Community housing shortfall

This Issue This is a part of the Affordability feature

By - , Build 150

Providers of affordable rental housing can’t fulfil the demand for their services. They’re calling for a consistent government policy and longer-term funding.

Housing New Zealand homes in Otara, Auckland.
Housing New Zealand homes in Otara, Auckland.

SOCIAL HOUSING provides a key service in the wider housing system, yet over the last 20 years, this sector hasn’t significantly increased as a proportion of total dwelling stock.

Community housing providers have increased in size and number over the last decade, yet anecdotal evidence suggests the demand for their services exceeds their ability to increase the dwellings in their portfolios.

If the community housing sector was able to expand, it could potentially increase the supply of affordable housing to meet existing needs.

Affordable rent providers surveyed

An exploratory survey investigated community housing providers’ future objectives and growth goals together with the key constraints they see in achieving these aims.

Eight affordable rent providers were randomly selected and included in the survey, which was part of a larger study funded by BRANZ from the Building Research Levy.

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Most want to grow but face challenges

The community housing providers surveyed were uncertain about their future business plans. Although they all clearly saw the need to expand their services, they lacked the capital and resources to do so.

The survey revealed some key findings:

  • 87.5% of businesses have business plans or goals for strong growth over the next 5 years. One respondent’s focus is to maintain the current portfolio size and upgrade the quality and configuration of their units to better match current and future market demand.
  • The overall growth objective, in addition to assisting unmet need, is to achieve economies of scale for their business.
  • 62.5% want to grow the number of products provided in terms of tenure mix.
  • 75% of businesses are focused on growing their portfolio by developing or purchasing new dwellings rather than acquiring existing housing units.

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Constraints to achieving growth

Key constraints to achieving these goals were identified:

  • 87.5% of respondents said there is a lack of capital and funding, particularly since the reduction in government grants via the social housing unit.
  • 37.5% cite single-year rather than multi-year grants.
  • 37.5% say changes in government policy make it difficult to plan for the future – they desire a stable policy framework.
  • 62.5% say there appears to be a lack of government commitment to growing the affordable housing sector. This is evident now capital grants from the social housing unit are no longer available.

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Move from public to private

A few thought the transfer of social housing stock from Housing New Zealand to community housing providers would not, by itself, increase the number of social housing units.

It may, however, provide an opportunity for growth by redeveloping sites but the price would have to reflect any social covenants included as part of the sale. Covenants may be that the dwellings need to be retained as part of a social housing portfolio or redeveloped to provide modern housing in a configuration that reflects the demand in the surrounding area.

The more restrictive the convenants, the greater the likely discount between the unencumbered house values and the market value of the properties as a social housing portfolio.

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Subsidies and grants needed

While government’s income-related rent will not necessarily provide opportunities for growth, this is seen as a positive policy. The returns from a social housing portfolio, even with income-related rents, are not high enough to attract private capital. There will still be a need for grants or philanthropic contributions to help the sector grow.

A subsidy is also necessary to successfully provide affordable units for both rental and shared ownership in the longer term. The level of subsidy required is higher for affordable rental than affordable shared-ownership units.

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Hard to meet the demand

Most affordable renter accommodation providers had an overriding goal to increase the units in their housing markets. They indicate there is unsatisfied demand for affordable rental units that complement the housing stock provided by Housing New Zealand and council social housing units.

Constraints have been identified by the operators surveyed:

  • A lack of grants to assist with growing operations. Grants are no longer available from the Social Housing Unit, as government policy has changed direction. The focus has shifted to social housing stock transfers from Housing New Zealand to community housing providers.
  • A lack of long-term government support for the sector that is reflected in ongoing changes in government policy.
  • Grants that are available from the Social Housing Unit of MBIE are typically for 1-year terms. Operators see multi-year funding as more desirable as it would allow them to develop an appropriate business strategy and build capacity.

It is difficult to develop capacity and employ additional people when Social Housing Unit grants are only allocated on 1-year terms. The result is less strategic development plans and a reduced ability by the sector to secure sites as and when they became available.

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What’s needed

For community housing organisations to grow and provide greater support to households in need, they require:

  • multi-year funding
  • a consistent policy environment
  • a capital base that can be leveraged to build capacity and grow housing stock for needy tenants.

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Articles are correct at the time of publication but may have since become outdated.

Housing New Zealand homes in Otara, Auckland.
Housing New Zealand homes in Otara, Auckland.