Speech to the National Property Investors Association AGM

Hello everyone.  Thank you so much for having me along again this year.

I note that the theme for this year’s event here in picturesque Queenstown is “Adventures in property.” 

Managing the economy has been a bit of an adventure for the Government, a worldwide recession, natural disasters and the tragedy at Pike River have provided unprecedented challenges for  the Government. There have been financial ups and downs in all areas of the economy, which have had their impact on property as you are all too aware.

Last year, when I spoke to you in Marlborough, we were a month or so on from the September quake in Canterbury.  The Government was putting plans in place to help people to recover from that disaster.

The entire environment changed again on 22 February, as you know. So we had to respond to that.

All this has meant that the work of Government in your sector has been more critical than ever. 

 

CanterburyEarthquake

Quakes have continued to plague the region since February.

Minster for Earthquake Recovery, Gerry Brownlee, has tackled a range of complex issues.

Many of you will already know about CETAS – the Canterbury Earthquake Temporary Accommodation Service, a joint venture between the Department of Building and Housing and Ministry of Social Development.

More than 300 private landlords have registered available properties with CETAS, which first looks to place households who come to them for help within the existing private rental market.

Temporary villages have also been erected at Kaiapoi Domain and at Linwood.  This has never been about providing an alternative to the existing private rental market or properties. It is to complement the market and access to the private rental stock is the first priority.

There are 22 units at Kaiapoi Domain (a mix of one, two, three and four bedroom units) available, with six of them occupied.

There are 41 units at the Linwood Park Village. Tenancy agreements have been sent to a number of residents who have indicated that they want to move there.

Demand for such accommodation has always been a big question, and that demand is being monitored constantly.

 

Social Housing

I would like to talk now about social housing – particularly the Social Housing Unit.  The Unit was set up earlier this year to increase the supply of social and affordable housing.

As part of the 2011 budget, Government set aside around 40 million dollars for growth in this sector.

To give you a quick snapshot of state housing in this country:

• There are 69,671 state homes.
• Housing around 200,000 people.
• More than $15 billion worth of housing.
• Turnover of 9 per cent (approx. 6,000) in 2010/11 as at 31 May this year
• Dividends taken by Government – the highest, $176 million in 2002, not all of which has been returned to provision of social housing.
• 30,000 three-bedroom homes in a society of fewer ‘nuclear families’.
• 4,800 households paying market rent.
• 4,200 households living in houses that are too big.
• 2,900 households living in houses that are too small (by 2 or more bedrooms).
• 27,000 homes in the wrong place and of the wrong type to meet demand, or in poor condition.
• In the past inadequate measures to locate and deal with those living in state houses without genuine entitlement.
• Inadequate measures and controls to deal with those who abuse their state home or cause ongoing distress to their communities.
• No open and transparent pathway for moving people on once a state house is allocated.
• A need for more ‘at scale’ affordable housing alternatives for tenants who don’t ‘quite need’ a state house.
• HNZC Policy team providing advice that often duplicated that of the Department of Building and Housing.

When we looked at the old model for social housing, it was clear that it was no longer meeting the needs of tenants.

 

The Jigsaw

Social and affordable housing involves a number of complex issues that are interrelated.

The Government’s response has been to develop an integrated approach, where a number of different components will build on each other to deliver the results we need – like a jigsaw puzzle. 

Despite record levels of Government investment waiting lists remained fairly static and critically those most in need were not getting access to a home quickly enough.

No one was more frustrated about this than the HNZC Board and Executive. HNZC staff know their tenants and they were well aware of the issues that needed to be addressed to make the system fairer.

• Not enough pathways to move out those who no longer required a state house and who were capable of living elsewhere.  Some tenants whose personal situations had improved markedly had a sense of entitlement to a state house for life.
• Not enough homes in areas of high demand, meaning tenants in most need, could wait for long periods before being housed
• Too many homes in areas of low demand. The investment was not being used to best effect
• Homes are over or under-occupied.

 

Understanding the problem

Bill English and I appointed the Housing Shareholders Advisory Group and asked them to report back on the issues facing the provision of niche, social and affordable housing.

The Group’s report, ‘Home and Housed: a vision for Social Housing in New Zealand’ and the subsequent Summary of Stakeholder Feedback laid the foundation for the Government’s changes.

 

JIGSAW piece one – Housing Shareholders Advisory Group (HSAG)

The vision of the Advisory Group and 19 recommendations were underpinned by four imperatives:

• Empowering HNZC to focus on the ‘high needs’ sector
• Developing third-party participation
• Investigating initiatives across the broader housing spectrum
• Clarifying sector accountabilities.

 

JIGSAW piece two – More focussed management of HNZC Assets

HNZC will divest surplus housing stock that is the wrong size or in the wrong place to meet need and will invest in more homes of the right size and in the right location.

HNZC will embark on a programme of building, buying, leasing, selling and renovating homes to reconfigure its portfolio to meet need.  A side benefit of this programme will be newer housing stock and a reduced maintenance bill.

HNZC is unlikely to pull out of an area altogether - where there is a genuine need they will continue to provide state housing.  There may be a case for other providers of social housing to step in, in some instances, to lease, buy or takeover surplus state housing stock.  HNZC will work closely with the new Social Housing Unit (SHU) to identify these opportunities.

 

JIGSAW piece three - Empowering HNZC to focus on the ‘high needs’ sector

The Government and HNZC want a fairer state housing system that delivers state housing to those most in need.

To achieve this, reviewable tenancies have been introduced for new HNZC tenants. 

All new tenants entering a state house since 1 July 2011 have a reviewable tenancy, which will involve reassessing their household circumstances every three years.

Where circumstances do improve, tenants will be assisted to move into the community housing sector or the private sector with perhaps an Accommodation Supplement – freeing up state houses for new tenants on the waiting list.

 

JIGSAW piece four - Assessing Housing Need

From 1 July, Housing New Zealand started using improved criteria to decide who gets in to state housing. All applicants are being recorded on a housing need register.

Only those in the greatest need (A and B priority applicants) will be eligible for state housing and will go on Housing New Zealand’s waiting list if a suitable house isn’t immediately available.

Those with lower housing needs (C & D priority applicants) on the housing need register will not be part of the waiting list, and instead will be helped in to other types of housing through Housing New Zealand’s Options and Advice Service.

Developing third-party participation

The Government cannot provide all niche, social and affordable housing on its own - but past attempts by Housing New Zealand to engage with third sector providers of this type of housing haven’t delivered social housing on the scale that is needed.

We need more social housing in New Zealand so we need community housing providers to grow.

Third sector providers of niche, social and affordable housing including iwi and member groups of Community Housing Aotearoa have said they are ready and able, with the appropriate levels of Government, support to step up and deliver more social housing.

 

JIGSAW piece five – the Social Housing Unit (SHU)

A decision was taken to separate the provision of funding to the third sector from HNZC for several reasons.

Firstly because the HSAG believed that a specialist unit with a more commercial focus on the provision of social housing would be more efficient and cost effective.

Having an independent, specialised unit was also important, and we wanted to free up Housing New Zealand to focus on its core business as a social landlord, providing state houses for those in greatest need, for the duration of that need.

The aim of the SHU is to get much more of this affordable housing delivered to a range of families along the housing continuum. We anticipate its focus will be more commercially based, getting ‘the best bang for everyone’s buck’.

As well as continuing to work with the type of niche providers that successfully delivered housing under HNZC’s Housing Innovation Fund, the SHU will need to develop partnerships, allocate funding and develop an investment strategy to support the growth of social and affordable housing at scale. 

To do this it will have more cash, the option of land transfers and sale or lease of surplus housing stock.

Although Housing Innovation Fund projects have successfully delivered up to three dollars worth of housing for every dollar invested, it has been more costly to administer than it needed to be.

 

JIGSAW piece six – Social Housing Fund

The Government is committed to growing ‘at volume’ provision of niche, social and affordable housing by the third sector.

We have earmarked $40 million for the new Social Housing Fund.

An additional $5 million has been set aside for the Tamaki Transformation project which should also impact positively on the volume of niche, social and affordable housing.

We expect the SHU to have far lower administration costs – it will be a relatively small, tightly focussed team.

The cost of running the SHU is expected to be less than half the administration costs of the previous Housing Innovation Fund alone, and of course its work will be much broader in scope as well as larger in scale and impact.

The Department of Building and Housing, which is already responsible for broader housing policy, has taken over the social housing policy role formerly held by HNZC, cutting duplication and making substantial savings.

HNZC is committed to working closely with the SHU especially when it comes to its asset management policies.

 

Jigsaw piece seven – Greater independence

We are working with the Ministry of Social Development to identify whether there is some middle ground between the Income Related Rents and the Accommodation Supplement that would assist tenants moving into social housing provided by the third sector.

We want to make sure there are the right incentives and support for people to move on from rented social housing to greater independence, when they can. 

That, of course, is in your sector.

There are opportunities for partnerships between investors and community housing providers.

Two quality examples that come to mind are CORT, Community of Refuge Trust in Auckland, and Comcare, a Canterbury region mental health provider.

Both are examples of existing third sector providers wanting to expand their housing stock, who are looking for investment partners.

This work is ongoing.

So, in summary, how will we know if we have succeeded?

Those A and B priority clients in the most need will get access to a state house that is the right size, is in the right location and is in the right condition to meet their need for the duration of that need. And they will get a house within a decent time frame.

The quality and number of homes leased, owned and managed by HNZC and the third sector combined will improve significantly.

We will see more people progress along a housing continuum, from state housing to niche social housing or affordable housing, then to private rental or in some cases into home ownership.

 

Residential Tenancies Act and Unit Titles Act

Two key legislative changes have bedded in since your Marlborough conference last year.

Changes to the Residential Tenancies Act were at that stage just a fortnight old.

On 20 June this year, the new Unit Titles Act 2010 came into effect. 

Both Acts needed significant modernisation – the RTA dated back to 1986, and the UTA even further back – 1972.

I have spoken extensively about both, and I don’t want to bore you with a re-hash of old news, but by the same token organisations like yours are always best placed to test the practical effect of legislative change.

The Residential Tenancies Act was unbalanced.

Changes to the way tenancies could be terminated and reviewed by landlords sought to get some of that balance back. These changes strengthen the authority of landlords in specific situations that were fundamentally unfair to them.

We improved the enforceability of Tribunal Orders, made some of the processes clearer, and worked to ensure there would be a good mix of flexibility and certainty of tenure in the market.

Your protection has increased as we now have harsher penalties for tenants who are violent towards their neighbours or landlord.

You’ll also be pleased to learn that further improvements are coming, around strengthening the courts’ collection operation.

My colleague the Minister of Courts is leading changes I am sure you will welcome. These include strengthening the credibility of fines, reparation and civil enforcement systems, that will deliver a fit for purpose collections system with simpler, faster and better collection and enforcement services.

Of specific interest to property investors is that the District Courts Act has been amended to make it easier for creditors to get an attachment order, which is usually the most effective means of recovering a debt.

Attachment orders require a debtor’s employer, or the Ministry of Social Development, to make regular deductions from a debtor’s salary or benefit until the debt is paid. The attachment order can be enforced by the District Court.

A further change has been made to the Residential Tenancies Act so that Tenancy Tribunal Adjudicators and Mediators can record the details of an attachment order agreed by the parties at the end of a hearing in their orders. This means an attachment order can be imposed immediately.

 

The Department also led the work on the Unit Titles Act.

The Unit Titles sector is one that is growing.  There are more than 20,000 of them in New Zealand, many of them residential apartments – and many of those are for rent.

We’re seeing more unit title developments go up all the time, particularly in the major centres, but as Kiwis change the way they live and work it’s a trend we might expect to see elsewhere, too.

Part of the reason for changing the Act, was in fact, to help facilitate that growth.

When I think about what the Unit Titles Act 2010 is, I think “clarity”.

It’s now clearer who owns common property.  It’s clearer what constitutes a principle unit.  There is clarity around the rights and responsibilities of owners and bodies corporate.  The governance and management structures are clearer.

There is also a clearer path to making decisions, with a lowering of the body corporate voting threshold. 

People can now get things done without being locked out by what has in the past sometimes been just one owner.

Where things don’t go smoothly – which is sometimes the case in property, I don’t need to tell you, I’m sure – a new dispute resolution system has been put in place. 

This is overseen by the Department of Building and Housing and works much like dispute resolution in the tenancy market. 

 

Length of time for cases to be heard by the Tenancy Tribunal

I am aware that the length of time it has taken some cases to reach the Tenancy Tribunal has been an issue.

I won’t spend too long on this.  A big part of the issue here is the number of sitting days allocated to the Tribunal by the Ministry of Justice.

The Ministry’s challenge is that they face competing demands for limited Court room availability across a range of jurisdictions—including the Family Court, Criminal Court, other Tribunals, etc, as well as the Tenancy Tribunal.

The problem is particularly acute in areas such as Auckland, Waitakere, North Shore and Christchurch, as well as smaller areas where there may be just one Court facility.

The Department of Building and Housing has arranged with the Ministry of Justice for an additional 10% increase in Court sitting days nationally.

In araes where serious delays exist, the Auckland region and Christchurch,  additional days over and above 10% have been allocated to address their problems.

The Department is actively monitoring this situation to ensure waiting times for clients are kept to a minimum.

More work is yet to be done in the area of improving the Tribunal, but do know that it is underway and that we have been turning our minds to it.

 

Closing

All adventures contain an element of peril, so the challenges we face should be met head on.  Adventures in property are no different.  Meeting those challenges is precisely what we’re doing in addressing the needs of the many different people in the housing market – everyone lives somewhere, after all.

I hope that my address here today has given you a few good insights, and got you thinking about your own contribution to the broader housing and property picture.

I also hope it has given rise to a few questions – I am happy to take those now.