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Elevate Magazine
February 4, 2025

Government’s Plan to “Get Kāinga Ora Back on Track”

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Photo source: Wikimedia Commons

The New Zealand Government has announced a sweeping turnaround plan for Kāinga Ora, the country’s largest social housing provider, in an effort to restore financial stability and improve performance. Housing Minister Chris Bishop revealed the plan on Tuesday, citing an urgent need for reform following a damning 2024 independent review led by former Prime Minister Sir Bill English.

Mounting Debt and Underperformance Prompt Overhaul

Kāinga Ora, which manages approximately 75,000 state houses, has faced significant financial and operational challenges in recent years. Its debt has ballooned from $2.3 billion in 2017/18 to $16.5 billion in 2023/24, with projections suggesting it could reach nearly $25 billion by 2026/27. Operating deficits have also surged, growing from a $76 million surplus in 2017/18 to a $568 million deficit in 2023/24.

The independent review found that the agency was not financially viable without major cost-saving measures and structural reforms. It also highlighted inefficiencies in Kāinga Ora’s operations, including rising overhead costs, poor fiscal discipline, and a lack of accountability in managing its housing stock. The review further noted that despite significant government investment, the social housing waitlist has grown to over 20,000 applicants, indicating a failure to deliver the necessary housing solutions.

Five Key Pillars of the Turnaround Plan

The Government’s response includes a five-pronged strategy aimed at stabilizing Kāinga Ora’s finances while ensuring it remains focused on its core mission of providing quality social housing.

Refocusing on Core Mission

Kāinga Ora will prioritise being an effective social housing landlord, focusing on maintaining and managing existing homes while ensuring that new builds align with the needs of New Zealanders.

Improved Tenant and Community Management

The agency will implement stronger tenancy management strategies, emphasising the importance of tenants fulfilling their responsibilities while also receiving appropriate support. Measures will be taken to enhance community relationships and create safer neighbourhoods.

Better Housing Portfolio and Build Management

Kāinga Ora will streamline its asset management practices, aiming to renew older properties and construct new homes in a cost-effective manner. The agency will simplify social housing specifications and utilise a broader range of delivery methods to cut costs.

Enhanced Organisational Performance

In response to concerns about inefficiencies, Kāinga Ora will focus on reducing overhead costs and leveraging its buying power more effectively to ensure taxpayer money is used efficiently.

Sustainable Financial Model

The agency will move toward a long-term financial structure that reduces reliance on borrowing, bringing deficits under control while maintaining a stable supply of social housing.

Property Sales and Construction Adjustments

A key aspect of the turnaround plan involves a more strategic approach to Kāinga Ora’s housing stock. The agency will conduct around 1,900 to 2,000 “construction events” annually, including approximately 1,500 new builds and 400 retrofits of existing homes.

To offset costs, Kāinga Ora will also sell approximately 900 homes each year, focusing on older properties in high-value areas such as Auckland. Proceeds from these sales will be reinvested in constructing new, more suitable housing units in areas with higher demand. Minister Bishop emphasised that this was not a “fire sale” but a necessary move to ensure the best use of resources.

Bishop said that Kāinga Ora owns about 200 homes worth more than $2 million each, primarily in Auckland; a better use of that capital would be to divest them and reinvest in denser, more affordable environments.

While these measures will result in a net-zero change in the number of state houses over time, critics argue that the approach does little to expand the overall supply of public housing.

Cost-Cutting Measures and Narrowed Scope

In an effort to curb costs, Kāinga Ora will also adjust its construction methods. The agency has been criticised for building homes at prices that exceeded market rates by approximately 12%. The turnaround plan commits Kāinga Ora to delivering new builds at costs in line with, or lower than, private-sector benchmarks.

Among the cost-cutting measures, the agency has removed its requirement to achieve Homestar certification, a rating that assesses environmental and energy efficiency. Additionally, it plans to improve site selection to reduce foundation and infrastructure costs and optimise design layouts to make homes more cost-effective.

The agency’s role will also be streamlined. Under the new plan, responsibility for the KiwiBuild underwrite program will be transferred to the Ministry of Housing and Urban Development, while the Infrastructure Acceleration Fund will be managed by the National Infrastructure Funding and Financing Agency. The Kāinga Ora Land Programme, which was responsible for urban development initiatives, will be wound down.

The workforce at Kāinga Ora is also set to shrink, with proposals to cut around 1,000 full-time equivalent roles as part of broader efforts to improve financial sustainability.

Political and Public Reaction

The plan has sparked debate, with opposition parties and housing advocates voicing concerns about its potential impact on vulnerable New Zealanders.

Labour’s housing spokesperson Kieran McAnulty accused the Government of prioritising cost-cutting over expanding social housing.

“If the best that he can come up with is the number of overall homes won’t go backwards, then it shows their priority is cutting spending, not housing people,” McAnulty said.

Green Party housing spokesperson Tamatha Paul echoed these concerns, warning that the sale of public housing could have long-term consequences.

“We must resist the sale of public housing at all costs because it will have consequences for generations to come,” Paul said.

However, Minister Bishop defended the plan, arguing that it strikes a necessary balance between financial sustainability and maintaining social housing supply.

“Today’s plan is a big step in the right direction for Kāinga Ora,” Bishop said in a press release. “The Government will be closely monitoring progress as the plan is implemented.”