Government and Auckland City agree on housing

The Government has offered to buy Auckland City Council’s pensioner and residential property portfolio.

On Monday, 30 September 2002 Cabinet approved an agreement negotiated between Housing New Zealand Corporation and the council.

Housing New Zealand will pay a total of $83 million for the Council’s two portfolios:

1542 pensioner rental units, on 50 sites, with a book value of $101 million. 129 residential units, with a book value of $31 million.

This reflects the full market value for residential housing and a discount for pensioner housing – which takes into account the fact that these sites will always be retained for social housing and that Housing New Zealand Corporation is committed to a fast tracked redevelopment programme.

For the Auckland City Council the deal will allow an exit from the social housing market, and relieve ratepayers of approximately $75 million of pensioner housing upgrades and maintenance costs during the next 20 years.

Sale proceeds will be used to substantially reduce debt.

When approved by council on 10 October the deal will be subject to due diligence, and is due to go unconditional on 30 November 2002. Housing New Zealand Corporation will acquire the properties from 1 March 2003.

Auckland Mayor John Banks says the deal represents a significant social contract between the Government and Auckland City.

“It is a victory for economic common sense and social justice.

“It has always been my hope that the City’s housing stock would be sold to the Government. It is arguably the only proposition that could meet Auckland City’s objectives of substantially upgrading the existing homes and improving the quality of life for residents.”

Mr Banks said elderly tenants deserve security, respect and dignity.

Under the negotiated deal, Housing New Zealand will:

guarantee accommodation for life for all council’s pensioner tenants invest up to $75 million over the next five years to upgrade or replace existing properties.

“My long experience working with Housing New Zealand confirms they are very good landlords. The new owners will give pensioners the much-deserved sense of security.

“Government ownership means the houses remain public property. This is a win-win-win proposition for the Government, ratepayers and our tenants,” concluded Mr Banks.

Auckland City owns 1542 pensioner units and 129 residential houses.

The council resolved this year that providing social housing is the responsibility of central government, not local government.

The council believes the money it spends on providing housing would be better used to repay debt and fund new capital expenditure, which would benefit a greater number of residents and ratepayers.

Pensioner housing

Any change to the 1542 pensioner houses must be sensitive to the needs of tenants - pensioners must have a lifetime accommodation guarantee.

The council asked its officials to commence discussions with Housing New Zealand Corporation to see whether it was interested in purchasing and managing the Council’s pensioner units.

Residential housing

The council also asked its officials to commence discussions with Housing New Zealand Corporation to see whether it was interested in purchasing and managing Council’s residential housing portfolio, subject to a price adjustment for any offer-back arrangements taken up by tenants.

Housing New Zealand Corporation / Council agreement

Housing New Zealand Corporation has offered Auckland City $83 million to purchase the pensioner and residential houses.

Housing New Zealand Corporation has agreed that council’s undertaking to give pensioners a guarantee of accommodation for life will be honoured.

Housing New Zealand Corporation will also respect council’s guarantee of accommodation for residential tenants until 31 March 2003. After that date Housing New Zealand Corporation will manage the tenancies in accordance with the Residential Tenancies Act.

The book value of the council’s pensioner housing is $101 million and the book value of the council’s residential housing is $31 million.

The agreed offer of $83 million reflects the full market value for residential housing and a substantial discount for pensioner – which takes into account the fact that these sites will be retained for social housing and that Housing New Zealand Corporation is committed to a fast tracked redevelopment programme.

Redevelopment

Housing New Zealand Corporation has committed up to $75 million over five years to redevelop pensioner housing, a similar amount to what council intended to spend over a longer period.

Housing New Zealand Corporation would ensure there is minimum disruption for tenants during any redevelopment process.

Waiting lists

The contact details of people currently on the council’s waiting list for pensioner housing will be given to Housing New Zealand Corporation. Housing New Zealand Corporation will then contact them and arrange for an assessment to determine their eligibility for accommodation.

Council has not allocated new tenants to properties that are currently vacant, due to the sale negotiation process.

Sale process

The agreement reached between Housing New Zealand Corporation and council staff requires the formal approval of both the Government and Auckland City Council. On Monday, 30 September 2002 the Government approved the agreement. It is anticipated that Council will accept the offer when it next meets on Thursday, 10 October 2002.

All pensioner and residential tenants will be kept fully informed of developments relating to the sale.

Auckland City Councillor Dr Bruce Hucker, a strong advocate for the council having a role in providing affordable public housing, describes the proposed agreement between the Government and Auckland City as a win-win one.

Dr Hucker says the proposed agreement has support across the council because it will

Provide pensioner tenants with security, access to income related rents and improved accommodation Increase the stock of publicly owned and affordable rental housing in a city in great need of that More rapidly improve the stock of accommodation which, in turn, would improve the quality of life for tenants.

Dr Hucker said the proposed deal would deliver an improvement on a situation in which the council alone owned the housing and invested in it at the previous rate.

However, a difference would remain between those who believed the council had no role in providing housing – and those who believed it had a social responsibility to provide access to affordable housing.

Dr Hucker said he would support action in the future to extend the central government-council partnership to boost affordable public housing stock.

“The deal frees the council to look at further investment in housing in partnership with Government. I believe we should reinvest sales proceeds from the council’s capital fund in areas like this and work together with the Government on that.”

Dr Hucker said he and other councillors had been working directly with the Government to support the outcome delivered by the proposed agreement.

The agreed sale price is $83 million. This reflects the full market value for residential housing and a substantial discount for pensioner housing – which takes into account the fact that these sites will be retained for social housing and that Housing New Zealand Corporation is committed to a fast tracked redevelopment programme.

The book value of the council’s pensioner housing is $101 million and the book value for the residential housing is $31 million (as at 30 June 2002).

The sale will also result in cost savings for Auckland City.

The pensioner housing business operates at an annual loss of around $5 million after taking into account an appropriate return the cost of capital employed. Auckland City will save around $75 million over the next 20 years because it is no longer required to fund the pensioner housing capital expenditure and planned maintenance programmes. It is intended that proceeds from the sale, together with the proceeds from the sale of Auckland City’s shareholding in Auckland International Airport Ltd, would be used to repay debt and establish a capital fund to be used for much needed infrastructure in the city.

Accordingly, the sale of the houses to Housing New Zealand Corporation will enable council to invest the capital it had previously used for the provision of housing into projects which will benefit a wider cross section of residents and ratepayers while at the same time ensuring the housing needs of the pensioners and low income families will be provided for.

Housing New Zealand Corporation is planning to spend up to $75 million on converting and upgrading existing units, and building replacement units in instances where three units are converted into two. This is a similar amount to what council intended to spend over a longer period.

Auckland City’s Long-term Financial Strategy, as adopted in June, already takes into account the assumption that the houses will be sold over the next 20 years. The updated LTFS projections will reflect the implications of the houses being sold in March 2003 instead.

Why has the council decided to sell its pensioner and residential housing? Auckland City Council believes it is the responsibility of central, not local government to provide social housing. This was incorporated in the council’s recently adopted annual plan.

Will pensioners have security of tenure? Housing New Zealand Corporation will honour council’s undertaking to give pensioner tenants a guarantee of accommodation for life.

Will residential tenants have security of tenure? Housing New Zealand will respect council’s guarantee of accommodation for residential tenants until 31 March 2003. After that date, Housing New Zealand Corporation will manage the tenancies in accordance with the Residential Tenancies Act.

What will happen if I am on a waiting list for council pensioner housing? If your name is on a waiting list for the council’s pensioner housing your contact details will be given to Housing New Zealand Corporation. Housing New Zealand Corporation will then contact you and arrange for an assessment to determine your eligibility for accommodation.

What will happen to rents? Housing New Zealand Corporation charges income-related rents. The council does not. All tenants will be eligible to apply for an income-related rent and Housing New Zealand Corporation will contact tenants in December 2002 to discuss their application.

Will my council housing be redeveloped and improved? Housing New Zealand Corporation is committed to refurbishing and redeveloping existing properties as required. Housing New Zealand Corporation will be contacting tenants when redevelopment details are known.

Who would be my landlord? Council will remain the landlord of pensioner and residential housing until a sale contract is settled on 1 March 2003. After that date, Housing New Zealand Corporation will become the landlord.

I am an Auckland City tenant. How will Housing New Zealand know how to contact me? Auckland City and Housing New Zealand Corporation staff will work very closely during the hand over period to ensure tenants’ interests are looked after and that any decisions are clearly communicated to tenants.

Will my tenancy officer and other council staff be affected by the decision to sell the pensioner and residential houses? There are seven council staff who will be directly affected by the sale offer. They have been kept informed throughout the sale negotiations and Housing New Zealand Corporation and the council are exploring employment opportunities for them.

I lived in New Windsor – will it still be redeveloped so I can move back in? Housing New Zealand Corporation is committed to redeveloping New Windsor and we will keep you informed of any decisions that will be of interest to you.

I have council housing in my neighbourhood. What will happen when Housing New Zealand buys the properties? Housing New Zealand Corporation will undertake a comprehensive redevelopment of the pensioner houses that need attention. This will have a positive effect on surrounding properties. Any comprehensive redevelopment would be subject to the Resource Management Act or other local authority planning processes. Housing New Zealand Corporation undertakes thorough assessments of all applicants for its housing.

Will tenants and ratepayers be kept informed about the proposed sale? Yes. All tenants will be kept fully informed of developments. Each tenant will be personally contacted by the council to discuss his or her circumstances. Ratepayers will be kept informed through the council’s newspaper, City Scene, and the council’s website.

Who do I contact for more information? If you are a pensioner tenant and wish to speak with someone you can phone the council on 379 1344.

If you are a residential tenant and wish to speak to someone you can phone the council on 0800 110 910.

If you have a general inquiry you are able to phone the council call centre on 379 2020.

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