8 February 2024
Alex Olsen
[FYI request #25231 email]
Dear Mr Olsen
Thank you for your email dated 19 December 2023 to Kāinga Ora – Homes and
Communities, requesting the fol owing information under the Official Information Act 1982
(the Act):
1. Copies of al Cabinet papers, briefing papers and other significant advice documents
held by Kainga Ora discussing the transfer of HNZC houses to Accessible Properties
in Tauranga.
2. Copies of al Cabinet papers, briefing papers and other significant advice documents
held by Kainga Ora discussing the possible transfer of HNZC houses in Christchurch
to community housing providers.
3. Copies of al Cabinet papers, briefing papers and other significant advice documents
held by Kainga Ora discussing the expected benefits or disadvantages of transferring
HNZC houses in Tauranga and Christchurch to community housing providers.
I am requesting documents written between 1 January 2014 and 31 December 2017.
I have consulted with relevant staff about your request and searched the Kāinga Ora records
system for documents in scope. The fol owing documents produced between 1 January
2014 to 31 December 2017 and held by Kāinga Ora were found to be in scope:
22/09/2016 - Social Housing Reform Programme –Tranche 2 of the HNZC transfer
transactions
22/03/2017 - AH 17 027 - Housing New Zealand’s involvement in the transfer of
properties in Tauranga.
I have included copies of these documents in ful with this response. It is important to note
that although Housing New Zealand (as Kāinga Ora was known) contributed information and
cooperated with the then Government’s Social Housing Reform Programme, it was not
tasked with administering or implementing the transfers of housing that were part of it.
Furthermore, although some Cabinet documents from 2014 to 2017 are held by Kāinga Ora
in its document system, an assessment of these documents determined that they did not
discuss the Tauranga transfer or proposed Christchurch transfer in any significant detail.
For example, one Cabinet Social Policy Committee document from 2015, while comprising
of six pages, only contained three short references to Tauranga, saying that:
- Cabinet noted feedback and agreed that regional consultation could proceed
- significant cultural sites require further advice from officials
- Joint Ministers should decide if market sounding should proceed.
For more information about the Tauranga transfer and proposed Christchurch transfer I
would again recommend the Treasury’s website, as wel as the websites of the Ministry of
Social Development and the Beehive:
https://www.treasury.govt.nz/publications/history-social-housing-transfers-april-2010-
december-2017
https://www.treasury.govt.nz/publications/search?f%5B0%5D=issue_status%3A%21
%282475%7C5527%29&issued_from=10&issued_to=7&search=Social%20Housing
&sort_by=issue_date&sort_order=DESC
https://www.msd.govt.nz/about-msd-and-our-work/work-programmes/social-
housing/cabinet-papers.html
https://www.beehive.govt.nz/search?f%5B0%5D=government_facet%3A6064&f%5B
1%5D=portfolios%3A6098 .
Please note that Kāinga Ora proactively releases our responses to official information
requests where possible. Our response to your request may be published at
https://kaingaora.govt.nz/publications/official-information-requests/ with your personal
information removed.
Yours sincerely
Rachel Kel y
Manager Government Relations
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COMMERCIAL: IN CONFIDENCE
Office of the Minister Responsible for HNZC
Office of the Minister for Social Housing
Chair
Cabinet Social Policy Committee
Social Housing Reform Programme – Tranche 2 of the
HNZC transfer transactions
Proposal
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1.
This paper seeks Cabinet Social Policy Committee agreement for the Minister
Responsible for HNZC and the Minister for Social Housing (Joint Ministers) to:
ACT
a.
announce Christchurch as the next location for a transaction of Housing
New Zealand Corporation (HNZC) stock to the community housing sector;
b.
direct officials to commence engagement with Ngāti Toa Rangātira with a
view to progressing transactions in Porirua and Lower Hutt; and
c.
direct officials to investigate the potential for a transfer in Hamilton.
2.
The paper also fulfils a commitment made by Joint Ministers to report back to
Cabinet before further decisions on transfer transactions are announced.
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Executive Summary
3.
The intent of the Social Housing Reform Programme (SHRP) is to build a fair,
efficient and effective social-housing market that wil better support people in
greatest need for the duration of that need. A key objective of the SHRP is that
there is more diverse ownership or provision of social housing. The transfer of
social housing provided by HNZC to alternate providers wil help us meet this
OFFICIAL
objective, through diversifying ownership of social housing.
4.
Transactions will also contribute to achieving the other objectives of the SHRP.
We need more developers, financiers and specialist service providers to get
involved in order to increase the sector’s capability and capacity. This capability
and capacity will support the objective of more innovation and more
responsiveness to social housing tenants and communities, and help ensure
people who need housing support can access it and receive social services that
meet their needs.
5.
The transfer of social-housing properties from HNZC to the community housing
sector is a key aspect of the SHRP – each transfer will kick-start additional sector
growth, bring innovation, and support the provision of housing services that are
aenxdavrmx 2016-09-22 14:05:25
responsive to tenant needs. This is not just about taking over provision of existing
places from HNZC, it will increase sector ability to add new supply and diversify
service offerings. The first of these transactions aside from the transfer to Tāmaki
Redevelopment Corporation is in Tauranga.
6.
Transactions also support the overal Capital Recycling programme, which is
helping the Government meet long-term fiscal objectives through active
stewardship of government resources. The Crown capital released from
transactions gives the Government more headroom for other capital expenditure
to support key public services and investments, and maintain net debt targets.
7.
Later this year HNZC wil be presenting a proposal to the Minister Responsible
for HNZC for large scale multi-year developments in Auckland, with a potential
cost over three years of the order of $1.6 bil ion. The capital proceeds from
transactions enables the Government to consider more ambitious proposals than
would otherwise be the case.
8.
We are now considering a joint transfer with Horowhenua District Council of its
115 community housing properties with 249 HNZC properties. There has also
been renewed interest in Invercargill, and we are investigating the
recommencement of a transaction there.
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9.
The Tauranga transaction has stimulated interest in the social-housing market,
with multiple CHPs making an investment in that procurement process and three
high-quality RFP responses received. Negotiations with a preferred bidder are
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nearing completion. We intend, through subsequent transfers, to create larger
providers of social-housing around the country, and expect them to make
significant contributions to the development of a more capable and responsive
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market that can better meet tenant needs. A pipeline of transfer transactions is
important to give the sector confidence that investing in our programme is the
right choice to make, and that they will have the opportunity to grow if they do a
good job.
10.
Key lessons from the Tauranga transaction include:
a.
There is a clear and sophisticated market for large scale transactions
INFORMATION
particularly where there is the opportunity to reconfigure/redevelop the
RELEASED
portfolio being transacted.
b.
Large scale transactions are an efficient way to drive rapid change in the
composition of the community housing provider (CHP) sector. Participants
can bring considerable innovation and resources to bear on social-housing
and are eager to undertake redevelopment and add to housing supply.
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c.
HNZC has internalised the true cost of multiple risks in providing social-
housing services (e.g., methamphetamine and insurance) and the
transaction process is surfacing these and revealing the true cost of
provision.
d.
Purchasing flexibility for the Ministry of Social Development (MSD) in
supply contracts without provider supply flexibility has a monetary cost.
11.
Although the Tauranga transaction is still under negotiation with the Preferred
Bidder, the parameters of that negotiation have positively exceeded our fair value
expectations. We are confident that it wil result in improved services for tenants
and value for money for taxpayers. With this in mind, we intend to progress a
second tranche of transactions (Tranche 2) to maintain the momentum generated
by the Tauranga transaction. Momentum helps develop the social-housing
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link to page 8
market, and thereby achieve the goals of the Government’s Social Housing
Reform Programme.
12.
Eight areas were identified as potential candidates for Tranche 2 due to high
levels of presenting market interest
.1 A ranking process based on our key
priorities identified Porirua, Lower Hutt, Christchurch, and Hamilton as the most
attractive of those locations. For each area, officials have subsequently:
a.
undertaken a preliminary assessment of the iwi and hapū rights and
interests in each location (based on information held by the Crown and
HNZC),
b.
engaged with local councils on a possible transfer (except for
Christchurch),
c.
assessed reconfiguration opportunities based on MSD’s requirements, and
d.
assessed the potential commercial viability and opportunity for
redevelopment.
13.
Christchurch is a clear sale-opportunity, with the potential for more than one
provider in that market and a relatively-rapid sales-process (expected to conclude
by September 2017). It is therefore attractive from the viewpoints both of
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developing the social-housing market and maintaining momentum in the
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transactions programme. We therefore propose that Christchurch should be the
next location announced for a transfer transaction.
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14.
Compared with Christchurch, Porirua and Lower Hutt wil offer greater opportunity
for regeneration, but the existence of widespread rights of first refusal (RFRs) wil
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complicate the commencement of a procurement process. Regeneration may
also not be possible without additional subsidy being provided by the Crown
(either increased IRRS payments or through lower transfer proceeds). In
combination, transfers in Christchurch, Porirua and Lower Hutt will be pursued as
Tranche 2.
15.
We envisage a potential Hamilton transaction as being initiated after the above
transactions have commenced. This allows preparatory work to be done for
INFORMATION
Hamilton, and for Ministers and officials to focus on ensuring the successful
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transactions in Christchurch, Porirua and Lower Hutt.
Background
16.
The intent of the SHRP is to build a fair, efficient and effective social-housing
market that wil better support people in greatest need for the duration of that
need. Our actions so far include:
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a.
making the Income-Related Rent Subsidy (IRRS) available to registered
CHPs,
b.
transferring the needs-assessment function to MSD, and
c.
MSD purchasing additional social-housing places on behalf of the Crown.
17.
These steps wil allow us to flexibly purchase social-housing places from a wider
range of housing providers, where and when we require them, for the duration of
the tenant’s need. It wil also enable other parties to provide the capital required
1
The long list of potential locations for Tranche 2 transfers included Auckland Region, Christchurch, Hawke’s
Bay Region (excluding Napier), Napier, Palmerston North, Waikato (especially Hamilton) and Wellington Region
(especially Hutt Valley and Porirua).
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aenxdavrmx 2016-09-22 14:05:25
to upgrade and expand the stock we need. A key objective of the SHRP is to
encourage and develop more diverse ownership of social-housing. We also need
more developers, financiers and specialist service providers to get involved.
18.
However, barriers inhibit the ful development of a social-housing market. These
barriers include a lack of spread and scale in the current social-housing market
and low returns from social-housing provision. We need ways of overcoming
these barriers to support alternative social-housing providers to grow, including
new entrants. This growth needs to happen at a greater rate than the overall
social-housing stock is growing at. The large scale transfer transactions we are
discussing in this paper wil facilitate the growth we need if the sector is going to
be able to make a meaningful contribution to the challenges we face.
19.
The Social Policy Committee agreed a delegations framework for SHRP
transactions, which allows Joint Ministers (the Minister Responsible for HNZC
and Minister for Social Housing) to approve the location of transfer transactions
and to proceed to Regional Consultation. There is also flexibility in the
delegations for us to approve changes to the commercial process and structure
for future transactions. SOC Min (15) 14/3 refers.
20.
There are two primary considerations in relation to decisions on the scale and
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pace of additional transfers of social-housing properties:
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a.
In his 2015 State of the Nation speech, the Prime Minister stated the
Government would look to sell 1,000 - 2,000 HNZC properties over the
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fol owing year (2016) for use as social-housing run by approved CHPs.
b.
In December 2014, Cabinet agreed that HNZC would provide no less than
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60,000 properties by 2017 (CAB Min (14) 39/22 refers).
21.
The commitments were intended to demonstrate our deliberate approach to the
transfer programme; to enable us to learn from our initial forays and confirm their
viability and value before entering into a more ambitious stage of market
development. The case for transfer transactions has been made, and we now
intend to move forward with the programme.
22.
HNZC is currently reforecasting the number of its properties in light of its
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INFORMATION
construction and divestment programme. HNZC is only divesting properties in
areas of lower demand and which cannot be used for emergency housing. We
expect that HNZC wil have more than 60,000 properties at the beginning of
2017, but these numbers may dip below 60,000 in late 2017 or early 2018 as
properties are transacted, before increasing as developments come on stream.
HNZC wil remain a very large scale provider and the total number of emergency
and social properties available, comprising social housing properties owned by
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HNZC and CHP in New Zealand wil be increasing.
23.
This paper fulfils the undertaking we made, also mentioned in the Prime
Minister’s speech, for Cabinet to review progress before any further decisions on
transactions of HNZC stock are announced (to move beyond the initial
commitments made).
24.
The Crown has a policy of consulting with iwi and hapū before SHRP
transactions are undertaken to ensure it understands their rights and interests in
HNZC land before it is transferred to third parties. Progressing to a procurement
process in a particular area will depend upon the outcome of consultation with
local iwi and hapū.
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25.
Discussions have already occurred with Ngāi Tahu as part of the Invercargill
transaction Regional Consultation, so it is possible to progress to Regional
Consultation and Market Sounding in Christchurch without undertaking the
preliminary discussions we intend to have with Ngāti Toa in respect of possible
Porirua and Lower Hutt transfers. The intent wil be to not include in the transfer
any of the few HNZC properties in Christchurch that are subject to RFR (25
properties).
26.
HNZC wil continue its ‘business-as-usual’ activity of property/asset management
and sales to tenants in areas identified for transfer until a contract is signed with
the new provider. There will be no hold-up to this important activity as we
undertake consultation, test the market, and complete transactions. In particular,
for the locations shortlisted for Tranche 2, we also expect HNZC to have an
enduring role that wil enable it to continue developments after transfers are
concluded. MSD can also contract for additional supply from CHPs independently
of any transfer processes that may be occurring.
Lessons learnt from Tranche 1 transactions
27.
The first transactions have stimulated interest in the wider social-housing market
from domestic and international players, and there has been an investment from
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participants in the procurement process for Tauranga.
28.
The first large-scale transaction is occurring in Tauranga, and will result in the
ACT
transfer of 1,124 properties from HNZC to the provider. To date:
a.
The viability of a transfer in Tauranga was originally tested via a Market
Sounding, which commenced on 17 August 2015.
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b.
The commercial process was then started when the Expressions of Interest
was released on 20 November 2015.
c.
The Request for Proposal was released to three parties on 23 March 2016,
and responses were received by 07 June 2016.
d.
Fol owing a detailed evaluation process, Accessible Properties was
announced as the Preferred Bidder on 12 August 2016. Accessible
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Properties, owned by IHC New Zealand Inc., is New Zealand’s largest non-
government CHP.
29.
Lessons learned from Tauranga include:
a.
There is a market for large-scale social-housing transfers particularly where
there is sufficient opportunity for reconfiguration and redevelopment. This
was demonstrated in Tauranga where five high-quality Expressions of
OFFICIAL
Interest were received and al of the RFP responses were of a high calibre.
The minimum size of transfers to attract these institutional investors and
large-scale providers is 1000 properties, although 2000 is more attractive to
them. The Invercargill transfer did not reach this scale and the market
response was limited.
b.
Large-scale transactions provide an efficient way of driving rapid change in
the composition of the CHP sector. As part of developing the transaction
contract, MSD has had to be very clear about what it values and its service
requirements. This clarity wil assist MSD in negotiating a contract with
HNZC. The transactions also provide a benchmark against which to
measure the performance of HNZC and CHPs. Participants can bring
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aenxdavrmx 2016-09-22 14:05:25
considerable resources to bear on social-housing and are eager to
undertake redevelopment and add to housing supply.
c. The Tauranga transfer is identifying risks and associated costs which
have historically been internalised by HNZC. The agreed commercial
model wil price and provide solutions for these issues, which include:
the cost to an owner of insuring for social-housing tenants (with
particular emphasis on methamphetamine contamination and
fire hazards);
dealing with building defects that HNZC has not resolved;
maintaining housing to a set standard for the life of the contract;
and
interest rate risk on debt funding (affecting the cost of capital
deployed).
d. The current funding settings, which are based on market rent being
sufficient to maintain a social-housing business, make transactions
financial y marginal. The extent to which the Government is seeking
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reconfiguration and redevelopment needs to be made as clear and
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accessible as possible as the financial viability of a transaction wil be
enhanced where there is potential for capital growth that can be realised
by the provider.
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e. Early engagement with iwi and hapū with RFRs enables a better
understanding of their aspirations and provides scope to incorporate
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shared objectives within the commercial structure.
f. Purchasing flexibility for the Ministry of Social Development (MSD) in
supply contracts without provider supply flexibility has a monetary cost.
30.
The potential for a pipeline of future transfer transactions was noted by market
participants as an incentive to offset their upfront investment of resources in the
INFORMATION
Tauranga procurement. Commencing Tranche 2 by the end of this month wil
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maintain and capitalise on this momentum and allow us to give visibility to a
pipeline of future transactions.
31.
A commercial process was also commenced in Invercargil , but that transfer was
put on hold due to the single qualifying respondent withdrawing from the
procurement. Lessons learnt in Invercargill include clearly communicating the
nature of the transaction early. We have recently received advice from officials
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that three parties have expressed interest in relation to Invercargil , and we have
asked them to investigate the recommencement of a commercial process there in
the near future.
32.
Transaction structure and processes also need to reflect the size and opportunity
of the transaction and type of likely market participants. What was accepted by
the market as appropriate for a large-sale transfer like Tauranga wil not
necessarily hold true for a smaller transaction. This learning has been applied to
the smal er transaction currently being planned for Horowhenua and wil be
applied for any new process in Invercargil .
33.
Knowledge and expertise gained from the first tranche of transactions will help
make future transfers a smoother process, with a better Crown understanding of
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link to page 12
potential issues and preferred positions, as wel as increased market capability
and understanding of our objectives.
Locations selected for Tranche 2 transactions
34.
We consider that the most important factor for a successful transaction is the
presence of market interest. Through undertaking a comprehensive Request for
Information, officials were able to identify eight areas where there is strong
market interest in future transactions.
35.
These eight locations were then ranked according to:
a.
Alignment with MSD’s purchasing intentions and contracting framewor
k.2
b.
Understanding of iwi and hapū interests.
c.
The potential for community-led regeneration.
d.
The ability of the transfers to help maintain momentum of CHP
development.
e.
Opportunities to improve the utilisation of HNZC stock.
36.
Four locations were subsequently identified as the most attractive options for the
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next tranche of transactions. These locations areas are:
a.
Christchurch,
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b.
Hamilton,
c.
Lower Hutt, and
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d.
Porirua.
The key characteristics of each of these locations are set out in the table
appended to this paper.
The table was prepared in consultation with the Office of
Treaty Settlements (OTS), Te Puni Kōkiri (TPK), the Ministry of Business,
Innovation and Employment (MBIE), MSD, and HNZC.
37.
As the locations were mainly selected on the basis of market interest, the
considerations we have placed particular emphasis on were whether a scale
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INFORMATION
transaction is likely to be commercial y viable, and the extent to which we could
maintain momentum for the transfers programme. Commercial viability included
the current match of stock to tenant needs, as well as
reconfiguration/redevelopment opportunities.
38.
After considering the advice from officials, we intend to announce Christchurch
on 27 September as the next location for a transfer transaction. Christchurch has
OFFICIAL
the potential for more than one provider in that market and a relatively-rapid
sales-process (expected to conclude by September 2017). It is therefore
attractive from the viewpoints both of developing the social-housing market and
maintaining momentum in the transactions programme. Regional Consultation
and Market Sounding in Christchurch would be initiated before the end of this
month (a timeline is included below). Our intention is to progress one or more
transfers of HNZC properties and tenancies in Christchurch as a sale, since
introducing a leasing option may introduce unnecessary delay.
39.
The potential to improve outcomes for tenants and regenerate communities leads
to our interest in Lower Hutt and Porirua. We wil carefully assess the benefits
2
In particular whether there is sufficient ongoing demand forecast by MSD for social housing to warrant the long
term supply contracts required to make a transfer transaction viable.
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and costs of undertaking regeneration before making any decisions on how
transfers in those locations will shape up.
40.
Whilst a transaction excluding RFR properties in Porirua and Lower Hutt could
proceed, it would be chal enging because RFR properties are located amongst
the non-RFR properties. Discussions with Ngāti Toa Rangātira, the RFR holder,
wil focus on how the iwi can be involved in the transaction and the relationship of
this with the iwi’s goals, rights and interests, in particular RFRs. These
discussions should be treated as commercial y confidential until such time as a
public announcement is made.
41.
We envisage a potential Hamilton transaction as being initiated after the above
transactions in Christchurch, Porirua and Lower Hutt have commenced. This
allows preparatory work to be done for Hamilton, and for Ministers and officials to
focus on ensuring the successful transactions in Christchurch, Porirua and Lower
Hutt. A very high proportion of HNZC properties in Hamilton are subject to RFRs,
so a transaction would likely commence on a bilateral basis with Waikato-Tainui.
42.
Officials are working to identify the current fiscal costs of social-housing tenants
in Christchurch, Hamilton, Lower Hutt, and Porirua. This will incorporate a wider
consideration of cost to the Crown than just housing support. In particular it can
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be used to assess the benefits of regeneration of housing stock (as discussed
THE
below). This information will provide a platform to determine the baseline, monitor
the outcome of transfers and also help shape the objectives of future transfers. It
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wil integrate with wider work MSD is undertaking on its investment approach as
part of the intended development of its role as an intelligent purchaser.
Timing and commercial considerations for Tranche 2
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43.
The draft target timeline for a transfer transaction for Christchurch is set out
below based from a 27 September 2016 announcement. Each stage in the
process is dependent on the successful conclusion of the previous stage and any
delays wil cascade through subsequent stages. The timeframe is heavily reliant
on the outcome of consultation and iwi consultation being resolved. A delay in
either of these stages could cause longer delays to the overal timeframe.
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INFORMATION
44.
Christchurch transfer timeline:
a.
Announcement of intention to carry out a transfer transaction – 27
September 2016
b.
Regional Consultation and Market Sounding – complete by end-November
2016
OFFICIAL
c.
Expressions of Interest Stage – up to three bidders announced end-
February 2017
d.
Request for Proposals Stage – preferred bidder announced mid-June 2017
e.
Contracts signed with successful bidder – end-August 2017
f.
Transition from HNZC to new provider – completed November 2017.
45.
Lower Hutt and Porirua may require a longer timeframe depending on the extent
to which regeneration is included at the outset, or to market-test transaction
specific parameters. Each will also be timed from a later start date due to the
need for preliminary discussions with Ngāti Toa Rangātira to be concluded. We
wil consider timing post-discussion.
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46.
The timing of any announcement in respect of Hamilton is uncertain. We expect
that once initiated, a Hamilton transaction may be taken through to completion
sooner than some Tranche 2 locations as it may progress immediately from
preliminary discussions with Waikato-Tainui to a bilateral commercial negotiation.
47.
As mentioned above, there are possibilities for further developing or adapting the
commercial structure used in Tauranga to better meet the circumstances of
specific locations, tenant cohorts, market characteristics and portfolios of
properties during Tranche 2. These include:
a.
the possibility of introducing leases (rather than sale),
b.
contracting for innovative solutions for specific cohorts (such as older
people), and
c.
accommodating smal er CHPs within a larger transaction.
In order to support diversity in the sector, it will be important for the pipeline of
transfer transactions to offer a range of opportunities. Scale is important to attract
new participants, but access to smal er portfolios or niche provision may be of
interest to others in the sector.
48.
Specialist property advisors wil also provide reports on the redevelopment
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potential of the stock in the locations identified (these have already been received
THE
for Christchurch, Lower Hutt and Porirua). This can allow for redevelopment to
feature more heavily in the final selection of portfolios and commercial processes
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that ensue (if desired). It wil also be open to MSD to seek to use the transaction
process to help meet any current or anticipated shortfall in stock.
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49.
The opportunity for urban regeneration to drive better outcomes for tenants, and
reduce long-term fiscal costs, has been identified for large parts of the HNZC
portfolios in Lower Hutt and Porirua. There is a high concentration of aged stock
that is in need of renewal, and a significant mismatch of current supply with
demand in both locations. However, there is limited commercial prospect for
widespread redevelopment. Outside of a few sites, undertaking regeneration of
the social-housing stock wil likely require additional funding or for properties to
be transferred at a significant discount as redevelopment wil require asset write-
INFORMATION
downs.
RELEASED
50.
Officials wil continue to investigate opportunities for regeneration, and fiscal or
OBEGAL impacts will be considered as part of any recommendation to proceed
with a transfer.
51.
In Tauranga we required RFP respondents to outline how they would reconfigure
the stock to better meet MSD’s requirements, including reducing overcrowding,
OFFICIAL
as wel as how they could meet MSD’s 2015 Purchasing Intentions for the
Tauranga District [approximately 40 additional one-bedroom places, 20 two-
bedroom places, and ten larger places (more than four bedrooms)]. This could
become a greater focus for Tranche 2 transfers.
52.
We may seek multiple providers to be operating in large locations, or establish a
smal er number of providers with greater scale. A larger number of providers wil
increase opportunities for:
a.
MSD to benchmark providers,
b.
competition between providers to retain or increase market share
(promoting innovation and cost efficiencies), and
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aenxdavrmx 2016-09-22 14:05:25
c.
risk management should a provider fail.
53.
The feedback in the Tauranga transaction is that a portfolio of 1,000 properties is
at the bottom end of the scale in terms of attracting institutional investors and
large scale providers. We therefore intend to test transactions of up to 2,500
properties in Christchurch and possibly in Lower Hutt. This wil allow us to gauge
whether the additional size generates an even stronger market response, while
still al owing for multiple scale providers in each location.
54.
However, the exact size and number of transfers in each location wil be
determined through:
a.
financial model ing to ensure that where a split of a portfolio is proposed it
is sustainable for both the new provider(s) and HNZC; and
b.
Market Sounding to confirm the viability of a proposed transfer-transaction,
and how smal er scale or niche provision might be accommodated within it.
55.
We want officials to continue investigating the feasibility of different options and
testing them during Market Sounding for each new transaction. We wil notify
Ministers before any public announcements are made in respect of Lower Hutt,
Porirua or Hamilton. Those locations should be treated as commercially
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confidential until such time as a public announcement is made. We will seek
THE
Cabinet agreement before commencing a commercial process where significant
fiscal or OBEGAL implications are likely to result from a transfer.
ACT
Tranche 2 transactions will support fiscal objectives
56.
Transactions also support the overal Capital Recycling programme, which is
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helping the Government meet long-term fiscal objectives through active
stewardship of government resources. The Crown capital released from
transactions gives the Government more headroom to support other capital
expenditure to support key public services and investments, and maintain net
debt targets.
Consultation
RELEASED
INFORMATION
57.
The advice was prepared in consultation with the OTS, TPK, MBIE, MSD, HNZC
and DPMC.
Financial Implications
58.
No direct financial implications result from the decisions in this paper. Depending
on how many transfer transactions are run concurrently, a relatively minor
OFFICIAL
increase in operational delivery capacity may need to be funded for the Crown
and HNZC. MSD’s ability to deliver additional transfer transactions is linked to the
funding it wil be seeking shortly under its Intel igent Purchaser business case.
59.
Undertaking significant regeneration as a part of a transfer transaction may come
with a fiscal cost, or have an impact on OBEGAL, but decisions on this are yet to
be made and wil be subject to Cabinet oversight and authorisation.
60.
The capital proceeds from large-scale transactions provide an opportunity for
significant additional capital spending, including for social housing, while
maintaining our fiscal strategy. Later this year HNZC will be presenting a
proposal to the Minister Responsible for HNZC for large scale multi-year
developments in Auckland, with a potential cost over three years of the order of
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$1.6 billion. The capital proceeds from transactions enables the Government to
consider more ambitious proposals than would otherwise be the case.
Human Rights
61.
None
Legislative Implications
62.
None
Regulatory Impact Analysis
63.
Not applicable
Gender Implications
64.
None
Disability Perspective
65.
None
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Publicity
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66.
The intent is to go to Regional Consultation and Market Sounding in Christchurch
wil be announced by the Minister Responsible for HNZC on 27 September at a
speech at the NZCID Social Housing Funding Forum.
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67.
The size of the HNZC portfolio in Christchurch - over 5,000 properties - allows us
to commit to one or more transfers there, with the potential for HNZC to retain a
sustainable presence. This wil be noted in the announcement on 27 September,
but the size of HNZC’s retained portfolio wil only be confirmed once Market
Sounding has been completed.
68.
Reference will also be made in general terms to the Government exploring
options for other transactions, without referring specifically to Porirua, Lower Hutt
INFORMATION
or Hamilton, given the further work that needs to be done before these options
RELEASED
can be firmed up.
69.
The need for discussions with iwi to occur before any other locations are publicly
announced currently precludes more explicit definition of the future pipeline.
Public announcements in respect of the identity of each of the other locations
discussed in this paper can only be made once discussions with affected RFR
OFFICIAL
holders have been satisfactorily concluded.
70.
Any announcement to recommence a commercial process in Invercargil would
need to occur before 20 November 2016 in order to allow for a truncated
procurement process under Government Rules of Sourcing (as market testing
has already occurred).
Recommendations
71.
The Minister Responsible for HNZC and Minister for Social Housing (Joint
Ministers) recommend that the Social Policy Committee:
1.
note Cabinet agreed to the objectives of the SHRP in December 2014,
and agreed the commitments the Government would make over the
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next few years [CAB Min (14) 39/22], limiting the sale of HNZC
properties over 2016 to 2,000 properties, and that HNZC would provide
no less than 60,000 properties by 2017,
2.
note that the proposed additional transactions are consistent with the
Government’s commitments made in respect of the timeframe and
volume of HNZC properties to be transferred to the community housing
sector,
3.
note that key lessons learnt from initial transfer transactions include
that:
a.
there is a clear and sophisticated market for large scale
transactions,
b.
large scale transactions are an efficient way to drive rapid change
in the sector,
c.
HNZC has internalised the cost of multiple risks in providing social-
housing services,
d.
long-term contracts for certainty of funding wil be required,
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e.
tenant and community engagement helps build support for
transfers,
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f.
there are advantages if multiple parties are interested in social-
housing provision in an area.
4.
note that large-scale transactions align with the Government’s capital
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recycling objectives, allowing us to fund significant new capital projects
while maintaining our fiscal strategy,
5.
note that development of a pipeline of transactions generates
momentum in developing the social-housing market, and thereby in
achieving the goals of the Government’s Social Housing Reform
Programme,
INFORMATION
6.
agree to continue the programme of transfers of HNZC properties and
RELEASED
tenancies to the community housing sector, in order to build a more
diverse and responsive market that better meets tenant needs and
provides value for money for taxpayers,
7.
note that the Minister Responsible for HNZC and Minister for Social
Housing are authorised to act as Joint Ministers [SOC Min (15) 14/3],
OFFICIAL
8.
note that the Crown has a policy of consulting with iwi and hapū before
transfer transactions are undertaken to ensure it understands their rights
and interests in HNZC land before it is transferred to third parties,
9.
invite Joint Ministers to:
a.
announce Christchurch as the next location for a transaction of
HNZC stock to the community housing sector in order to maintain
programme momentum,
b.
direct officials to commence engagement with Ngāti Toa Rangātira
with a view to progressing transactions in Porirua and Lower Hutt,
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c.
direct officials to commence engagement with Waikato-Tainui,
once RFR negotiations have concluded in Tauranga, with a view to
progressing a transaction in Hamilton,
d.
report back to Cabinet if any recommended transaction will have
significant fiscal costs or OBEGAL impact as a result of its
intended commercial structure and objectives,
10. note that the size of the HNZC portfolio in Christchurch - over 5,000
properties - allows us to commit to one or more transfers there, with the
potential for HNZC to retain a sustainable presence,
11.
note that officials are currently investigating the potential to
recommence a transaction of HNZC properties and tenancies in
Invercargill,
12. note that intentions in respect of transfers of HNZC properties in Lower
Hutt, Porirua, and Hamilton should be treated as commercially
confidential until public announcements are made,
13. note that Joint Ministers wil report back to Cabinet before any public
announcements are made in respect of any transfers of HNZC
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properties in Lower Hutt, Porirua, or Hamilton.
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RELEASED
INFORMATION
Hon Bill English
Hon Paula Bennett
OFFICIAL
Minister Responsible for HNZC
Minister for Social Housing
Date:
Date:
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Table: Key characteristics of locations identified for Tranche 2 transfers of tenancies and properties from HNZC to the community housing sector
Christchurch
Hamilton
Lower Hutt
Porirua (including Tawa)
Number of HNZC properties
5,612
2,833
3,443
2,797
excluding community group
houses
Avg. age of housing stock
43 years
38 years
58 years
51 years
Social housing register
403 (expected to be met from existing developments)
166
78
117
Demand for social housing
Stable
Increasing
Increasing
Increasing
No. of HNZC properties
25
2,088
2,522 (2 iwi + 1 hapū)
1,750
subject to a Right of First
Refusal (RFR)
No. of HNZC properties not
5,587
745
911
1,047
subject to an RFR
MSD’s preference for shape
of the local market
Three large CHP’s (one of these being HNZC).
At least two large CHPs (one of these being
Three large CHP’s established across Porirua and
Three large CHP’s established across Porirua and
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Lower Hutt (one of these being HNZC).
Lower Hutt (one of these being HNZC).
HNZC).
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Iwi interests
Ngāi Tahu holds RFRs over 25 properties.
Tainui has an area-wide RFR over Hamilton. There is
There are two iwi and one hapū with RFRs over HNZC
One iwi holds all RFRs (Ngāti Toa Rangātira).
no exemption from the RFR for social housing or
properties. The main RFR holder is Ngāti Toa Rangātira,
All of the RFRs include exemptions which allow the
other public purposes and this
is likely to mean any
which holds RFRs over 1,687 properties.
transfer of properties if it assists the Crown’s social
transaction would be on a bilateral basis with the
All of the RFRs include exemptions which allow the transfer
objectives in relation to housing.
RFR holder, Tainui.
of properties if it assists the Crown’s social objectives in
We understand HNZC has a constructive relationship
relation to housing.
with Ngāti Toa Rangātira which may assist with RFR
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Taranaki Whānui ki Te Upoko o Te Ika and Te Atiawa jointly
discussions.
hold RFRs over 835 properties.
A further iwi that is yet to settle, Ngāti Rangatahi, claims
interests in part of the Lower Hutt area.
Engagement with Council
Christchurch City Council (CCC) has not been engaged
Officials have engaged with Hamilton City Council
Officials have engaged with Lower Hutt City Council
Officials have engaged with the Porirua City Council
on the possibility of a social-housing transaction due to a
(HCC), which is supportive of a social-housing
(LHCC). LHCC expressed a variety of concerns but was
(PCC) on a potential Porirua transaction. PCC is
potential conflict of interest arising from their
transaction. The Council recently sold its pensioner
interested in the opportunities a social-housing transaction
interested in working in partnership with the Crown,
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establishment of a CHP.
housing stock, and understands the merits of such a
might provide to contend with these issues. Some of these
expressing a desire to see the transaction target
Once a decision is made to progress with a transaction
transaction. The Council views Tainui as a natural
concerns include the concentration of social-housing,
redevelopment and reconfiguration opportunities, as well
in Christchurch, officials intend to engage with CCC.
partner, and expressed a desire to be kept informed
vacant properties, and LHCC’s overall growth strategy
as managing its changing population.
The Council or a subsidiary may be interested in
of developments for any social-housing transaction in
(increasing housing supply).
participating as a bidder.
the region. However, it has have not expressed a
preference for a hands-on partnership role.
Reconfiguration requirement
Low to Medium:
Significant:
Significant:
Significant:
shift from 3 bedrooms to smaller units
shift from 3 bedrooms to smaller and larger units.
shift from 3 bedrooms to smaller units
shift from 3 bedrooms to smaller units
HNZC has spent considerable funds upgrading the
existing stock needs upgrading due to age and
existing stock needs upgrading due to age and
stock.
condition (oldest stock in the national portfolio)
condition
high concentration of social-housing stock in certain
high concentration of social-housing stock in certain
areas.
areas.
Potential commercial viability
Likely to be commercially viable.
Under investigation but expected to be the most
Under investigation but expected to be better than Porirua
Challenging without considerable subsidy:
of redevelopment
viable of the four areas
market dynamics need to change materially before
it becomes economic to materially redevelop and
INFORMATION recycle capital from most of the existing stock
attractiveness of Porirua may have the potential to
RELEASED
improve over the medium term.
Key objectives for a
Maintain momentum in social-housing transfer
Reconfiguration and redevelopment to:
Reconfiguration and redevelopment to improve quality
Reconfiguration and redevelopment to improve
transaction
programme
Increase both social and affordable housing
of stock and reduce concentration of social-housing in
quality of stock and reduce concentration of social-
Some opportunity for reconfiguration
supply
certain areas.
housing in certain areas.
Possibility of transaction that includes scope for
improve quality of stock and reduce
parties to identify innovative solutions for particular
concentration of social-housing in certain areas.
cohorts such as elderly.
OFFICIAL
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Table: Key characteristics of locations identified for Tranche 2 transfers of tenancies and properties from HNZC to the community housing sector
Christchurch
Hamilton
Lower Hutt
Porirua (including Tawa)
Key challenges to a
Ensuring transaction is attractive to market
Reaching agreement with RFR holder.
Reaching agreement with iwi given multiple RFR
Reaching agreement with RFR holder on how the
transaction
participants where opportunities for redevelopment
holders with overlapping interests
properties are dealt with
are more limited.
Some risk as to whether redevelopment is
Risk associated with commercial viability of
commercially viable. The Government could create
redevelopment due to Porirua being a low
incentives for redevelopment.
demand/low capital growth area. The Government
could create incentives for redevelopment.
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RELEASED
INFORMATION
OFFICIAL
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Document Outline
- (5c) Social Housing Reform Programme_ Transfer of HNZC Properties to the Community Housing Sector.pdf
