Housing Minister Chris Bishop revealed the move in a speech to KangaNews Debt Capital Markets Forum. Photo: RNZ / Samuel Rillstone
The government is providing $150 million for lower-cost debt to community housing providers (CHPs) via the the Community Housing Funding Agency.
Housing Minister Chris Bishop revealed the move in a speech to KangaNews Debt Capital Markets Forum in Auckland on Thursday afternoon.
He said the government's housing agency Kāinga Ora borrowed through the Crown, which gave it a competitive advantage.
CHPs provide long-term public rental housing, and include registered private businesses, charities and councils.
The Community Housing Funding Agency (CHFA) was launched by Community Finance last year as a way of pooling finance requirements for CHPs to provide cheaper debt.
Bishop said the funding boost for the agency would level the playing field with Kāinga Ora.
"We call this competitive neutrality. In some areas and for some people, CHPs are the answer. In other areas, Kāinga Ora will be the way to go," he said.
"While KO's borrowing is done through the Crown, CHPs currently access debt from the private market at higher rates. We have further work to do to better align KO and CHP access to and costs of finance.
"Currently, CHPs account for 16 percent of our social homes - around 13,000 houses. The government has funded an additional 1500 social houses in Budget 2024, 1000 of which are to be delivered by CHPs from June this year."
An interim loan will be provided to the agency in early April, ahead of the full amount by the end of the year.
"This will lay the foundation for CHFA to borrow hundreds of millions or billions of dollars, supporting not just the delivery of social housing, but also CHPs' broader affordable housing portfolios," Bishop said.
He also highlighted this year's government Budget would have four main focus areas: economic growth, social investment, limiting government spending while funding "high-priority commitments and cost pressures", and developing a pipeline of long-term infrastructure investment.
Bishop has previously spoken about the government's view barriers for CHPs to provide social housing should be removed, and the playing field with Kāinga Ora levelled, saying the government was "agnostic" as to whether the state or community sector delivered social housing.
He and Finance Minister Nicola Willis also complained in December that Kāinga Ora's house-building costs were 12 percent higher than the private sector.
However, its chief executive Simon Moutter at the time said the agency was building homes with the purpose of using them for social housing, was providing accessibility, and had less capacity than the private sector to select appropriate land for building.
Regardless, the agency had already cut, and was aiming to further reduce, building costs.
The agency had earlier revealed a "turnaround plan" for Kāinga Ora after a rapid review led by former National Party prime minister Bill English.
Opposition parties criticised the review as "not based on fact", and said the shake-up of Kāinga Ora was all PR and about saving money.
A game changer
Community housing groups and a prominent KiwiSaver provider already invested in the sector have labelled the scheme a game changer, which would ultimately bring billions into the sector.
Community Finance chief executive James Palmer said the changes were a watershed for the sector.
"This provides our country with the platform to deliver new affordable homes at scale, helping to address chronic affordable housing shortages nation-wide, with less cost to taxpayers and less government debt."
Palmer's organisation will manage the new Community Housing Funding Agency.
KiwiSaver provider Simplicity is one of a few investment funds to back such schemes, having somewhere around $60m invested, and managing director Sam Stubbs expected it would attract investment funds.
"The CHFA is a great way to help unlock billions of dollars of KiwiSaver money and get it invested in New Zealand to help solve one of our most critical infrastructure challenges - affordable housing."
The chief executive of the Wellington-based Dwell Housing Trust, Elizabeth Lester, said her group was refinancing with the new agency this week.
"The CHFA, with the support of the government, will help us save hundreds of thousands a year in interest costs compared to what we have historically been charged with banks. These savings will be reinvested into new homes to help more people."
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