another for tenants by offering extra services and benefits to those who signed up to their lease.

This market will progressively replace Housing New Zealand's monopoly which sees the state corporation managing 68,000 or so state houses.

In comparison, private sector providers have control of a mere 5000 homes or units.

While nearly 40 privately-run organizations have satisfied the criteria to be registered as community housing providers, few of them have the cash resources to indulge in a mass house-building programme of the kind needed to be on more equal terms with Housing New Zealand.

That is English's fundamental dilemma. For his market-oriented model to work, the community housing providers who will be competing for tenants actually have to have the homes to house those tenants.

That sector has struggled to raise the necessary capital to build enough houses to make any real difference.

Barring financial subsidies to those providers, the Government's only option is to "transfer" state houses at what is inevitably a discount.

For "transfer" read "sell". It is at this juncture that English is most vulnerable - and his opponents the most active.

The repeated suggestion that English's market is really backdoor means of privatizing a social asset has resulted in their being a degree of apprehension within National's ranks.

The policy has two big negatives. It is extremely complex. That increases the capacity for things to go haywire.

Moreover, the policy is not popular now and may become even less so.

You get the feeling that if English's name was not on the policy, it would have been ditched by National long before now.

The more you scrutinize the Salvation Army's carefully-worded announcement, the more it seems its leadership was similarly nervous about the "transfer" of state assets but without saying so directly.

The Salvation Army is also not convinced that taking up the Government's offer would markedly improve the lives and living conditions of those state house tenants who come with the homes as part of the package.

This directly contradicts the Government's assertion that tenants would be better off than they are now because organizations like the Salvation Army could offer services which other landlords, notably Housing New Zealand, could not.

No-one can accuse English of rushing things, however.

Work has been underway for more than five years on his market concept. It is only now that the theory is turning to implementation.

The intention is to roll out the policy in the regions first, choosing areas where supply and demand is more "stable'.

That will allow adjustments to policy setttings to be made without causing major ructions. Only then can the policy be introduced into the turbulent Auckland market.

English's difficulty is that this is a policy that could have unforeseen consequences unless all of his ducks are kept strictly in a row. But make no mistake. English is determined to make it all work no matter the potential cost to his reputation.