Peter Jeffries: Funding change has hurt non-profit housing

Mar 19, 2019 | News

In 2016, we were the third largest developer of public housing in Auckland after Housing NZ and the Tamaki Regeneration Company. By the end of this year, we will have added over 150 homes to our portfolio.

In 2017 we responded to a Government request for forecast housing supply with a commitment to build 100 homes in each of the following three years. Unfortunately, our plans to build these additional homes are on hold.

This is the result of the Government pausing its capital co-funding support for community housing 12 months ago. Until then, the Government matched up-front any money raised by the non-profit sector to deliver long-term housing assets in the community.

As a rapidly growing city, Auckland needs more of every type of house. The Government has commendably given attention to boosting the supply of affordable private housing as well as increasing the amount of public housing available from Housing NZ.

These initiatives include affordable, higher-density, family-friendly homes provided under KiwiBuild, Housing NZ and community housing providers.

Housing NZ is planning to build about 500 additional public houses in Auckland each year for the next four years. These all contribute to the solution.

But waiting lists are getting longer, particularly for the most vulnerable for whom KiwiBuild and standard housing options are not suitable.

In December, there were 4363 people on the public housing waiting list in Auckland, 1797 more than the year before. That is a 70 per cent increase.

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A recent homelessness count in Auckland found 336 people living without shelter and a further 2874 people in temporary accommodation.

At current levels of construction, supply will not even match current – let alone future – demand. The Government recognises the significant contribution of community housing and has set a target of 30 per cent of new public housing from our sector.

However, the Government’s actions imply it will rely solely on guarantees of 150 per cent of market rent for 25 years (inflation adjusted) to encourage the construction of new community housing.

An article last month in the Herald showed this policy would allow property developers to generate a profit with no obligation to house vulnerable families past the 25-year contract.

Presumably, developers will be able to sell-up and realise their Government-subsidised capital gains at that time. This poses a significant risk that, within a generation, Auckland could be back to where it is now with a serious shortage of public housing.

The approach the Government appears to be adopting marginalises the role of long-established and successful non-profit community housing providers.

Organisations, such as ours, not only house vulnerable families but provide essential wrap-around services for many years. These services are necessary and compliment those provided by Government agencies. We doubt reducing the role of non-profit community housing providers is what the Government intends.

Above-market rent subsidies do not enable non-profit organisations to build significant amounts of new community housing. Community providers cannot replace the lost up-front Government co-funding by attracting long-term investors.

Twenty-five year contracts are a very long-term commitment and there is a risk the interests of for-profit investors diverge from non-profit organisations over the course of the contract. Any divorce would be messy.

In contrast, up-front funding by the Government poses less risk because it aligns the social goals of both the Government and the non-profit organisation. A funding stake held by the Government is a better way to secure its interests than relying solely on regulations and annual contracts.

The upshot of this funding change is the supply of new community houses has dramatically stalled in the last 12 months. Just several dozen new community houses were added across Auckland city. Even projects green-lighted for construction have risked falling over at the last minute.

The capability still exists in the non-profit sector to continue to deliver community housing projects at scale.

But, if the status quo prevails much longer, we will need to consider cutting back development expertise that has taken years of hard work to establish and will be difficult to re-hire later.

As a proven, workable alternative, the non-profit community housing sector is offering to contribute a dollar for every dollar the Government provides with any surpluses invested back into additional housing.

Peter Jeffries is the Chief Executive of the Community of Refuge Trust.

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