It was supposed to be simple: Wellington City Council would place its cash-strapped accommodation in a different ownership model and new tenants would receive a much-needed housing allowance.
He worked for Christchurch City Council, which set up a Community Housing Provider (CHP) to manage its accommodation in 2016, and has since received Income Related Housing Benefit (IRRS) for new tenants. He also worked for Auckland Council, which did the same in 2017.
Except that a recent change in government policy means that the $9.8 million allocated to the council’s grant in last week’s budget comes with a hook: it’s only guaranteed for two years.
Unlike councils before it, Wellington City Council will not receive the grant for new tenants under a cogeneration model on an ongoing basis. Instead, the council should receive exceptions through the budget.
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The funding announcement split city councilors – either seen as ‘a step forward’ or ‘smoke and mirrors’ depending on who you ask – with council workers and the government also on different pages on its ramifications.
The council estimates that new tenants will continue to receive the subsidy beyond two years, assuming they continue to meet the means test.
“Their funding doesn’t stop after two years,” said Kym Fell, the council’s client and community manager.
The Ministry of Housing and Urbanism was more circumspect. “Provisions [beyond the two years] would need to be confirmed,” spokeswoman Anne Shaw said.
Mayor Andy Foster said ending the deal would cause problems for the council’s housing arm. “We need that not to be the case if we are to continue to deal with the problems we have.”
These problems are manifold: the council housing unit is due to become insolvent by June next year.
In 2007, the council signed a grant deed with the government, agreeing to a $400 million upgrade package across its portfolio, and now needs to find the money to complete the work.
Many of its 3,500 tenants, meanwhile, are struggling to pay their rent. The council is reducing these rents, but tenants are still paying 70% of market rates.
The IRRS appears as a solution. It caps a tenant’s rent at 25% of their income, with the rest paid by the government. It would also resurrect the council housing unit; turn a $6 million deficit into a $5 million surplus.
Foster called the budget announcement a “first step” toward financial sustainability. In theory, it could fund access to IRRS for up to 380 households over a two-year period.
He hoped to strengthen the arrangement through conversations with the government over the next two years.
Councilor Diane Calvert said the funding allocation ignored the council’s current tenants.
“It’s an ad of nothing roughed up to look like something,” she said. “It’s all smoke and mirrors. At the end of the day, [the current crisis] concerns our existing tenants who are struggling to pay their rent.
The council has not confirmed that its housing portfolio will undergo a CHP – consultation around this decision continues.
Foster called the budget’s conditional money “explicit support and approval” from the government for this option – approval that was ultimately needed for the council to receive the grant anyway.
He hopes such an entity can be established before July 1 next year, when the two-year funding period begins.
In October, the government changed the policy regarding access to IRRS for CHPs, only allowing the “repurposing of existing homes” in limited circumstances.
Housing Minister Megan Woods explained how the policy affects social housing operations.
“Government policy is that any new transfers from social housing to a CHP will not automatically qualify for IRRS.
“This position does not apply to consultancy portfolios that have been transferred to CHPs in the past, which may continue to access IRRS funding.”
While the grant may be available to new tenants under a new ownership model, current council tenants will still not receive the grant.
And this despite the efforts of these tenants – campaigning under the IRRS 4 ALL banner – who pushed the government to accede.
Debbie Port, a tenant who has spoken out against the current settings, bottled up her rage in response to the announcement.
“It doesn’t matter if you’re existing or new – if you have the same income, you should be able to access the grant.”
Woods said extending the grant to current council tenants meant “we won’t see progress in moving people from the housing register to houses”.
Green MP Ricardo Menéndez March, who previously backed an IRRS 4 ALL campaign petition, disagreed with that guess.
“It’s an austerity approach. It’s not a trade-off between new housing and the subsidy – it’s a political decision, and one that Labor is actively taking.
Extending the grant to Wellington City Council would cost the government $13.2 million a year.
In March, the council agreed to an 18-month rent freeze for its tenants, as well as changing the eligibility criteria for its own housing benefit.
Councilors at the time called it a “band-aid”, as neither initiative was financially viable.
Councilor Jill Day said the two stages “address the immediate needs” of tenants, while the council is looking for a CHP alternative.