Wellington City Council, New Zealand's largest council housing provider, could make a preliminary decision this morning to end its role as landlord.
In Wellington, council tenants' rent is capped at around 70 percent of the market rent. Photo: RNZ / Richard Tindiller
The council manages 1927 units, accommodating 3200 tenants.
But the operational costs, plus the capital investment needed to bring many of them up to scratch, is becoming too expensive.
Projections in a council report showed that by 2030, there will be an operating deficit of nearly $50 million.
Meanwhile, the capital programme over the next 10 years - which would make the units comply with Healthy Homes standards - was estimated to be just shy of $450m.
The main proposition on the table is to establish a new entity: a Community Housing Provider (CHP), to which the council would transfer its properties, and which would then take over the management of the housing.
But councillors are dissatisfied with the proposal, which has been described as a waste of time.
Fairer rents for tenants
Councils up and down the country have had a particularly hard time keeping their housing operations cost-efficient.
The main culprit for that has been local government's lack of access to the central government-funded Income-Related Rent Subsidy.
The subsidy is a rent top-up for tenants who live in a house run by either Kāinga Ora or a CHP.
Under the scheme, tenants pay rent at 25 percent of their income, at which point the subsidy comes in and pays the remainder.
As a result, rent is kept affordable for the tenant, and the housing provider can charge market rates.
But because council tenants do not get the subsidy, the tenant has to pay 100 percent of the rent (although some are entitled to the Accommodation Supplement).
Subsequently, to keep rent affordable, councils charge below-market rent. In Wellington, it is capped at around 70 percent of the market rent.
But in a city like Wellington, 70 percent of the market rent is still too expensive for many council tenants.
Mary* is a council tenant, a superannuaitant, and she also receives the Accommodation Supplement.
At the moment, her rent amounts to 46 percent of her income.
"According to the Green Party calculations, I should be paying no more than 25 percent based on the income I have," Mary said.
"According to the United Nations I shouldn't be paying more than 35 percent.
"I live on a very, very tight budget."
While she pays rent at 46 percent, someone in an identical situation but living in a Kāinga Ora or a CHP home would only be paying 25 percent of their income through the subsidy.
"Just from an equity perspective," said Councillor Diane Calvert, "what I can't understand is why the government is forcing [council] tenants themselves to be put through all this extra stress."
Establishing a Community Housing Provider
Today councillors will make a preliminary decision on whether to establish a new Community Housing Provider, so council tenants can get access to the rent subsidy, and so it becomes more financially sustainable for the council.
They would not be the only one. Christchurch, Auckland and Hutt City have already done the same.
Specific details are yet to be worked out, but initial projections show if the CHP came into effect in the 2020/21 financial year, it would turn a $6m deficit into a $5m surplus.
That would not be possible. It is expected to take three years for the CHP to be established. But it shows the impact the subsidy can have.
But Calvert said it accounts to a waste of time and money, when the government could just allow council tenants to access the rent subsidy.
"If they can give it to a CHP, why can't they give it to a council?
"We provide the same level of tenancy services, and the same level of property, and we cater to the same type of tenant, as a CHP or Kainga Ora provides.
"I just don't understand why they're forcing us down this path."
She said it was the best option, but she would prefer the council was able to hold onto its housing.
Councillor Fleur Fitzsimons took a different approach and opposed the move to establish a CHP.
"I've got major concerns about the council setting up a Community Housing Provider.
"I think Wellingtonians are rightly proud that the council runs social housing, and I think we should be slow to do anything that would break that real trust between tenants and the council," she said.
Councillors Diane Calvert, left, and Fleur Fitzsimons have opposing views on the city's social housing. Photo: RNZ
She argued there were other avenues for making housing cost effective, such as having council blocks include people paying mixed rentals - some at the market rate, some at the affordable rate - depending on their income.
But there are also calls for the council to expand their options, and instead of looking to establish a new CHP, utilise the existing ones.
There are 10 operating CHPs in the Wellington region.
Chief executive of Kahungunu Whānau Services Ali Hamlin-Paenga said it made no sense when there are CHPs who have "been in the game for a long time.
"Many of us actually have a wraparound service, which could contribute to the overall wellbeing of the people in those properties. That then has a roll-on effect to the wider community.
"It just doesn't seem like they've looked at that option, and they've looked more at 'how do we hold onto this?'"
But Calvert said as council is the one who has invested in the properties, they feel a sense of guardianship over them.
If passed, a report will come back in September with further detail as to the plans, before it goes to consultation.
*Mary's name has been changed