Hon Paula Bennett

Minister for Social Housing

28 November 2015

Speech to the Habitat for Humanity Annual Conference

Good morning, thank you for the opportunity to talk with so many of you from your outstanding organisation.

As the words, Habitat, and, Humanity, in your name rightly proclaim, you provide a range of solutions from affordable housing and rental subsidies to budgeting advice and home repair programmes for low income families.

You understand, wherever it’s possible, the importance of keeping the dream of home ownership alive.

To wherever possible help the hardest-pressed people in our society from dependency to independency.

Through innovative techniques such as sweat equity and community working bees you ignite hope in people and provide opportunities for them to work towards owning their own home.

As an aside, I also want to say how delighted I was to a see the shadow of uncertainty over your charitable status removed and common sense prevail.

It’s the right result.

Where we have come from

Interestingly, the home ownership dream Habitat for Humanity instils in people around the world was not a founding principle when state housing was introduced.

Perhaps that’s why for too many years and under too many Governments the direction of state housing became blurred and confused.

It lost its way.

For too many people, it became a dependency trap, not a launching pad inspiring them to achieve home ownership.

We built houses everywhere. We put people in them, heavily subsidised their rent and shamefully, in far too many cases we left them there with inadequate or poorly co-ordinated support services.

Some of our citizens with the highest needs will always require social housing.

That’s a given.

But for others, the dream of working towards owning their own home, shrivelled and died as we developed a monopoly social housing provider – the state.

Critically, as successive Governments tinkered with Housing New Zealand. We didn’t re-develop housing in tandem with changes to demographics and our society.

So much so that 30 per cent of Housing New Zealand properties are the wrong size or in the wrong place to match demand.

We have empty homes in towns around New Zealand but in places like this, here in Auckland, we desperately need more.

We intend to purchase them – more than 1800 extra places in the next two to three years.

With rising house prices, a rapidly growing population and a social housing stock poorly configured for today’s society, Auckland presents real challenges.

Having seen the frankly unsustainable place state housing had grounded itself, it seemed indisputable - transformation is essential.

That’s not to diminish the integral role state-built houses played in uplifting many New Zealanders lives over many decades, but boiled down we had choices to make.

Stick to a model that had stagnated?

A sector dominated by a giant state provider landlord and Government paying itself our highest social housing payment - the Income Related Rent subsidy or IRRS.

Meanwhile out in IRRS no-man’s-land, on the coalface but on the fringe, Community Housing Providers were forced to plead and pitch for Government assistance to build homes every few years.

Well that might be an OK way to operate in the good years.

But as you know, when the economy goes south, that’s when support like social housing is needed the most, and it’s also when Governments have the least ability to spend extra money.

We looked for a better future for social housing, one where the sector can grow sustainably and is buzzing with diversity and innovation.

That’s what our Social Housing Reform Programme is all about, and I’d like to briefly re-state its core objectives because we shouldn’t lose sight of the principles behind this work.

Those objectives are:

To ensure people who need housing support from Government, can get it.
To help people in social housing to independence where appropriate.
To ensure social housing properties are the right size and configuration and in the right place.
To increase the supply of affordable housing, especially in Auckland.
Last, to encourage and develop more diverse ownership of social housing

The turning point for the reforms was opening up the IRRS to community providers, not just the state.

While I am not going to pretend to you we can ignore significant challenges the sector faces, and in Auckland the challenges across emergency, social and affordable housing are just that much bigger, we have made progress this year.

You might not read about all of this on the front page, but over the last 12 months here is some of what the Government and the social housing sector has achieved together:

The Government committed to fund thousands more IRRS places by 2018.
MSD now has contracts with over 30 community providers who house over 300 households with IRRS – up from none last year.
A $2.5 million boost this year for emergency housing, and we’re also working closely with the sector on a long term funding solution for other towns and cities too.
We’ve spent $728,000 supporting over 300 people from social housing into sustainable private accommodation by paying for things like letting fees, bond, and moving costs. Incredibly, 33 people have bought their own home.
A new initiative supporting people thinking of moving from high demand areas to low demand regions with help from our community partners and financial support from MSD.
Our $435 million HomeStart support package, which started in April, will help 90,000 people into home ownership over the next five years.
Our programme to put social housing and affordable homes on under-utilised Crown Land in Auckland has seen its first site - Moire Rd - gazetted earlier this month and could provide 35 social houses.
Within days we will announce the results of our request for community providers to supply an extra 300 social housing households in Auckland.

Our Vision, what does next year look like?

All well and good.

But no bones about it, the essence of our reforms, like your conference theme of “Capability through Challenges and Change,” is to grow a sustainable sector.

And as we’ve been thinking and working in broad terms about reaching our objectives, there have been a lot of learnings.

The parameters around that broad thinking have narrowed.

We are getting down, as they say, to the devil in the detail.

So while we grow, I’m going to predict a few things I reckon I would be recapping on if I was speaking to you this time next year.

Community providers and HNZ will have purchased hundreds more social housing places in Auckland.
More than 800 HNZ social and affordable houses will have been built or nearing completion in Auckland
The intended transfer of more than 1400 HNZ houses in Tauranga and Invercargill to CHP’s will be finalised.
Further opportunities for CHP’s and consortiums to grow by obtaining state houses in other parts of New Zealand will have been identified.

How will the new funding work for CHPs

We’ve asked the community housing sector to move in new directions since the decision to open up IRRS and I know that kind of change can be unnerving.

Here’s how I see the flexibility MSD now have in place for CHPs buying social housing.

In many cases it’s a bit like taking out a 25 year mortgage.

The key new words are tailored and flexible.

If we look at the negotiable contracts for building new social housing, a CHP can get a 25 year Government backed income stream – based on the Income Related Rent subsidy – effectively the going market rate of rent.

Under the flexible tailored contracts MSD will continue to pay even if the house is empty between tenancies.

MSD is also open to negotiating to pay more than the IRRS.

They are also open to paying an upfront development payment - in most cases around 10 to 20 per cent of the total cost of building.

Say the house costs $400,000 that could be an $80,000 upfront payment that does not have to be paid back.

Some contracts already signed include extra fees to manage higher tenancy costs.

Now like any mortgage the big cost is interest so what we are starting to see is CHPs shopping around for finance.

They are not taking the first offer from the first financier.

Because they, and the financiers know, there is a property there as security along with a 25 year Government guaranteed income stream.

That’s not the same boat Mums and Dads are in when they negotiate a mortgage.

I’ve heard of CHPs recently getting 5 per cent and I’ve no doubt some may well get lower than that.

They are also factoring in, that as rents go up, income from the IRRS also goes up.

Typically in areas of high demand and particularly in Auckland, rents go up, not down.

But MSD will also negotiate over other factors that CHPs might have concerns about, by considering paying bonuses for providers who achieve agreed outcomes.

People ultimately matter, not who owns the houses

Some CHPs have picked up on this flexibility and have already signed contracts for new builds.

Others are opting to lease existing houses and are negotiating flexible tailored contracts for those.

Because buying or building houses isn’t the only way to provide social housing services

I still wonder sometimes if we still focus too much on who owns the house instead of people who need housing.

Some tenants, as you know, will require more time, more specialist wrap around help.

Some will never leave social housing for very good reasons and a decent society understands and fronts up to provide shelter and services for those citizens.

But for many, many people in social housing our goal - and theirs - is to move them along the housing continuum.

Most evidence - and I heard a lot about this from overseas providers - is that two key things drive tenant satisfaction.

They want someone to answer their phone call and they want repairs done in reasonable time.

And let’s not forget the public who have a place at the centre of this too.

Taxpayers rightly expect us to provide adequate and reasonable housing and to treat social housing tenants with dignity and decency.

The public also expect tenants to reciprocate.

And they expect people who are capable of it, to work towards private accommodation or better still, home ownership.

Consortiums

Which leads me back to really important objectives of our reform – we want an innovative and diverse social housing sector.

The way I see it, the reforms are creating a two speed market.

Small to medium sized CHPs specialising in what they do best and what they’ve always done… growing sustainably at a pace that suits them.
Larger-scale CHPs created from partnerships with developers, iwi and financiers and growing rapidly.

Let me be crystal clear. We need both.

As the new social market morphs and grows from a current virtual monopoly, there will be room for niche and large scale providers.

Niche can be nimble, large scale can be stable and steady.

It’s not a race so neither needs leave the other in its dust.

The large scale providers might be more likely to be part of one of the buzz words emanating from the reforms….consortia

But then equally so could smaller CHPS decide to form consortia.

What’s the formula for consortia, or consortiums?

Well, nothing scary really. It’s a partnership.

It could be a larger scale registered CHP providing fairly standard tenancy services, teaming up with a big developer or merchant bank.

Or it could be a medium sized CHP, joining iwi who might also be a CHP and they also have some money to invest.

But let’s say this consortia is involved in major development and needs more money that the iwi partner can put in.

So perhaps they connect with KiwiSaver or an international pension fund looking for somewhere safe to put their money.

Then again, a consortia could be a partnership comprising a CHP specialising in disability housing.

Perhaps the CHP looked after the disabled son of an elderly couple who want to cash in their orchard that’s big enough for six houses. The couple know Bob their local builder and Margaret their local bank manager.

They form a partnership.

Or a consortia could be a mix of any of those.

The point is that each party to the partnership has different strengths and different skills but they need each other to make it work.

Summary

There’s one word I left out of those examples of consortia.

Government.

Because we are partners with all CHPs in the reforms.

We are partners with all the consortia that may form, large or small.

And of course we’re partners with the tenants, some of our most vulnerable who need the Government to stand with them and support them.

At the start of these reforms we asked the social and affordable housing sectors to be innovative and creative.

The sector, and I, have likewise been asking our people in Government to be innovative too.

They’ve been asked to think about things. And they have.

Among the discoveries in that process is that some of the assumptions we made will need to be more flexible and there’s no shame in saying that.

We won’t always agree but overall I believe we’ve engaged with each other more than we ever did.

We’ve got a way to go but I hope you share my belief we’ve hatched the beginnings of a more sustainable future for social housing.

You know, I asked for this job as your Social Housing Minister, and I can tell you… I’m loving it.

Get the house right, you get the life right.

Thank you again for all the work you do, and I look forward to continuing to work with you.

ends

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