Hon Chris Bishop
Minister of Housing
Associate Minister of Finance

Introduction

Good morning. It’s great to be here at the Community Housing Aotearoa Conference and to see so many people dedicated to fixing New Zealand’s housing crisis.

I’d firstly like to congratulate you on celebrating 20 years. Well done, and here’s to 20 more.

I’d also like to thank you. Community housing providers around New Zealand are doing a great job providing warm and dry homes for people in need, affordable rentals, social support, and much more.

Today I’m here to talk about this Government’s vision for housing, particularly social housing.

This Government believes in social housing, and we believe in the CHP sector. We intend to back you to succeed.

Before I get onto that, I want to talk about our wider housing crisis and what we’re doing about it.

Our housing crisis

Sometimes people try to think of social and affordable housing in its own little bucket, as if it can be divorced from the rest of the housing system.

It can’t.

The truth is, that our failure to create a functioning housing market has created a cascading series of extremely difficult and expensive public policy problems to solve, with a real human cost.

You know all the stats, so I won’t dwell on them too much.

After inflation, house prices in New Zealand increased by more than any other OECD country in the past 30 years. Between 2000 and 2021, inflation adjusted house prices rose 256 per cent.

In the year to June 2023, 45 percent of renting households spent at least 30 percent of their post-tax income on housing. Research by the OECD shows that this is even higher for low-income households, and higher in New Zealand than any other country.

There are around 21,000 families on the social housing wait list.

And in the last few years, we have seen the human disaster that is emergency housing, where, in 2022, the government was spending $1 million on average per day to house people in motels around the country.

Our housing crisis is phenomenally expensive for government.

Central government spent over $5 billion last year alone on housing assistance in many different forms. That includes the accommodation supplement, Income Related Rent Subsidies, emergency housing grants, transitional housing, and initiatives to address homelessness.

Each new government programme has begat another government programme; and they have grown like mushrooms. The system is complicated, confusing, and often duplicative. Most importantly, it is extremely expensive.

If that $5 billion amount stayed flat, over the 4-year budget period the New Zealand government will spend over $20 billion just on helping people to be housed.

To put it is perspective, that’s 15 Transmission Gully motorways, or two thirds of Central Government’s school property portfolio, or billions of dollars more than our entire network of hospitals – an astonishing amount of money.

Our housing crisis is most importantly a moral issue. A generation locked out of home ownership. Kids growing up in motels. People living pay check to pay check just to afford rent. A long list of families in housing need who can’t get access to a warm dry home.

All our problems in housing are connected to each other and our Government is determined to fix our housing crisis by focusing on the fundamentals – our Going for Housing Growth policy, improving the rental market, making changes to lower construction costs, reforming of our planning laws, and improving social housing.

Progress we’ve made already

Tomorrow marks the anniversary of the Government’s first year in office.

I’m pleased with the progress we’ve made so far.

We are ending the blight that is emergency housing. Latest reporting shows that that there are only 993 households in emergency housing – down from 3,405 when we came to government. That’s a 71% decrease.

This has come from a sustained focus by MSD workers into getting our most vulnerable people into houses – either social houses or private rentals.

More than 1,600 kids have moved out of motels into housing thanks to our Priority One initiative, which we campaigned on and implemented soon after coming to government.

The social housing waitlist (public housing register) is down to around 21,000. It is still too high, but it is about 4,000 fewer than it was a year ago.

In building and construction, Chris Penk is making changes to make it easier to build. We’re reforming the building consent system, removing barriers to overseas building products to increase competition, increasing the use of remote inspections, and much more.

We’re also changing the law to make it easier to build granny flats of up to 60 square metres, without a building consent or resource consent.

The centrepiece of our housing policy is “Going for Housing Growth”.

It consists of three pillars that address the root cause of our housing crisis - freeing up land for development and removing unnecessary planning barriers, improving infrastructure funding and financing, and providing incentives for communities and councils to support growth.

Report after report has found that our planning system, particularly restrictions on the supply of urban land and infill opportunities, are at the heart of our housing affordability challenge.

The first pillar of Going for Housing Growth has been announced and involves the establishment of Housing Growth Targets for Tier 1 and 2 councils, new rules to make it easier for cities to expand outwards at the urban fringe, a strengthening of the intensification provisions in the NPS-UD, new rules requiring councils to enable mixed-use development in our cities, and the abolition of minimum floor areas and balcony requirements.

These changes will be advanced through a Resource Management Amendment Bill to be introduced before the end of the year, and National Direction changes next year.

Pillar two about “infrastructure funding and financing for urban growth" is very important and I’ll have more to say on that soon.

Social Housing

That brings me to our social housing system.

One of the first things we did on coming to government was commission an independent review into Kāinga Ora.

We were worried about it in Opposition, and it turns out we were right.

The last government was well practiced at throwing money at things, and Kāinga Ora was no exception. It had easy access to debt, hundreds of millions of dollars allocated to it, and was asked to do everything from urban development, infrastructure grants, a shared equity scheme, first home grants, specified development projects – as well being a landlord to and looking after tenants!

Despite billions thrown at it and billions borrowed, the waitlist quadrupled under the last government.

As you know, there is a new Board in place at Kāinga Ora and the first thing we did was ask for a Turnaround Plan.

Last week Ministers received that plan.

It is critical that Kāinga Ora is a highly performing organisation – not just for the Crown’s books – but for the people it houses and for the communities it operates in.

Once Cabinet has considered the plan, we will release it publicly and the next steps for Kāinga Ora.

In the meantime, we know it is important to keep construction of social housing going. The previous government’s 3,000 new social housing places involved funding until only June 2025, so we allocated $140 million in Budget 2024 to new social housing places to be delivered only by CHPs. This was funded from ending the First Home Grant scheme, a classic example of low value expenditure being reprioritised to fund higher value priorities.

Back in May, I signalled that around 500 homes would be allocated quickly based on the existing pipeline to ‘maintain momentum’. I am pleased to say that as of October, around 100 social housing places for June 2025 onwards have either been approved or are in the final stages of consideration, and my officials tell me there is a strong pipeline of proposals.

Most of the remaining 1,000 places are to be allocated using strategic partnerships, with the aim of targeting areas where the need is most acute.

Under this new approach, strategic partners will be funded to deliver social housing at a portfolio level, as opposed to looking at proposals one by one. This will help build more enduring capacity and capability.

The Ministry of Housing and Urban Development has selected a small number of CHPs to start work on strategic partnerships. A formal announcement of the selected partners will be made once those agreements have been confirmed.

While most of the 1,500 places will be delivered through ‘maintaining momentum’ and strategic partnerships, there will still be some room for CHPs to deliver projects outside of this.

Competitive neutrality

My ambition for the social housing system is to create a level playing field between CHPs and Kāinga Ora.

Put it this way: I don’t care who builds social and affordable houses, as long as they get built.

The last government was obsessed with state housing.

I’m obsessed with building houses across the housing continuum for people who need them.

I am agnostic as to whether those houses are delivered by community housing providers or the government.

The truth is we won’t solve our housing crisis through the government alone.

I call this competitive neutrality. In some areas and for some people, CHPs are the answer. In other areas, Kāinga Ora is the way to go.

However, we don’t have competitive neutrality right now.

As I am sure you are aware, Kāinga Ora can borrow at a small margin above the Crown’s cost of financing, while CHPs effectively get access to finance only at commercial rates.

Announcement

Over the last year, I have heard from you, major banks, intermediaries, and investors that access to finance is a concern for CHPs.

I want to give the sector assurance that the Government has heard you and is committed to creating that level playing field.

Today I can announce three actions the Government is taking now to help CHPs access borrowing to deliver new social housing.

The first is making the Operating Supplement available upfront.

To improve the confidence around the delivery of the 1,500 places, the Government will make $70 million of Operating Supplement available upfront, that would otherwise be paid to CHPs over time.

The purpose of this upfront funding is to unlock the equity CHPs require to raise debt finance where they otherwise wouldn’t have been able to. For instance, I know that it can be tough to get financing in regional locations where banks may require more equity.

This will ultimately mean more community housing projects will meet financing criteria, and those projects can be advanced sooner.

Second, changes to IRRS Contracts

I have directed the Ministry to make targeted changes to IRRS contracts for new housing supply that makes the revenue stream more attractive for financiers.

There are several clauses in HUD’s contracts that investors repeatedly emphasise as problematic. These add to the perceived risk of the transactions and therefore increase the cost of financing or deter investors altogether. There are also operational measures HUD has identified to help mitigate some of the cash flow risks that investors have identified

I am leaving this work with my officials to follow up with CHPs in the coming months.

Three, using leasing

On top of the IRRS contract changes, I have also instructed the Ministry to review the use of leasing to provide social housing, in cases where it provides value for money.

There is already significant interest from private developers and investors in partnering with CHPs to help them deliver and operate social housing.

Over the coming months and into the new year, the Ministry will review and reset its framework for leasing.

There are many leasing terms and structures. The Ministry’s framework will consider what happens at the end of the lease term and what the options are for CHPs, for Government, and for the tenants at that stage.

Reserve Bank

We have also heard what CHPs have said around Reserve Bank rules. Broadly, we agree with you and think the risk weights may be overcooked for lending for social housing.

The Minister of Finance will soon request that the Reserve Bank undertake a review of standardised risk weights, including prioritising work on lending for social housing.

Over time, and as the social housing sector grows, there is the potential for changes through that review to increase competition and place pressure on the cost and terms of debt financing.

But banks are not the only source of debt financing for CHPs or their partners. In other jurisdictions, financing for the operating phase tends to come from lenders that can be more flexible to meet the needs of the sector, such as capital markets. This is an area where I am seeing a lot of opportunities and potential for innovation.

Credit Enhancement

That brings me to my next announcement.

I am pleased to announce that the Government is committed to exploring a credit enhancement intervention for CHPs, so that they can access suitable debt.

Over the next three to four months, the Government will consider a range of options to support CHPs’ access to debt on terms reflective of their real risk and circumstance.

These options include, but are not limited to:

• providing direct lending or guarantees to CHPs,
• establishing a Crown intermediary to provide financing efficiencies, or
• providing lending or guarantees to a private lender.

CHPs having access to financing that is not unnecessarily restrictive gives them a stronger economic case for building more social houses and goes some way to levelling the playing field with Kāinga Ora.

The days of the state preferring its own entity are over.

But – I will be blunt – this work will take time, and there are many details to comb through. I have requested that the Treasury, with support from the Ministry of Housing and Urban Development, report back to me early next year with details on a fulsome credit enhancement proposal for consideration next year.

Depending on what that looks like, it also may take some time to implement.

I’m being realistic about timelines, because I don’t want you to wait for the Crown and put a break on the fantastic momentum that we want the CHP sector to continue.

Review of Housing Funds

I’m coming to the end of my time with you, but I know you’re probably wondering what is happening to the rest of the Kāinga Ora Review recommendations around “active purchasing” and community housing associations.

Our major focus this year has been to reset the organisation. At the same time, we also started a comprehensive look at all the funds the Government uses across the housing system.

What is clear to me is that the system is messy, opaque, expensive and often duplicative.

We can create better institutional structures that enable investment discipline and certainty. We can create simpler and clearer funding streams for CHPs and Kāinga Ora to access. We can be far more deliberate about where and when we invest, based on much greater use of granular data about housing and social need.

So that work is coming together, and I’ll have more to say in the new year.

Conclusion

Let me conclude by finishing where I started, which is saying thank you for what you do.

Together, we will solve New Zealand’s housing crisis. I’m looking forward to continuing to work with you.

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