Others projects listed included $49m already spent on a 301-apartment Wellington project on Arlington St that sits bare except for concrete foundations, $15m spent buying land for two Christchurch projects and another $6m-plus spent buying and preparing land in Auckland’s city centre.
Housing Minister Chris Bishop said the review backed-up the installation of a new Kāinga Ora board tasked with turning its “big financial trouble” around.
“We expect to receive the turnaround plan before the end of this year,” he said.
The pause on projects highlights how dramatically Kāinga Ora’s mandate has changed.
Recent Labour governments had viewed it as a major urban developer. They pumped billions in, hoping it would not only build public homes but also regenerate whole communities by encouraging private developers to build alongside its projects.
However, the National-led Government started examining its finances from day one, with a review it commissioned finding the agency was not financially viable as its debt jumped from $2.7b in 2018 to $12.3b by June 2023.
The Government now plans to contract new public housing builds out to private builders and non-profits known as community housing providers, with Bishop previously saying Kāinga Ora should return to its core job of being a “good landlord”.
As part of that, he instructed Kāinga Ora to review all projects struggling to meet budgets and those where build contracts had yet to be signed.
Where has the money been spent?
As of July 31, Kāinga Ora identified 371 such projects, however, it says that 48 of those have since been given a green light to go ahead.
Overall, $294m had been spent on the 371 projects by the end of July, with about one-third, or $104m, having gone into Auckland’s 102 paused projects.
The projects range from single home developments to 300-apartment complexes, with at least 50 of them having had at least $1m spent on them so far.
Some projects, such as Auckland’s Elm St and Racecourse Pde development, beside Avondale Racecourse, had been viewed as key pieces in wider urban regeneration projects.
The 139 apartments had been expected to rise alongside a $500m-plus private development of 728 apartments by developer Ockham and iwi Marutūāhu.
Together the two developments added weight to a push currently under way to rezone the entire racecourse ready for the development of possibly thousands of new homes.
So far Kāinga Ora has spent $15m buying land at the site and a further $9m on planning designs as well as demolishing an existing motel and levelling and decontaminating the ground.
In Wellington, the Arlington St site on the city centre’s southern edge, had originally been planned as Kāinga Ora’s biggest.
A 2022 press release by the then Labour Government, celebrating funding for the project, said it would deliver 301 townhouses and apartments spaced across 16 buildings and surrounded by playgrounds and an orchard.
So far, one-sixth of the project’s planned $296m budget has already been spent. It’s been used on building designs, demolition of existing homes, site decontamination and preparation, and “piled foundations” for one of the buildings.
The project originally came to a halt last October under the previous Government, when costs threatened to balloon over budget.
Work on alternative options has since been under way, with the Herald understanding they could be presented to Cabinet within months.
The next two developments where the most money has already been spent are in Christchurch - one in the city’s east in Phillipstown and the other in the west in Upper Riccarton.
Most of the cash has gone towards the $15m combined cost of buying the land parcels, which are now overgrowing with weeds while plans for the 39 and 44 homes remain up in the air.
Another $6m has been spent on an Auckland city centre site on Vincent St where land remediation works have been done and an old church demolished ahead of a planned 53 new homes.
That project was then put on hold when a further $11m was reportedly spent on the former YWCA seven-storey building next door, so that the agency could consider the best use of the combined sites, Kāinga Ora said.
Other major Auckland projects under review include a planned 186 homes in Onehunga on Jordan Ave where $4.2m has so far been spent, 180 homes planned for Mt Wellington on Rowlands Ave and Waipuna Rd where $2.7m has been spent, and 123 homes planned for Manukau on Osterley Way where $1.8m has been spent.
A particularly controversial Blockhouse Bay development on Marlowe Rd and Bolton St has had $4.2m spent on it so far without any houses being built.
Some local residents have been complaining because the planned 68 homes do not include pensioner housing, which was reportedly one of the conditions for the land being donated to Auckland Council back in the 1970s, RNZ reported.
‘Good money shouldn’t be thrown after bad’
Despite so much taxpayer money at risk of being lost if projects are cancelled, Act housing spokesman and coalition Government member Cameron Luxton said the review must go ahead.
“We certainly don’t think good money should be thrown after bad – that would be a case of the sunk costs fallacy,” he said.
And with Kāinga Ora in a “very worrying financial situation”, he suggested projects could be on the chopping block.
“If the millions spent so far has been on ‘preparing the land’, as Kāinga Ora says was the case for Wellington’s Arlington development, then that represents a capital investment that could be clawed back in a land sale, or used to support more affordable projects,” he said.
Bishop agreed, saying the agency had to return to financial sustainability and delivering its core functions.
In the meantime, it would still complete 2600 of its planned homes, while his Government had funded an additional 1500 social houses to be built by community providers, he said.
Labour’s housing spokesman Kieran McAnulty, however, accused National of using its review to distract from plans that it intended to wind down Kāinga Ora’s building operations, and potentially lose all the expertise it had built up in recent years.
Where to from here?
Kāinga Ora said it had gained greater clarity on its next steps now the Government had stated that it expected about 2600 of the agency’s already planned homes to be built through to June 2026.
A further 3000 existing homes are also set to be renewed through a mix of renovation, redevelopment, or by selling and replacing them with new homes.
Gareth Stiven, the agency’s general manager of strategy, finance and policy, said two main considerations would guide which projects went ahead.
The first was that priority should be given to building in locations where homes were most needed, and to renovating existing homes where possible.
The second consideration was ensuring costs and plans still stacked up financially against alternative options for each site.
Stiven said the agency had nearly all of its 2024-25 builds already contracted, meaning the fate of many of the 371 projects would depend on how many homes the Government wanted the agency to build after 2026.
As the fate of the projects are decided, Kāinga Ora said it would update nearby neighbours.
It remained unclear whether the wider public would be given a run down of the review results and its housing outcomes, amid queries by some critics that it could result in some projects being pushed ahead with poor quality housing.
Stiven also defended why so much money had been spent on the projects, saying the scale of building expected of the agency by last Government meant it had to have a significant pipeline of projects on the go.
That was normal in the industry where developers were often in early planning on new projects while still finishing existing developments, he said.
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