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John MacDonald: Kāinga Ora needs to get its house in order

John MacDonald,
Publish Date
Tue, 21 May 2024, 12:58pm
Photo / NZ Herald
Photo / NZ Herald

John MacDonald: Kāinga Ora needs to get its house in order

John MacDonald,
Publish Date
Tue, 21 May 2024, 12:58pm

What an absolute shambles Kāinga Ora sounds like. 

But, let’s be honest, even though the Government is making noises about what a shocker this investigation and report by Sir Bill English is - it’s probably quietly quite pleased with it, don't you think? 

And, for me, the key thing it all comes down to is how involved a government, of any persuasion, should be in providing housing for people who need help to get a roof over their head. 

Is it the Government’s job to be a developer and a landlord? Or just a landlord? 

And I think the smoke signals from Wellington are very clear in that, as far as the current government is concerned, if it could get out of building state houses it would, and it would just focus on being the owner and the landlord. 

Which is why I say I reckon it’ll be quietly pleased with what Sir Bill English has delivered in the report he’s written on his investigation into our state housing provider. 

But I think we’ll be heading down the wrong track completely if we think the best or only way to get out of the Kāinga Ora shambles is to do the old outsourcing trick. 

That’s not to say that Kāinga Ora is a poster child for state or public housing. It’s not. As Sir Bill has highlighted, it’s a shambles. Or as Sir Bill’s report said —echoed by the Housing Minister Chris Bishop yesterday— Kāinga Ora is not financially viable nor socially viable. 

Here are some numbers which show how dire things are on the financial front. 

Kāinga Ora is staring down the barrel of a $700 million annual deficit.  

Its debt level has gone through the roof. In 2018, it had $2.7 billion in debt. By 2023, that had increased to $12.3 billion in June 2023. And it’s now forecast to get up to $23 billion within four years. 

Apparently, it has had easy access to debt but has done a completely cruddy job of keeping checks on things with “insufficient focus on fiscal discipline, and low levels of accountability leading to growing annual losses.”  

What’s more, Kāinga Ora says it needs $21.4 billion in cash from the Government over the next four years, which the Housing Minister says equates to about $4,000 for every New Zealander. 

So, if Kāinga Ora was your business, you would have been shut down by the bank long before now.   

Sir Bill English’s report also has harsh things to say about how Kāinga Ora has expanded from being a state landlord to a developer and running schemes to help first-home buyers.  

And fair enough too, because that is nuts. I bet that wasn’t what Michael Joseph Savage had in mind when he opened New Zealand’s first state house in Wellington in 1937. 

David and Mary McGregor were the first people to live in that house. As well as Prime Minister Savage, 300 other people were at the opening ceremony, and they all trudged through the house in dirty shoes and eventually had to be asked to leave by the McGregors. 

And sightseers were still turning days after that, having a nosey through the windows. 

Today, there isn’t the same level of fascination with state houses. But interest in the shambles Kāinga Ora has become will be going through the roof after this report that came out yesterday. 

One of the real shockers for me, is this finding that the Board —so the people right at the top of the organisation— didn’t seem to be all that concerned about the money side of things. 

Chris Bishop said yesterday it was evident that the Board had been acting more as an advisor to management instead of governing the place and telling management what to do and what not to do. 

Example: Bill English found that in the papers prepared for the May 2023 Board meeting, there was no Statement of Financial Position. Chris Bishop sys the Board just assumed new lending of several billion dollars from the Government would be approved and didn’t even think about what they’d do if the Government said “no”. 

Again, I’ll compare it to the private sector and say that if the Board of a company acted that way, they’d be out on their ears. And they’d probably take the business down with them. 

But now the chickens are coming home to roost. A new Board chair has been appointed and the Government is promising a complete shake-up, with Kāinga Ora building fewer houses and the Government getting what are called “Community House Providers” more involved in providing social housing. More often than not, these are charitable organisations. 

But is that the answer? I don't think it is. 

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