Proposal 3: Providing more sustainable Council housing for our older people

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Kāpiti has a growing housing need and making sure that our most vulnerable residents have access to quality, affordable housing is a core part of our long-term goal of building a resilient community that has support for basic needs.

However, the cost of providing the service is increasing, and councils are unable to access central government funding to help ratepayers and tenants cover the cost. Last year we undertook a comprehensive review to confirm the condition of the homes and upgrade needs, and to consider options that would provide a service that better meets the needs of our community.

Key takeaways from the review include:

• The Council owns and manages 118 homes for older people on the Kāpiti Coast. While the units are in fairly good condition, there is limited ability to improve accessibility, and diversity in size and configuration.
• We have a current waitlist of 60 older people, and we expect this to grow. Anecdotally, we know this waitlist is not an accurate reflection of actual demand, as many people don't apply, assuming they won't be successful. We know the need now and in the future is much greater.
• Our ability to grow the portfolio is restricted because of the level of subsidies required. To increase the number of units would be unaffordable if the cost was covered by ratepayers, either through rates or debt.

We’ve identified two options where Council would transfer and/or sell these assets to either a new community housing provider (CHP) or an existing one. Both options would take around 18 months to put in place and have similar benefits, with the exception that establishing a new CHP has the added benefit of allowing Council to have more influence on behalf of tenants and our communities.

What is a CHP and why does that matter?

CHPs are community housing providers that are accredited by central government with a specific mandate to provide community housing.

• CHPs can negotiate with the Ministry of Housing and Urban Development (MHUD) for funding to grow the housing stock. The CHP is then responsible for maintaining the assets.
• They are regulated to ensure the homes are of good quality, have good tenancy management services, and are well managed. Housing is their sole focus – they have the connections, skills and expertise, and a mandate to deliver.
• They have access to a more complete and robust suite of services for tenants. This means transferring housing assets will improve levels of service for our older people, even if that means they’ll be provided by someone other than Council.
• Unlike councils, CHPs also have access to the central government’s Income Related Rent Subsidy, which means rent for approved residents can be reduced from 30% to 25% of a tenant’s net income, with central government paying the difference between the tenant’s rental payment and the market rent for the property. This eliminates the need for ratepayer subsidisation.

There is, of course, an option for us to continue owning and operating these units, but we don’t think doing so is sustainable or compliant with good financial investment. Operating costs are already being subsidised by ratepayers, and with costs to maintain and upgrade the units on the rise, we expect the level of subsidy to increase substantially in coming years.

   This is our preferred option.

We could establish a new independent CHP that we have a level of influence in. This is because it will allow us to have an ongoing relationship with the CHP. We would transfer (gift) the housing assets to the new CHP because of this direct and ongoing relationship. We would expect the new CHP to be 100% self-funding so we would not anticipate any ongoing administrative costs for the Council, however we would expect Council to incur some initial setup costs at the beginning.

There are a few key reasons we prefer this option, but the main one is it will ensure that older persons' housing continues to be delivered for eligible older people, and will enable the growth of the portfolio without passing the costs on to ratepayers. There are significant costs involved with just providing the current level of housing for our older people. We can’t charge enough rent to cover the costs to maintain and operate the assets, so currently ratepayers subsidise the cost through their rates. To build more houses, we’d have to borrow subject to sufficient debt headroom, as well as continue to subsidise rents for the tenants in these new houses, which further impacts rates. Retaining ownership of our housing assets isn’t affordable, or sustainable, for us, or for our community.

Note: Figures in brackets are reductions

With this option, Council will continue to own and operate the portfolio. This means ratepayers will continue to subsidise the ever-increasing costs. Without increasing rates and debt, this option means we won’t be in a position to build new homes for older people due to already high levels of debt and the amount the ratepayer would need to subsidise to cover the cost.

Tenants will miss out on the wrap-around support and services a CHP can provide, and there will be no access to income-related rent subsidies from central government. The ability to provide improved accessibility options would also not be possible without significant investment from rates or by increasing Council debt.

We don’t think this is an affordable or sustainable option in the long run because current legislative settings for housing do not allow councils to access central government-funded subsidies. This means that the level of subsidisation by the ratepayer will increase annually as the portfolio ages and needs more maintenance and refurbishment. This will result in increased requirements for funding through rates and debt drawdown.