Housing Minister Chris Bishop says the total number of social houses will not reduce under the government's Kāinga Ora turnaround plan.
The strategy - endorsed by Cabinet and revealed on Tuesday - refocused the government's housing agency.
That would be achieved through about 1500 new homes and 400 retrofits annually, offset by about 800 sales and 700 demolitions.
However, chair Simon Moutter said the number of houses would stabilise from 2026 onwards "at around 78,000 unless of course the Minister instructs Kāinga Ora to add to our housing stock beyond that date".
He said the agency would however continue to deliver new social housing to either add to the stock where more homes were needed or to replace existing homes.
"As key cost savings are embedded, Kāinga Ora's financial sustainability will significantly improve with the aim of materially reducing the operating deficit and eliminating it within 10 years or so."
Bishop said the plan had five major 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.
Kāinga Ora has an asset base of $46.7b of property assets around New Zealand, housing 191,000 tenants.
Budget cuts last year have also projected savings of $130m from staffing, $464m from operating maintenance, $126m from capitalised maintenance, $96m from retrofit savings, and $12m from travel savings.
Matt Crockett. Photo: RNZ/ Marika Khabazi
"Kāinga Ora sales will focus on older properties in high value areas, with the proceeds going to provide multiple other units in different areas," Bishop said.
"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."
He said about 93 percent of new home construction was done by the private sector, and Kāinga Ora should be building or acquiring "simple, functional warm and dry houses, as quickly and efficiently as possible".
This would mean bringing construction costs down from the current estimate of 12 percent above market rates to "fully allocated costs that are in line with, or better than, market rates".
Housing Minister Chris Bishop. Photo: RNZ / Samuel Rillstone
The scope of the agency would also be reduced, with the Ministry of Housing and Urban Development taking over its remaining underwriting activities; and his new National Infrastructure Agency taking over the Infrastructure Acceleration Fund.
The Kāinga Ora Land Programme would be wound down, and changes to other settings would also be made through amendments to the law being progressed this year.
"Despite rhetoric from Labour in the past, divestment of properties in order to manage stock is a routine approach to Kāinga Ora's operations. In the past five years they have sold, demolished or ended the lease on more than five thousand 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.
"The plan will refocus Kāinga Ora on its core purpose of being a good social landlord and improve operating performance and reduce losses, with debt capped at an acceptable level."
Bishop said the plan would reduce Kāinga Ora's deficits by about $190 million this financial year, while the 2027/28 deficit would be reduced by $354m compared to pre-election estimates.
Simon Moutter. Photo: RNZ / Marika Khabazi
It would reduce the agency's debt by about $1.8b compared to the pre-election figures.
The plan was developed after a review of the agency led by former prime minister Bill English found Kāinga Ora was under-performing and would not be financially sustainable without making savings and financing changes.
"The review made it clear that Kāinga Ora was in considerable financial strife. The government appointed a refreshed board and asked them to deliver a turnaround plan by the end of 2024 to return the agency to financial sustainability," Bishop said.
The review itself was somewhat contentious, with a former board member criticising the government's shake-up of the agency as "sheer folly, wanton folly" at the time.
Bishop signalled in November he wanted more of the country's social housing stock to be built by private providers, making a range of changes to streamline that process.
Finance Minister Nicola Willis in December revealed the 12 percent figure to a select committee, saying it was "despite all of that cheap Crown capital, despite all of that scale".
Moutter at the time said part of the extra cost was from accessibility and longevity - with appropriate fittings that would not deteriorate - as well as the land the government had available to build on.
"Property developers can pick and choose what land is going to be the lowest cost to build on - which is partly topology, but partly sort of form factor, etcetera, which leads to greater efficiencies - and we don't always have those degrees of freedom."
On Tuesday he said the accessibility and longevity requirements had not changed, but Kāinga Ora was aiming to offset that with the large scale of its building programme.
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