Subsidy for troubled Wellington council social housing would cost $100m over four years

It would cost the Government $100 million over four years to rescue Wellington City Council’s “bleeding” social housing stock by extending a critical subsidy to tenants.

City Housing is in financial trouble and forecast to be insolvent by June 2023. It has 1927 properties and 3200 tenants.

To the frustration of city councillors and other local authorities across the country, councils do not have direct access to something called the Income Related Rent Subsidy (IRRS).

Under the scheme low-income tenants pay no more than 25 per cent of their income on rent.

At the moment, the subsidy is only available for new tenants going into Kāinga Ora or Community Housing Provider (CHP) social housing.

If City Housing could have accessed the subsidy from the beginning of this year for all existing tenants, it would have an operating surplus of $5m instead of a deficit of $6m.

Housing Minister Megan Woods said the cost of extending the subsidy to Wellington City Council social housing was estimated to be about $100 million over four years.

The figure has been revealed in response to a written parliamentary question from Green MP Ricardo Menéndez March who asked for the annual cost.

Answering questions on behalf of Woods in the House today, Minister for Building and Construction Poto Williams said diverting IRRS funding to councils would mean reducing the Government’s housing build programme.

“I’m also keen to understand what more councils could do to support their own housing stock because as well all know, Government cannot solve the housing crisis alone and we want to continue to see councils play a role as they have done for generations.”

Menéndez March said the subsidy should be extended to councils and their tenants who are being left out in the cold.

“The Greens are calling on Labour to actually use all the levers available to fix the housing crisis and support councils to continue providing affordable rentals.

“It reeks of austerity for the Minister to claim that supporting council housing takes away from the ability to build more state housing. We have the resources to support state and council housing tenants so they don’t pay more than 25 per cent of their weekly income on rent.”

As many as three quarters of City Housing tenants pay more than 35 per cent of their income on rent.

Gaining access to the subsidy has united Wellington City councillors from across the political spectrum.

Councillor Diane Calvert is a particularly strong advocate for it along with Labour councillor Fleur Fitzsimons, who said it would be “a game changer”.

There was nothing in Budget 2021 to help Wellington City Council with the dilemma, so councillors decided to go back to the Government to try again.

Mayor Andy Foster was directed to write to the Housing and Finance Ministers seeking to enter formal negotiations over the subsidy.

Foster has previously described City Housing as “bleeding to death”.

A response letter from Woods, tabled at a council committee meeting today, said she was concerned the council was identifying financial sustainability issues with its social housing stock.

This is because the council committed to being a social housing provider until at least 2037 in a Deed of Grant signed with the crown agreeing to a $400m upgrade programme for the City Housing portfolio.

The Government agreed to fund the majority of the first half of the upgrades, $220m, and the council agreed to meet the cost of the second half, $180m.

But the upgrades cost more than first thought and the council’s social housing arm is now cash-strapped.

The remaining upgrades, plus routine asset maintenance and renewals, amount to $446m over the next 10 years.

Woods said in the letter she has directed officials at the Ministry of Housing and Urban Development to undertake analysis of potential options to support councils facing financial challenges in continuing to provide social housing.

“Given the risks for council tenants and implications for Wellingtonians that need housing support, the Government is committed to working with WCC to find ways to ensure this housing is retained as affordable rental housing.”

But the Government was focused on using the IRRS to increase new build public housing, Woods said. In the Wellington region between 470-690 public housing places and 160-170 transitional housing places are planned.

Source: Read Full Article