Documents Released With The Review Showing Kainga Ora's Worsening Financial Problems

COMMERCIAL-IN-CONFIDENCE
Joint Report: Kāinga Ora Spending, Funding and Financing Review
Date: 13 July 2023 Report No: T2023/1385

HUD2023-002680
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File Number: SH-18-1-1-1
Action sought
Action sought Deadline

Minister of Finance
(Hon Grant Robertson)
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Note the Project Team is currently working
to understand the costs (i.e. current levels
of spending) associated with the provision
of public housing.
31 August 2023
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Minister of Housing
(Hon Dr Megan Woods) Agree the outcomes of the post
implementation review of the customer
programme and tenancy support functions
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be provided to joint Ministers
Contact for telephone discussion (if required)

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Name Position Telephone 1st

Contact
Emily Pearse Project Lead, Kāinga N/A s 9(2)(a) 
Ora Spending, Funding (mob)
and Financing Review
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Geraldine Treacher Acting Director, s 9(2)(a) s 9(2)(a)

Financing, (wk) (mob)
Infrastructure and
Urban Development
Glenn Phillips Head of Crown Entity s 9(2)(a) s 9(2)(a)
Performance and (wk) (mob)
Monitoring
Minister’s Office actions
Return the signed report to Treasury.
Enclosure: No
Treasury:4836429v1 COMMERCIAL-IN-CONFIDENCE
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Joint Report: Kāinga Ora Spending, Funding and Financing

Review
Purpose of Report
1. This report provides an update on progress in relation to the joint Kāinga Ora
Spending, Funding and Financing Review (the Review), how the Review fits within the
Government’s broader fiscal sustainability work programme, as well as next steps.
Background
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2. In November 2022, Cabinet [DEV-22-MIN-0240]:
a. Agreed to provide Kāinga Ora with a Crown lending facility to meet its cashflow
requirement to 30 June 2023, and that all its future borrowing needs would be
centralised and met by New Zealand Debt Management, rather than private
markets.
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b. Requested that the Treasury and the Ministry of Housing and Urban
Development (HUD) undertake a comprehensive review of the spending,
funding, and financing of Kāinga Ora.
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Fiscal Sustainability
The government has set ambitious targets to increase public housing supply, which
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has significant implications on overall fiscal measures
3. In Budget 2023, Vote Housing and Urban Development received an additional:

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a. $7.882 billion for public housing functions, including $6.713 billion in capital
funding and $1.169 billion in operating funding to FY 26/27, and
b. $71.921 million in operating expenditure for Urban Development functions to

2024
4. The public housing funding outlined above includes:

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a. $3.1 billion in funding for 3,000 new public housing places for delivery by 30 June
2025, and
b. $3.6 billion in capital funding for cost pressures in the current public housing
programme, including an allowance for renewal activity to reach the net public
housing target. 1
5. The two initiatives outlined above represent nearly two thirds of the government’s new
capital spend in Budget 2023.
6. Of the $10.7 billion in new capital funding committed over the next 10 years in
Budget 2023, funding for the net new 3000 houses represents just under 30 per cent
of total capital spend. Funding for cost pressures in the public housing programme
represents approximately a third of capital expenditure.
1
This is inclusive of an additional $870 million in funding for the Tāmaki Regeneration Company.
T2023/1385:Kāinga Ora Spending, Funding and Financing Review 6
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b. Retrofits and renewals could be undertaken at a faster pace and/or over a

shorter timeframe, likely increasing upfront capital requirements and possibly
decreasing direct maintenance costs over time.
15. The Project Team will look to undertake scenario analysis, including any choices
around how quickly existing stock is retrofitted/renewed, as part of the broader funding
and financing workstream scheduled to commence over the coming months.
Customer Programme and Tenancy Support
16. The introduction of the Kāinga Ora – Homes and Communities Act 2019 signalled a
shift away from the commercial approach to tenancy management taken by Housing
New Zealand to a greater focus on customer wellbeing. Specifically, Kāinga Ora is
required to:
a. Support good access to jobs, amenities, and services, and
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b. Provide help and advice on matters or services related to housing.
17. In response to the objectives set in the 2019 Kāinga Ora Act, Kāinga Ora has
redesigned its property management and tenancy support functions to shift its focus
towards customer wellbeing and being a world class landlord (taking a less
transactional approach), given the range of tenants Kāinga Ora house who often have
complex needs above and beyond private tenants.
18.
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Specifically, Kāinga Ora has indicated the new model has been designed to:
a. Respond to far greater complexity in the Kāinga Ora customer base

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b. Sustain tenancies to help create stability and security for people who often have
a range of other challenges (an evidence-based approach)
c. Support customers to be well connected to their communities, lead lives with

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dignity, have the greatest degree of independence possible, and to sustain
tenancies
d. Work with community providers to support customers and ensure that most in
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need are supported and housed, and
e. Be a fair and reasonable landlord, treating customers and their neighbours with
respect, integrity and honesty.
19. Better supporting its tenants has resulted in significant growth in Kāinga Ora
personnel, increasing from 666 in 2018 to 1,330 in 2022, with a corresponding
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increase in the cost of delivering tenancy support services. 7
20. Documentation provided by Kāinga Ora shows that the primary driver of the overall
FTE increase is to provide appropriate ratios for coverage of high and medium-need
tenancies (Table 3 refers), allowing Kāinga Ora to spend more time with the tenants
who need it. As an example, high and medium-need customers are managed by the
‘Senior Housing Support Manager’ role, with a preferred target ratio of 100 customers
per portfolio. ‘Housing Support Manager’ roles manage medium and low needs
customers with a preferred target ratio of 220 customers per portfolio.
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FTE includes direct customer facing roles, supporting functions and corporate based overhead FTE allocation)
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Overhead costs 8
28. There are significant overheads allocated across the different activities that Kāinga
Ora undertakes. These may be driven by the requirements of operating in the public
sector (similar to Departments), the need to be regionally located and ensuring
community engagement is robust.
29. The Project Team is looking to understand this further, and overhead costs will be
further considered as a separate workstream (expected to commence in late July), and
feed into the funding and financing workstream in the second half of 2023.
Next Steps
30. The Project Team is working with Kāinga Ora to understand what information can be
extracted and validated from its systems to provide a comparison of actual build costs
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compared with the Budget 2023 bid, to form a view around any differences in cost.
This is expected to be provided in late August.
31. Over the next few months, the Project Team will undertake a range of scenario
analysis to understand the value of different purchasing options, and implications for
broader funding and financing settings and overall fiscal measures. This is likely to
include options around:
a.
b.
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Volume, pace, and quality of new build programme.
Appropriate age of the portfolio (which has implications for customer wellbeing,
maintenance costs and retrofit/renewal decisions).
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c. Delivery methods (e.g. Kāinga Ora redevelopment or developer led, CHPS etc).
32. This analysis is expected to be provided in late 2023 to support Budget 2024
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processes, alongside work on overhead costs, funding and financing models and
urban development functions.
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Overheads for this review are considered as the functions within Kāinga Ora enabling customer facing and delivery groups
to deliver the required outputs.
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Joint Report: Kāinga Ora Spending, Funding, and Financing Review –

Cost to Build
Date: 01 September 2023 Report No: T2023/1416

HUD2023-002977
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Action sought
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Minister of Finance Note that the Project Team now has a 4 September 2023
(Hon Grant Robertson) reasonable understanding of total capitalised
costs over recent years and how these
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compare to the cost assumptions
Minister of Housing underpinning the Kāinga Ora Long Term
(Hon Dr Megan Woods) Investment Plan (LTIP) and Budget
processes.
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Agree that Kāinga Ora develop and submit a
plan in late 2023 to improve its information
systems and data capability.
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Name Position Telephone 1st Contact

Emily Pearse Project Lead - Kainga Ora N/A s 9(2)(a) 
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Spending, Funding and

(wk) (mob)
Financing Review
Geraldine Treacher Manager Housing and Urban s 9(2)(a) s 9(2)(a)
Growth
(wk) (mob)
Monitoring and Performance (mob)
(wk)
Minister’s Office actions (if required)
Enclosure: No
Treasury:4838223v1 IN-CONFIDENCE
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Recommended Action
We recommend that you:
Total Capitalised Costs
a note that the Project Team now has a reasonable understanding of total capitalised
costs over recent years, and how these compare to the cost assumptions underpinning
the Kāinga Ora Long Term Investment Plan (LTIP) and Budget processes. In
FY2022/23, analysis shows that at a high-level:
i. Kāinga Ora redevelopments (which do not include the cost of acquiring land)
generally cost less than budgeted for.
ii. Developer-led projects cost less than budgeted for and less than redevelopments
when land costs are excluded (in order to provide a more direct comparison with
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redevelopments).
Independent Quantity Surveyor Analysis
b note that an independent quantity surveyor has assessed Kāinga Ora build costs,
which are marginally higher than a modest market home due to build features
associated with Kāinga Ora requirements and ‘public good’ policy decisions in
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providing higher quality public housing.
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note that given this external validation of build costs, the Project Team is looking to
better understand non-build costs.
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Validating the level of borrowing set aside for Budget 2023
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d note that to complete the process of validating the level of borrowing set aside for
Budget 2023 the Project Team is working to understand:
i. The split of build costs to non-build costs. This will include extracting capitalised
costs that are incurred prior to construction.
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ii. Kāinga Ora operating costs (including overheads).
iii. Valuation methodologies for Developer-led projects, and the value-for-money that
these projects deliver.
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e note that once completed, this analysis will allow the Project Team to provide an
estimate of total interest costs (i.e. the largest component of the Budget 2023 operating
assumption of $60,000 per new build per annum).
Final Report
f note that the outcomes of the Spending, Funding and Financing (SFF) Review are
expected to be provided to Ministers in late 2023 along with:
i. A greater understanding of current levels of expenditure, assurances around total
costs and what that might mean for debt requirements over coming years, and
different purchasing options in order to better manage the fiscal outlook.
ii. Advice assessing whether the Kāinga Ora funding and financing model is
efficient, fit for purpose, provides value-for-money, is sustainable and supports
the delivery of the Government’s housing objectives and commitments.
T2023/1416 Kāinga Ora's Spending, Funding, and Financing Review - Cost to Build Update Page 4
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Data and System Limitations
g note while Kāinga Ora has provided a range of information to support the SFF Review,
improvements are required to the way asst cost data and project management
information is recorded and linked across the organisation to improve cost visibility.
h Agree that Kainga Ora develop and submit a plan by late 2023 to improve its
information systems and data capability in order to better understand costs, support
good decision making, and provide assurance.
Agree / Disagree Agree / Disagree

Minister of Finance Minister of Housing
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Geraldine Treacher Glenn Phillips
Manager Housing and Urban Growth Head of Crown Entity
The Treasury Monitoring and Performance
Ministry of Housing and Urban
Development
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Hon Grant Robertson
Minister of Finance
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Hon Dr Megan Woods

Minister of Housing
_____/_____/_______
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Joint Report: Kāinga Ora Spending, Funding, and Financing

Review – Cost to Build
Purpose of Report
1. This report provides an update on progress on the Kāinga Ora Spending, Funding and
Financing Review (the SFF Review), including:
a. The cost to build public housing over recent years.
b. Linking the cost to build public housing to Budget 2023 assumptions.
c. How this links to work previously undertaken by the SFF Review Project Team.
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d. Next Steps for the SFF Review, including
i. Validating build costs vs. non-build costs.
ii. Validating operating costs (including overheads).
iii. Validating methodologies for Developer-led projects, and the value-for-
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money that these projects deliver.
iv. Comparing what has been provided through the Budget process to provide
an overview of any expected difference and implications for the
Government’s overall fiscal position.
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Budget 2023
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2. As part of Budget 2023, borrowing and operating funding was provided to deliver
Government commitments including:
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a. $3.1 billion of borrowing for the Kāinga Ora portion of the 3,000 additional public
housing places by June 2025 including an allowance for renewal activity to offset
demolitions to reach the net target.
b. Approximately $4 billion of borrowing up to June 2024 to meet the previous public

housing commitment including an allowance for renewal activity to reach the net
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target.
3. At an individual unit level, the broad financial assumptions included:
a. Up to $760,000 per new build (both additional and renewal),
b. The procurement of land additional to current State land holdings to enable new
builds (value is dependent on the location of land), and
c. Approximately $60,000 per new build per annum to operate 2 these places on an
ongoing basis.
4. These figures were derived from the Kāinga Ora Long-Term Investment Plan (LTIP)
model, which assumed the following average costing excluding capitalised overheads
across typologies (Table 1 refers).
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This includes maintenance and asset management, property management and tenancy services, retrofit and complex
remediations, and interest expenses.
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11. To identify unit-levels costs, Kāinga Ora has undertaken a matching exercise linking
various asset management and project management datasets with accounting system
information to develop a per-unit cost by typology and number of bedrooms. 7
12. This matching exercise provides a sample size that accounts for around 88 per cent of
projects that Kāinga Ora has delivered in FY 2022/23.
13. It is important to note timing issues impact when project costs are recorded over the
financial year, and this timing issue sits against a backdrop of high cost inflation.
Average Total Capitalised Costs per unit: FY2022/23
Redevelopments
14. Redevelopment generally refers to the process of demolishing an existing public home
which has reached the end of its economic life and then rebuilding. Depending on
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whether the land and community is suitable, redevelopment may result in replacing the
home with more than one new property. Kāinga Ora manages the redevelopment, and
in some situations, this involves works to make the land suitable. Kāinga Ora advise
that their landholdings can be lower quality or more complex to build on than market
land.
15. The Project Team identified 1,381 individual units in FY2022/23 with near-complete
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cost information at a total cost of $841 million. The average total capitalised cost of
these units by size and typology is shown in Table 3 below. All cost averages include
capitalised overheads expect for the LTIP benchmark.
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Table 3: FY2022/23 Redevelopment actuals by typology and size compared to LTIP 8,9
s 9(2)(f)(iv)
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Developer-led Projects
16. Developer-led Projects (new and existing) refer to the purchase of new or existing
homes from private developers or owners for use as a public . They have become an
increasingly large part of the Kāinga Ora pipeline. Developer-led projects include the
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cost of land and build (i.e., complete houses) and developer’s/builder’s margins.
Kāinga Ora often purchases these as ‘turnkey’ properties and developers manage the
build.
17. The Project Team identified 1,080 individual developer-led projects with near-complete
cost information were identified in FY2022/23 at a total cost of $837 million. The
average total capitalised cost of these units by size and typology is shown in Table 4
below.
7
Because costs are recorded at the project level, proportional estimates have been applied.
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Where cells are empty, less common typologies were not delivered within FY2022/23
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These figures may increase marginally (i.e. by less than 10 per cent) as final invoices are paid before being capitalised
10
LTIP figures informing Budget requirements are escalated by 10.9% in FY2023/24 and 5.5% in 2024/25
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s 9(2)(ba)(ii)
18. To understand value-for-money and compare redevelopment costs with new build
acquisition costs on a like-for-like basis the Project Team is looking to understand the
intrinsic value of the land component of acquire new costs.
19. Initial analysis against a reduced sample size (Table 5 refers) shows that, on average,
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Kāinga Ora redevelopments ($609,190) cost an average of $35,000 more than
developer-led acquisitions ($574,000) when the cost of land is excluded.
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How these numbers compare to Budget 2023 funding
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20. At a high-level, analysis shows that in FY2022/23:
a. Kāinga Ora redevelopments (which do not include the cost of acquiring land)
generally cost less than budgeted for.
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b. Developer-led projects cost less than budgeted for and less than redevelopments
when land costs are excluded (in order to provide a more direct comparison with
redevelopments).
Table 6: FY2022/23 Average redevelopment and new build acquisition (excluding and
including land value) actuals compared to LTIP
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s 9(2)(ba)(ii)
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These figures may increase marginally (i.e. by less than 10 per cent) as final invoices are paid before being capitalised.
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LTIP figures informing Budget requirements are escalated by 10.9% in FY2023/24 and 5.5% in 2024/25.
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Averages presented are dependent on the weighted bedroom average for each build type and acquisition method, which will
contribute to the difference in price.
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These figures are based on a small subset of 54 per cent of total units for developer-led projects in FY2022/23.
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21. With developer-led projects expected to be a significant proportion of delivery of

coming years, the Project Team will undertake further work to better understand
valuation methodologies and the value-for-money that these projects deliver.
How Kāinga Ora build costs compare to the market – quantity surveyor
analysis
22. To provide external validation of the costs associated with new public homes (by size
and typology) Kāinga Ora engaged an independent quantity surveyor (QS) to:
a. Estimate the build cost of new public homes (by size and typology), and
b. Compare that cost to a modest market home (i.e., KiwiBuild).
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23. Analysis from the independent QS showed that build costs for public homes are
marginally higher than a modest market (KiwiBuild) home, largely reflecting the cost of
build features, components and specifications associated with Kāinga Ora
requirements and policy decisions intended to provide higher quality public housing.
24. It is likely that higher level design choices (such as typology, bedroom configuration,
gross floor area, land utilisation and common areas/parking) drive greater inherent cost
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differences relative to the market than the building components picked up in the QS
analysis. Factors such as wall-to-floor ratios and the choices of typology to best utilise
available land area may be significant, and these differences will be more challenging
to pick up via QS analysis. More work is needed by Kāinga Ora to understand costs of
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providing particular typologies, configurations and land utilisation in a standardised way
across the public housing portfolio (Attachments 1 and 2 refer).
25. Given the work undertaken by the QS validating Kāinga Ora build costs with those of
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the market, the Project Team is wanting to better understand non-build costs.
Next Steps
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How these numbers compare to Budget 2023 funding
26. Given the size of the Kāinga Ora capital investment pipeline and the government’s
current fiscal position, the Project Team is looking to provide Ministers with assurances
around total costs and what that might mean for debt requirements over coming years.
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27. To complete the process of validating the level of borrowing set aside for Budget 2023
the Project Team is now working to understand:
a. The split of build costs to non-build costs (the LTIP model assumes a split of
51 per cent build costs to 49 per cent non-build costs), including capitalised costs
that are incurred prior to construction.
b. Kāinga Ora operating costs (including overheads).
c. Valuation methodologies for Developer-led projects, and the value-for-money that

these deliver.
28. The Project Team will undertake a bottom-up validation approach utilising the
FY2022/23 analysis and enhancing this with information that can be provided from
contracts that have been entered into for delivery in FY2023/24 and FY2024/25.
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29. Once completed, this analysis will also allow the Project Team to provide an estimate
of total interest costs incurred (i.e. the largest component of the Budget 2023 operating
assumption of $60,000 per new build per annum).
Final Report
30. The outcome of this work is expected to be provided to Ministers in late 2023 to
support Budget 2024. The Final Report is aiming to provide:
a. A greater understanding of current levels of expenditure, assurances around total
costs and what that might mean for debt requirements over coming years, and
value different purchasing options in order to better manage the fiscal outlook.
b. Advice assessing whether the Kāinga Ora funding and financing model is
efficient, fit for purpose, provides value for money, is sustainable and supports
the delivery of the Government’s housing objectives and commitments.
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Progressing work to support better information systems and understanding of
costs
31. While Kāinga Ora has provided a range of information where it is available to support
the SFF Review, the Treasury is of the view that information available to support an
32.
making or provide assurances to Ministers.
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understanding of actual cost is not at an adequate level to support good decision
For example, the matching exercise that has been undertaken to understand actual
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costs has taken substantial time and requires manual matching of information from
different sources and through a number of systems. Given the size of Kāinga Ora’s
capital investment pipeline this information should be readily available in order to
understand actual costs, and how this compares to funding that has been allocated and
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approved.
33. The Treasury understands that Kāinga Ora is in the process of establishing a
programme of work to enhance analytics relating to the cost of building public housing.
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This is likely to take several years to be fully implemented and operational.
34. Given the system limitations identified, it is recommended that Kāinga Ora develop and
submit a plan to Joint Ministers in late 2023 that addresses these shortcomings in its
information systems and supports better information collection and understanding of
costs.
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DPMC recommended that Kāinga Ora take immediate actions to strengthen its
information systems.
35. Observations around the limitations of Kāinga Ora’s systems are consistent with those
identified by the Department of Prime Minister and Cabinet’s Implementation
Unit’s (IU’s) in its report – Stocktake of Kāinga Ora Public Housing Construction
Pipeline and Delivery (DPMC-2022/23-599) which recommended Kāinga Ora take
immediate actions to address risks and strengthen its information systems, and
develop a more systematic approach to areas where it could intervene or adapt its
practice to accelerate delivery.
36. The Treasury also understands that enhancements to the Kāinga Ora Pipeline are in
the final stages of testing prior to final release in early 2024, and is expected to address
the recommendations from the IU report. This new tool will enhance insight from the
Pipeline, helping to understand aspects like project status timelines, progress against
earlier estimates, and ensuring all of the major home delivery activities are captured.
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s 9(2)(f)(iv)
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Joint Report: Joint Report: Findings from the Kāinga Ora Spending,
Funding, and Financing Review
Date: 15 December 2023 Report No: T2023/2157

HUD2023-003422
File Number: SH-11-5-20-1-
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M100454
Action sought

Minister of Finance
(Hon Nicola Willis)
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Note the findings from the Kāinga
Ora Spending, Funding and
Financing Review
22 December 2023
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Minister of Housing
(Hon Chris Bishop)
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Emily Pearse Project Lead - Kainga Ora N/A s 9(2)(a) 
Spending, Funding and
(wk) (mob)
Financing Review
Geraldine Treacher Manager Housing and Urban s 9(2)(a) s 9(2)(a)
Growth
(wk) (mob)
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Monitoring and Performance
(wk) (mob)
Enclosure: No
Treasury: 4900548v1 IN-CONFIDENCE

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Recommended Action
a note that in November 2022, the previous Government agreed to provide Kāinga Ora
with a Crown lending facility to meet its financing needs through the New Zealand Debt
Management Office rather than private markets [DEV-22-MIN-0240 refers]
b note that as part of this change, the previous Government requested that the Treasury
and the Ministry of Housing and Urban Development (HUD) undertake a
comprehensive review of the spending, funding, and financing (SFF Review) of Kāinga
Ora
c note that the SFF Review was governed by the Treasury and HUD with representation
from Kāinga Ora on the Governance Group. The Governance Group was responsible
for reviewing the work undertaken by the cross-agency Project Team to present these
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findings
d note that there are two outstanding actions that were agreed and required of Kāinga
Ora before the end of 2023 as a result of the SFF Review:
i. Kāinga Ora to provide Joint Ministers with the outcomes of the post
ii.
functions in late 2023.
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implementation review of the customer programme and tenancy support
Kāinga Ora develop and submit a plan by late 2023 to improve its information
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systems and data capability in order to better understand costs, support good
decision making, and provide assurance.
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Geraldine Treacher Glenn Phillips

Manager Housing and Urban Growth Head of Crown Entity Investment
The Treasury and Performance Monitoring
Ministry of Housing and Urban
Development
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Hon Nicola Willis Hon Chris Bishop

_____/_____/_______ _____/_____/_______
T2023/2157:Finding from the Kāinga Ora Spending, Funding, and Financing Review Page 3
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Joint Report: Findings from the Kāinga Ora Spending, Funding,

and Financing Review
Purpose of Report
1. This report provides a summary of findings from the Kāinga Ora Spending, Funding
and Financing Review (the SFF Review), including:
a. Costs associated with the provision of public housing:
i. Capitalised cost to build: redevelopment and developer-led projects.
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ii. Operating costs: Maintenance and Asset Management, and Tenancy
Services.
b. How these costs link to Budget 2023 assumptions and Funding.
c. Overheads Costs.
d.
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Opportunities to support better information systems and understanding of costs.
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Background
2. Kāinga Ora is a capital-intensive Crown Entity that owns most of the Crown’s state
housing assets and is the Crown’s urban development agency. It provides tenancy
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services to nearly 200,000 customers and owns and maintains around 70,000 homes.
3. The size of the organisation means Kāinga Ora has a significant impact on the Crown’s
fiscal indicators, and faces challenging financial sustainability issues, with an operating
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deficit forecast to grow from $520 million in 2022/23 to $1.1 billion in 2027/28, driven by
interest on the debt-financed capital investment programme.
4. In late November 2022, the previous Government agreed to provide Kāinga Ora with a
Crown lending facility to meet its financing needs. It also agreed that all future
borrowing needs would be centralised and met by New Zealand Debt Management,
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rather than private markets [DEV-22-MIN-0240 refers].
5. New Zealand Debt Management borrows centrally and then ‘on lends’ to Kāinga Ora.
This significantly lowers borrowing costs at a whole-of-Crown level . It provides
financing certainty and cheaper debt to Kāinga Ora and greater transparency to the
Crown.
6. The previous Government further requested that the Treasury and HUD undertake a
comprehensive review of the spending, funding, and financing of Kāinga Ora (SFF
Review). The SFF Review has:
a. assessed the costs associated with the provision of public housing,
b. compared the level of borrowing required to that set aside at Budget 2023, and
c. explored the assumptions in the model underpinning Budget 2023 decisions on

operating funding.
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28. There are choices for Ministers through the level of any future debt allocated for Kāinga
Ora in future Budgets about how quickly existing stock is retrofitted and renewed over
the coming years and how this is balanced with any growth within the portfolio.
29. Given the relationship between maintenance costs and the age of the portfolio
identified above, these would likely have broader implications for Kāinga Ora spending,
funding and financing (including total spending on asset maintenance). For example:
a. Retrofits and renewals could be undertaken at a slower pace and/or over a longer
timeframe, likely reducing upfront capital requirements and possibly increase
direct maintenance costs over time.
b. Retrofits and renewals could be undertaken at a faster pace and/or over a shorter
timeframe, likely increasing upfront capital requirements and possibly decreasing
direct maintenance costs over time.
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Capitalised Cost to Build
30. Kāinga Ora’s build programme is mostly made up of redevelopments on existing

properties and purchases of properties from private developers.
31. Total Capitalised Costs for public housing units include both:
a.
b.
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Build costs (e.g., foundation, framing, cladding and fit out), and
Non-build costs: including making land build ready; Consenting and Development
Constructions; Site works and utilities; and Management, Contingency and GST.
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32. The review highlighted that the total capitalised cost (and therefore associated
borrowing) were broadly split 50/50 between build and non-build costs, but due to data
limitations further analysis of the main drivers of the non-build costs was difficult to
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progress.
Redevelopments
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33. Redevelopment generally refers to the process of demolishing an existing public home
which has reached the end of its economic life and then rebuilding. Depending on
whether the land and community is suitable, redevelopment may result in replacing the
home with more than one new property. Kāinga Ora manages the redevelopment, and
in some situations, this involves works to make the land suitable. Kāinga Ora advise
that their landholdings can be lower quality or more complex to build on than market
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land.
34. The Project Team identified 1,381 individual units in FY2022/23 with near-complete
cost information at a total cost of $841 million (average cost of $609,000).
35. Further detail on average total capitalised cost by size and typology is provided in
Attachment 1.
Developer-led Projects
36. Developer-led Projects (new and existing) refer to the purchase of new or existing
homes from private developers or owners for use as a public housing. They have
become a fundamental part of the Kāinga Ora pipeline.
37. Developer-led projects include the cost of land and build (i.e., complete houses) and
developer’s/builder’s margins. Kāinga Ora often purchases these as ‘turnkey’
properties and developers manage the build.
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38. The Project Team identified 1,080 individual developer-led projects with near-complete
cost information were identified in FY2022/23 at a total cost of $837 million (average
cost of $775,000).
39. Further detail is provided in Annex 1 Table 2 of average total capitalised cost by size
and typology
40. To understand value-for-money and compare redevelopment costs with new build
acquisition costs on a like-for-like basis the review looked at an estimation of the
intrinsic value of the land component of acquire new costs.
41. Initial analysis against a reduced sample size (Annex One -Table 3 refers) shows that,
on average, Kāinga Ora redevelopments ($609,000) cost an average of $35,000 more
than developer-led acquisitions ($574,000) when the cost of land is excluded.
Comparison to Budget 2023 funding
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42. At a high-level, analysis shows that in FY2022/23:
a. Kāinga Ora redevelopments (which do not include the cost of acquiring land)
generally cost less than the high level assumptions used in Budget 2023.
b. Developer-led projects cost less than the high level assumptions used in Budget
43.
2023.
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As part of the review, modelling was undertaken by Kāinga Ora to update for the
updated costs analysis to compare to $9.7 billion approved for total borrowing.
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s 9(2)(ba)(ii)
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44. As a result of the SFF work, actual requirements to June 2026 are expected to be
s 9(2)(f)(iv) . The remainder of the appropriation incuded as part of HYEFU allows
Ministers to make decisions in due course about the level of growth and renewal
activity within the Kāinga Ora portfolio.
7 Capital component only. The operating component is in the operations line.

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How Kāinga Ora build costs compare to the market – quantity surveyor
analysis
45. To provide external validation of the build costs associated with new public homes (by
size and typology) Kāinga Ora engaged an independent quantity surveyor (QS) to:
a. Estimate the build cost of new public homes (by size and typology), and
b. Compare that cost to a modest market home (i.e., KiwiBuild).
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46. Analysis from the independent QS showed that build costs for public homes are
marginally higher than a modest market (KiwiBuild) home, largely reflecting the cost of
build features, components and specifications associated with Kāinga Ora
requirements and policy decisions intended to provide higher quality public housing
(Attachment 2 and 3 refers).
47. It is likely that higher level design choices (such as typology, bedroom configuration,
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gross floor area, land utilisation and common areas/parking) drive greater inherent cost
differences relative to the market than the building components picked up in the QS
analysis.
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48. Factors such as wall-to-floor ratios and the choices of typology to best utilise available
land area may be significant, and these differences will be more challenging to pick up
via QS analysis. More work is needed by Kāinga Ora to understand costs of providing
particular typologies, configurations and land utilisation in a standardised way across
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the public housing portfolio.
Overhead costs
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49. There are material overheads allocated across the different activities that Kāinga Ora
undertakes. These may be driven by the requirements of operating in the public sector
(similar to Departments), the need to be regionally located and ensuring community
engagement is robust.
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50. The review did not undertake any work on the reasonableness of the level of corporate
overheads incorporated into capitalised build costs due to time and information
limitations.
Better information systems and understanding of costs
51. While Kāinga Ora has provided a range of information where it is available to support
the SFF Review, the information available to support an understanding of actual cost is
not at an adequate level to support good decision making or provide assurances to
Ministers.
52. For example, the matching exercise that has been undertaken to understand actual
costs has taken substantial time and requires manual matching of information from
different sources and through a number of systems. Given the size of the Kāinga Ora
capital investment pipeline this information should be readily available in order to
understand actual costs, and how this compares to funding that has been allocated and
approved.
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53. Kāinga Ora is in the process of establishing a programme of work to enhance analytics
relating to the cost of building public housing. This is likely to take several years to be
fully implemented and operational.
DPMC recommended that Kāinga Ora take immediate actions to strengthen its
information systems.
54. Observations around the limitations of Kāinga Ora’s systems are consistent with those
identified by the Department of Prime Minister and Cabinet’s Implementation
Unit’s (IU’s) in its report – Stocktake of Kāinga Ora Public Housing Construction
Pipeline and Delivery (DPMC-2022/23-599) which recommended Kāinga Ora take
immediate actions to address risks and strengthen its information systems, and
develop a more systematic approach to areas where it could intervene or adapt its
practice to accelerate delivery.
55. Enhancements to the Kāinga Ora Pipeline are in the final stages of testing prior to final
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release in early 2024 and is expected to address the recommendations from the IU
report.
56. This new tool is envisaged to enhance insight from the Pipeline, helping to understand
aspects like project status timelines, progress against earlier estimates, and ensuring
all of the major home delivery activities are captured.
Outstanding Actions from the Review
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57. As part of advice to the previous Ministers there are two outstanding actions that were
agreed to:
i. Kāinga Ora to provide Joint Ministers with the outcomes of the post
implementation review of the customer programme and tenancy support
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functions in late 2023.
i. Kainga Ora develop and submit a plan by late 2023 to improve its information
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systems and data capability in order to better understand costs, support good
decision making, and provide assurance.
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s 9(2)(ba)(ii)
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s 9(2)(ba)(ii)
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In Confidence
Offices of the Minister of Finance and Minister of Housing
Cabinet 100-Day Plan Committee
Kāinga Ora – Homes and Communities Independent Review
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Proposal
1 This paper seeks agreement to the proposed scope and approach to a review into
Kāinga Ora operations as outlined in the 100 day plan (CAB-23-SUB-0468 refers).
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Background
2 Kāinga Ora is a large Crown entity with annual expenditure of $2.5 billion and total
assets of $45 billion which have a significant impact on the Government financial
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statements in terms of OBEGAL. Net debt is impacted by $13.2 billion over the
forecast period.
3 Kāinga Ora faces challenging financial sustainability issues, with an operating deficit
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forecast to grow from $520 million in 2022/23 to $1.1 billion in 2027/28, driven by
interest on the debt-financed capital investment programme.
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4 There has also been a significant increase in staffing levels (over 2,000 additional
staff since 2017/18) across various functions which requires an assessment of the
value for money proposition.
5 Given the scope and scale of Kāinga Ora activities in the housing and urban
development system (including its critical role to deliver much needed social
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housing), it is essential that we have a high degree of confidence that it is operating

efficiently and effectively. This includes operating in a constructive and mutually
beneficial way with the construction sector and communities.
6 Major capital investments include a build programme to increase the number of public
housing places through redevelopment of existing houses on Kāinga Ora land or
purchasing new build properties in the market, and improving the quality of the
existing homes through retrofit programmes.
7 The ageing portfolio and the current waitlists will require decisions on the level of
investment over the coming years which will directly impact both net debt and
OBEGAL as the capital costs are financed through the Government borrowing
programme and both interest and depreciation are material.
8 Kāinga Ora also has other functions in relation to urban development activities which
have been established over the past four years which have time limited funding to
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June 2024. This provides an opportunity to assess the level of resource in these areas
to align to Government priorities.
9 In the past 18 months two specific reviews have been undertaken into Kāinga Ora
activity which have highlighted issues with efficiency, value for money and
transparency over the cost of core functions:
9.1 A review undertaken by the Treasury and Ministry of Housing and Urban
Development gathered analysis which provides a clearer understanding of the
various factors included in the total borrowing requirements which can inform
the independent review focus areas to reduce costs
9.2 A Department of Prime Minister and Cabinet Implementation Unit review that
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recommended immediate actions to address risks and strengthen information
systems and to develop a more systematic approach to areas where it could
intervene or adapt its practice to accelerate delivery.
10 Across both reviews some common themes emerged including:
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10.1 Obtaining reliable, accurate and regular delivery data has been problematic
10.2 Public Housing delivery pipelines are not transparent and it has been difficult
for others in the system to gain assurance on speed of delivery and cost.
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10.3 Fiscal costs are not collected in a manner that enables value for money to be
easily assessed.
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11 In addition, Kāinga Ora has commissioned reviews into various areas of delivery
which have been highlighted in their Briefing to Incoming Ministers but have yet to
be validated which will provide the Independent Review insights into key investment
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areas to assess the ability to extract savings and reduce the impact on the Government
financial statements.
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Objective of the Review
12 We propose that the review is focused on improving Kāinga Ora performance and
value for money in delivering its core functions and to manage the impacts of Kāinga
Ora on debt and OBEGAL. Kāinga Ora’s core functions are to be a good tenancy
manager, efficiently build and maintain social housing to meet needs, and be a good
community citizen.
Approach to Review:
13 The proposed approach to deliver on the objectives is to base the scope off the
findings of work to date with the use of independent reviewers to advance this at pace.
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14 We are recommending that as Responsible Ministers (Finance and Housing) under the
Kāinga Ora – Homes and Communities Act 2019, we initiate a review under Section
132 of the Crown Entities Act 2004 to ensure the review is independent.
15 As part of any review initiated under the Crown Entities Act 2004, Responsible
Ministers are required to consult with the Crown Entity (Kāinga Ora) on the purpose
and nature of the review which will occur subject to Cabinet endorsement of the
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proposed scope and structure contained in this paper.
16 It is proposed that the consultation is completed within a week of Cabinet

endorsement with the aim to announce the terms of reference and lead reviewer prior
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to Christmas.
Scope of Review:
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17 In light of the above we are proposing that the scope of the review includes:
17.1 The financial viability of Kāinga Ora

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17.2 Asset procurement and management
17.3 Tenancy management
17.4 Whether the remit of Kāinga Ora is conducive to good performance on their
core functions
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17.5 Institutional arrangements that would incentivise better performance.
17.6 Fiscal risks to the Crown
18 In addition to the review, the Ministry of Housing and Urban Development is

undertaking work on the broader funding and financing settings for social housing to
provide advice on approaches that enable Community Housing Providers to access
funding and capital to grow the sector to provide warm and dry homes to Kiwis in
need.
Structure of Review:
19 The proposed structure for the review is that it is led by an independent reviewer with
two additional independent experts with experience in:
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19.1 Governance of major capital investment programmes
19.2 Understanding of public finances and funding
19.3 Finance and commercial expertise in relation to land and property

development
19.4 Practical experience regarding housing and urban development activities.
20 We propose to procure the lead reviewer immediately following the consultation with
Kāinga Ora, with the two additional independent experts procured as soon as possible.
21 Given the knowledge built up over the previous reviews, The Treasury and Ministry
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of Housing and Urban Development will provide additional resources to the review
team including secretarial support.
22 Once the final terms of reference is agreed by Responsible Ministers, additional

external expertise may be required in subject matter areas to provide support to the
review team. It is proposed that the lead reviewer seek agreement with Responsible
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Ministers for the use of these resources.
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Indicative Timelines of Review:
23 The intention is that Responsible Ministers will receive the first report back by March
2024 which will be confirmed in January 2024 following commissioning with the lead
reviewer.
Financial Implications
24 Review costs of up to $500,000 for 2023/24 can be met from existing baselines.
Depending on the final scope and timing of the broader review and link to savings
exercises additional funding for 2024/25 may need to be sought as part of Budget
2024.
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Legislative Implications
25 There are no legislative implications with this paper.
Regulatory Impact Statement
26 There are no regulatory impacts with this paper.
Climate Implications of Policy Assessment
27
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There are no CIPA-relevant implications from the proposals in this paper.
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Population Implications
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28 There are no direct population implications with this paper.
Human Rights
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29 There are no direct implications for the New Zealand Bill of Rights Act or the Human
Rights Act from the decisions in this paper.
Use of external Resources
30 The programme of work will use three independent reviewers and depending on the
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final scope of the review further external subject matter experts may be required
which will be agreed between Responsible Ministers and the lead reviewer.
Consultation
31 Under Section 132(3) of the Crown Entities Act Responsible Ministers are required to
consult on the purpose and nature of the review with Kāinga Ora which will occur
subject to Cabinet endorsement of the proposed scope and structure contained in this
paper and be concluded within a week of Cabinet decisions.
32 The Kāinga Ora Board are aware of the intention to undertake this review.
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Communications
33 Upon finalisation of the terms of reference and appointment of the lead reviewer
Responsible Ministers intend to make a public release communicating the scope and
structure of the review.
Proactive Release
34 We intend to proactively release the paper, subject to redactions as appropriate and

consistent with the Official Information Act 1982.
Recommendations
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The Minister for Finance and Minister of Housing recommends that the Committee:
1 Note a review of Kāinga Ora operations is included in the 100 day plan (CAB-23-
SUB-0468 refers).
2 Agree that the Minister of Finance and Minister of Housing (Responsible Ministers)
establish an independent review of Kāinga Ora operations under Section 132 of the
3
Crown Entities Act 2004.
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Agree Responsible Ministers consult and consider any submission on the purpose and
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nature of the review from Kāinga Ora in accordance with Section 132 (3) of the
Crown Entities Act 2004 in the week following this decision.
4 Agree the proposed scope for consultation with Kāinga Ora includes:
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4.1 The financial viability of Kāinga Ora
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4.2 Asset procurement and management
4.3 Tenancy management
4.4 Whether the remit of Kāinga Ora is conducive to good performance on their
core functions
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4.5 Institutional arrangements that would incentivise better performance.
4.6 Fiscal risks to the Crown
5 Agree the proposed structure for the review is three independent members appointed
by Responsible Ministers covering the key areas of:
▪ Governance of major capital investment programmes
▪ Understanding of public finances and funding;
▪ Finance and commercial expertise in relation to property and land

development;
▪ Practical experience regarding housing and urban development

activities
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6 Note that resources to support the external reviewers will be made available from the
Treasury and Ministry of Housing and Urban Development including secretariat
support.
7 Note that additional external expertise as required will be agreed between Responsible
Ministers upon recommendation from the lead reviewer.
8 Authorise Responsible Ministers to finalise the terms of reference following

consultation with Kāinga Ora as outlined in recommendation 3 above on the scope
and structure outlined in recommendations 4 and 5 above.
9 Agree to publicly release the finalised terms of reference and structure of the review
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post the appointment of the lead reviewer.
10 Note costs of the review up to $500,000 will be met from baseline funding from
Ministry of Housing and Urban Development for the 2023/24 financial year.
.
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Hon Nicola Willis Hon Chris Bishop
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Annex
Terms of Reference
Independent Review into Kāinga Ora - Homes and Communities
Background and purpose

Kāinga Ora is a large Crown entity with annual expenditure of $2.5 billion and total
assets of $45 billion which have a significant impact on the Government financial
statements in terms of OBEGAL and impact net debt by $13.2 billion over the
forecast period.
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The Minister of Finance and Minister of Housing have decided to carry out a review
under section 132 of the Crown Entities Act 2004 to provide assurance over the
approach and delivery over significant investment programmes by Kāinga Ora.
Ministers have decided to utilise external independent reviewers with the support of
the Treasury and Ministry of Housing and Urban Development to undertake this
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review.
Objective
The review should identify ways to improve Kāinga Ora performance and value for
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money, and to manage the impacts of Kāinga Ora on debt and OBEGAL.
Scope
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The scope of the review will at a minimum include:
Financial viability of Kāinga Ora

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• The efficacy of Kāinga Ora’s funding arrangements with the Crown

• Property management and overhead costs compared to its revenues
• Cost of renewal of the portfolio over the long term compared to its revenues
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• Appropriateness of its portfolio valuation methodology for financial

reporting and decision-making purposes.
Asset procurement and management
• Housing procurement strategies and delivery by place, typology and amenity

• Procurement costs (including overheads) and quality
• Value for money of its development programmes including land acquisition
and building
• The effectiveness of its relationships with its key suppliers, developers,
Councils, Community Housing providers and others
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• Engagement with communities and tenants to reflect their housing

preferences
• Asset management performance.
Tenancy management
• Consider the performance of Kāinga Ora as a tenancy manager, including

consistency with a goal of delivering better outcomes for tenants.
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Kāinga Ora remit
• Consider whether the remit of Kāinga Ora, including in legislation, regulation,

Government policies, letters of expectation, statements of performance
expectations and Ministerial directions, is conducive to good performance of
its core functions.
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Institutional arrangements to incentivise better performance.
• Consider institutional arrangements for Kainga Ora functions, including

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operating scope, organisational form and structure, governance, and subsidy
and funding arrangements with the Crown, that will encourage better
performance and reduce fiscal impacts on debt and OBEGAL.
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Timeline
The independent review will report back to the Minister of Finance and Minister of
Housing in March 2024.
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100-23-MIN-0011
Cabinet 100-Day Plan

Committee
Minute of Decision
This document contains information for the New Zealand Cabinet. It must be treated in confidence and
handled in accordance with any security classification, or other endorsement. The information can only be
released, including under the Official Information Act 1982, by persons with the appropriate authority.
Kāinga Ora - Homes and Communities Independent Review
Portfolios Finance / Housing
ED
On 13 December 2023, the Cabinet 100-Day Plan Committee:
1 noted that a review of Kāinga Ora operations is included in the 100-day plan
[CAB-23-SUB-0468];
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agreed that the Minister of Finance and Minister of Housing (Responsible Ministers)
establish an independent review of Kāinga Ora operations under Section 132 of the Crown
Entities Act 2004;
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3 agreed that Responsible Ministers consult and consider any submission on the purpose and
nature of the review from Kāinga Ora in accordance with Section 132 (3) of the Crown
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Entities Act 2004 in the week following this decision;
4 agreed that the proposed scope for consultation with Kāinga Ora includes:
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4.1 the financial viability of Kāinga Ora;
4.2 asset procurement and management;
4.3 tenancy management;

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4.4 whether the remit of Kāinga Ora is conducive to good performance on their core
functions;
4.5 institutional arrangements that would incentivise better performance;
4.6 fiscal risks to the Crown;
5 noted that Responsible Ministers would give further consideration as to whether further
refinements are needed to the scope, and will report-back to Cabinet if necessary;
6 agreed that the proposed structure for the review is three independent members appointed
by the Responsible Ministers covering the key areas of:
6.1 governance of major capital investment programmes;
6.2 understanding of public finances and funding;
6.3 finance and commercial expertise in relation to property and land development;
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100-23-MIN-0011
6.4 practical experience regarding housing and urban development activities;
7 noted that resources to support the external reviewers will be made available from the
Treasury and Ministry of Housing and Urban Development, including secretariat support;
8 noted that additional external expertise as required will be agreed between Responsible
Ministers upon recommendation from the lead reviewer;
9 authorised Responsible Ministers to finalise the terms of reference, following consultation

with Kāinga Ora as outlined in paragraph 3 above on the scope and structure outlined in
paragraphs 4 and 5 above;
10 agreed to publicly release the finalised terms of reference and structure of the review,
following the appointment of the lead reviewer;
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11 noted that the costs of the review up to $500,000 will be met from baseline funding from
Ministry of Housing and Urban Development for the 2023/24 financial year;
12 agreed that $0.500 million will be provided from non-departmental appropriations in Vote
Housing and Urban Development in 2023/24 to support the review;
13 agreed to establish the following new appropriation to give effect to the decision in
Vote
paragraph 2:
Appropriation Appropriation
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Title Type Scope
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Minister Administrator
Housing and Minister of Ministry of Independent Non- This appropriation

Urban Housing Housing and Review of departmental is limited to
Development Urban Kāinga Ora - Output conducting an
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Development Homes and Expense independent review
Communities of Kāinga Ora -
Homes and
Communities (and
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any of its
subsidiaries) and
any immediate
short term actions
following the
review.
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100-23-MIN-0011
14 approved the following fiscally neutral adjustment to give effect to the decision in
paragraph 2 above with no impact on the operating balance and net debt:
$m – increase/(decrease)
Vote Housing and Urban 2023/24 2024/25 2025/26 2026/27 2027/28
Development &
Minister of Housing Outyears
Non-departmental Output
Expense:
Independent Review of Kāinga 0.500 - - - -

Ora - Homes and Communities
Multi-Category Expenses and

Capital Expenditure:
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Transitional Housing MCA
Non-departmental Output
Expense: (0.500) - - - -
Provision of Transitional
Housing Places
15 agreed that the changes to appropriations for 2023/24 above be included in the 2023/24
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Supplementary Estimates and that, in the interim, the increase be met from Imprest Supply.
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Jenny Vickers
Committee Secretary
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Present: Officials present from:

Rt Hon Christopher Luxon (Chair) Office of the Prime Minister
Rt Hon Winston Peters Department of the Prime Minister and Cabinet
Hon Nicola Willis
Hon Chris Bishop
Hon Dr Shane Reti
Hon Shane Jones
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Hon Simeon Brown

Hon Erica Stanford
Hon Paul Goldsmith
Hon Judith Collins
Hon Mark Mitchell
Hon Nicole McKee
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100-23-SUB-0011
Cabinet 100-Day Plan

Committee
Summary
This document contains information for the New Zealand Cabinet. It must be treated in confidence and
handled in accordance with any security classification, or other endorsement. The information can only be
released, including under the Official Information Act 1982, by persons with the appropriate authority.
Kāinga Ora - Homes and Communities Independent Review
Portfolios Finance / Housing
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Purpose This paper seeks agreement to the scope and approach of a review of Kāinga
Ora – Homes and Communities (Kāinga Ora).
Previous None.
Decisions
Proposal
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In the past 18 months two reviews have been undertaken into Kāinga Ora
activity, which have highlighted issues with efficiency, value for money, and
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transparency over the cost of core functions. This includes problems with
obtaining reliable, accurate and regular delivery data, and fiscal costs being
collected in a manner that does not enable value for money to be easily
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assessed.
Agreement is sought to establish an independent review of Kāinga Ora under

Section 132 of the Crown Entities Act 2004. The review is proposed to be
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conducted by three independent members appointed by the Responsible

Ministers (a lead reviewer and two additional independent experts). Additional
expertise may be required in certain subject matter areas.
Authorisation is sought for Responsible Ministers to finalise the terms of

reference, following consultation with Kāinga Ora. The terms of reference and
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structure of the review is proposed to be publicly released, following the

appointment of the lead reviewer. The draft terms of reference is attached.
The review will consider matters such as the financial viability of the
organisation, asset procurement and management, tenancy management,
whether the remit of Kāinga Ora is conducive to good performance on their core
functions, institutional arrangements that would incentivise better performance,
and fiscal risks to the Crown.
Impact Analysis Not applicable.
Financial None from this paper. Review costs of up to $500,000 for 2023/24 can be met
Implications from existing baselines.
Legislative None from this paper.

Implications
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100-23-SUB-0011
Timing Matters The lead reviewer is proposed to be procured immediately following

consultation with Kāinga Ora, and the two other independent experts as soon as
possible after.
Responsible Ministers expect to receive the first report back by March 2024,
which will be confirmed in January 2024 following commissioning with the
lead reviewer.
Communications Once the terms of reference and appointment of the lead reviewer are finalised,
Responsible Ministers intend to make a public announcement about the scope
and structure of the review.
Consultation Paper prepared by MHUD and the Treasury.
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The Minister of Finance and Minister of Housing recommend that the Committee:
1 note that a review of Kāinga Ora operations is included in the 100-day plan
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[CAB-23-SUB-0468];
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agree that the Minister of Finance and Minister of Housing (Responsible Ministers) establish
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an independent review of Kāinga Ora operations under Section 132 of the Crown Entities
Act 2004;
3 agree that Responsible Ministers consult and consider any submission on the purpose and
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nature of the review from Kāinga Ora in accordance with Section 132 (3) of the Crown
Entities Act 2004 in the week following this decision;
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4 agree that the proposed scope for consultation with Kāinga Ora includes:
4.1 the financial viability of Kāinga Ora;
4.2 asset procurement and management;
4.3 tenancy management;

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4.4 whether the remit of Kāinga Ora is conducive to good performance on their core
functions;
4.5 institutional arrangements that would incentivise better performance;
4.6 fiscal risks to the Crown;
5 agree that the proposed structure for the review is three independent members appointed by
the Responsible Ministers covering the key areas of:
5.1 governance of major capital investment programmes;
5.2 understanding of public finances and funding;
5.3 finance and commercial expertise in relation to property and land development;
5.4 practical experience regarding housing and urban development activities;

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IN CONFIDENCE
100-23-SUB-0011
6 note that resources to support the external reviewers will be made available from the
Treasury and Ministry of Housing and Urban Development, including secretariat support;
7 note that additional external expertise as required will be agreed between Responsible
Ministers upon recommendation from the lead reviewer;
8 authorise Responsible Ministers to finalise the terms of reference, following consultation

with Kāinga Ora as outlined in paragraph 3 above on the scope and structure outlined in
paragraphs 4 and 5 above;
9 agree to publicly release the finalised terms of reference and structure of the review,
following the appointment of the lead reviewer;
10 note that the costs of the review up to $500,000 will be met from baseline funding from
Ministry of Housing and Urban Development for the 2023/24 financial year.
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Jenny Vickers
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Committee Secretary
Hard-copy distribution:
Cabinet 100-Day Plan Committee
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Treasury Report: Kāinga Ora Independent Review
Date: 5 December 2023 Report No: T2023/1989

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Action sought
To: Action sought Deadline
Minister of Finance Indicate your preferred: 8 December 2023
(Hon Nicola Willis)
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• Level of involvement in in the establishment and
governance of the independent review.
• Structure for an independent review of Kāinga Ora
and additional supporting actions.
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Direct the Treasury to work with HUD to establish the
independent review.
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Max Christie Analyst, Housing and s 9(2)(a) N/A

Urban Growth (wk)
Emily Pearse Principal Advisor, s 9(2)(a) N/A 

Financing Infrastructure (wk)
and Urban
Development
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Geraldine Treacher Manager, Housing and s 9(2)(a) s 9(2)(a)

Urban Growth (wk) (mob)

Refer to the Minister of Housing’s office.
Note any
feedback on
the quality of
the report
Enclosure: No
Treasury:4893493v6 BUDGET-SENSITIVE
BUDGET-SENSITIVE
Executive Summary
This report provides you with context on Kāinga Ora – Homes and Communities (Kāinga
Ora) and advice on an independent review. As a Responsible Minister for Kāinga Ora
alongside the Minister of Housing, you have a role to oversee and manage the Crown’s
interests in the entity, especially considering its substantial fiscal impacts.
Kāinga Ora is a capital-intensive Crown Entity that owns most of the Crown’s state housing
assets and is the Crown’s urban development agency. It provides tenancy services to nearly
200,000 customers and owns and maintains around 70,000 homes.
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The size of the organisation means Kāinga Ora has a significant impact on the Crown’s fiscal
indicators, with contributions of $4.0 billion towards OBEGAL deficits and $13.2 billion
increase to net debt over the forecast period. Kāinga Ora faces challenging financial
sustainability issues, with an operating deficit forecast to grow from $520 million in 2022/23
to $1.1 billion in 2027/28, driven by interest on the debt-financed capital investment
programme.
Treasury and the monitoring agency, the Ministry of Housing and Urban Development
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(HUD), have been reviewing Kāinga Ora over 2023, with the following key findings:
There has been significant growth in the operating costs of providing public housing,
including growth in personnel of 2,000 FTE (145%) since 2017/18, and little
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assessment of the impact or value of the increased investment in tenancy services.
2. The actual costs for redevelopments of public homes were less than budgeted for in
2022/23, and acquisitions of homes from private developers (when land value is
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excluded) cost less than redevelopments.
3. According to Kāinga Ora’s current forecasts, the amount of debt required to deliver
existing commitments is $1.136 billion lower than what was anticipated during the
Budget 2023 process. This difference is already incorporated into the Crown’s fiscal
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forecasts.
4. Kāinga Ora’s debt projections, which inform the Crown’s fiscal forecasts, vary
significantly between fiscal updates and contain assumptions like generating $6 billion
revenue from the sale of public homes. The model developed by Kāinga Ora to inform
Budget 2023 decisions on operating funding for new units used assumptions that have
since been substantively revised. These forecasts are heavily dependent on the
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Government’s decisions on the pace and scale of the public housing growth and
renewals programme, and further investigation is warranted.
5. Kāinga Ora’s information management systems for public housing (that could inform,
for example, how or why the delivery pipeline faces delays) are not fit to provide the
Board with sufficient information to govern effectively. This also limited HUD and the
Treasury’s ability to progress the SFF Review.
We understand that the Minister of Housing has requested that HUD develop a Cabinet
paper for consideration by Cabinet on 18 December 2023 which is expected to seek
agreement around the structure and scope of the review. The Treasury is working with HUD
on the development of the Cabinet paper, and we are seeking your direction around the level
of involvement that you wish to have.
We recommend that the Independent Review be led by a senior independent person
supported by a cross-agency group and expert consultants as needed.
T2023/1989:Kāinga Ora Independent Review

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Subject to your steer on the scope and form of an independent review, the Treasury will
engage with HUD to develop a draft Terms of Reference to support a consultation process
with the Kāinga Ora Board (which is requirement under the Crown Entities Act).
We also recommend that joint Ministers refresh the Kāinga Ora Board, establish your
relationship with the Board, and set out a new Letter of Expectations that, among other
things, asks Kāinga Ora to provide concrete savings options to be considered in Budget
2024.
Recommended Action
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a note the key findings of the 2023 joint Spending, Funding and Financing (SFF) Review
of Kāinga Ora, which the Treasury worked on jointly with HUD
b note Kāinga Ora’s information systems for public housing are insufficient to provide the
Kāinga Ora Board with the consistent information needed to govern effectively, and we
expect Kāinga Ora to deliver you with a plan for improving its capabilities by the end of
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the year
c note that the Minister of Housing has requested that HUD develop a Cabinet paper for
consideration by Cabinet on 18 December 2023 which is expected to seek agreement
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around the structure, scope, and the level of involvement from Ministers, Cabinet and
Kāinga Ora. The Treasury is working with HUD on the development of the Cabinet
paper
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d indicate your preferred level of involvement in the establishment and governance of
the independent review (circle one):
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i. Directly govern jointly with the Minister of Housing as the review progresses
[Treasury recommended]
Yes / no
ii. Delegate governance to the Minister of Housing and stay updated on progress.
Yes / no
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e indicate your preferred governance structure for the independent review (circle one):
i. A targeted review led by the Kāinga Ora Board

Yes / no
ii. An independent review led by an external consultancy accountable to Ministers.

Yes / no
iii. Rolling targeted reviews with an independent senior lead accountable to

Ministers [Treasury recommended]
Yes / no
f. direct the Treasury to work with HUD to establish the independent review in line with
the terms described in this report
Directed / not directed.

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g. note that the Treasury supports refreshing the Board, refreshing Kāinga Ora’s Letter of
Expectation and establishing your relationship with the Board. HUD, as the primary
monitor, will provide further advice on these issues
h. indicate whether you would like to discuss these issues with officials
Yes / no.
i. note that the findings of the SFF Review have been discussed with Kāinga Ora, but the
actions moving forward remain sensitive
j. refer and discuss with the Minister of Housing

Referred / not referred
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Discussed / not discussed
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Geraldine Treacher
Manager, Housing and Urban Growth
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Hon Nicola Willis
Minister of Finance
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_____/_____/_______
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Purpose of Report
1. This report provides you with:
a. context on Kāinga Ora, including its financial and delivery performance and the
key findings from Treasury’s recent work reviewing Kāinga Ora’s spending,
funding and financing (SFF Review), and
b. our recommended terms and preferred governance structure for the Independent
Review of Kāinga Ora (Independent Review).
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Kāinga Ora is a Crown Agent with roles in public housing and urban
development
2. In 2019, Housing New Zealand Corporation and KiwiBuild were merged to form Kāinga
Ora – Homes and Communities (Kāinga Ora), a capital-intensive statutory Crown
Agent established under the Kāinga Ora – Homes and Communities Act 2019 (KOA)
with new urban development functions. You and the Minister of Housing are
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interests in the Kāinga Ora.
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responsible for administration of the KOA and for the management of the Crown’s
The obligations in the KOA are described at a relatively high level, meaning that Kāinga
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Ora has significant autonomy to determine in practice how it meets its statutory
obligations.
4. Broadly speaking, Kāinga Ora has two key roles. It:
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a. owns and maintains around 70,000 public houses and provides home ownership
products and other services, including tenancy services to nearly 200,000
customers and their families, and
b. delivers urban developments that connect homes with jobs, transport, open
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spaces and the facilities for communities. This includes accelerating the
availability of build-ready land and supporting the build of a mix of housing of
different types, sizes and tenures.
5. The Ministry of Housing and Urban Development (HUD) is the primary monitoring
agency for Kāinga Ora. HUD is responsible for the day-to-day administration of funding
to Kāinga Ora and monitoring Kāinga Ora financial and delivery performance.
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6. The Treasury is a secondary monitor with a particular interest in Kāinga Ora’s balance
sheet management and fiscal impacts. The Treasury also provides the Minister of
Finance with advice on Kāinga Ora’s investment activities given their significant fiscal
implications.
7. Informed by its annual reports over the last few years and our experience working with
Kāinga Ora, it is the Treasury’s view that Kāinga Ora is struggling to meet its housing
delivery targets and that it is not sufficiently able to demonstrate the value for money of
its activities.
8. We also consider that Kāinga Ora’s financial performance is weak and worsening, and
that the Kāinga Ora Board is not governing these concerns effectively.

BUDGET-SENSITIVE 5
BUDGET-SENSITIVE
OBEGAL Impacts
9. The costs of running Kāinga Ora and funding its activities across both roles is
significant and escalating. Kāinga Ora had an operating deficit of $520 million in
2022/23, compared to a $76 million surplus in 2017/18. The deficit is forecast to grow
to $1.1 billion in 2027/28. This will have an aggregate negative impact of $4.0
billion on OBEGAL over the forecast period.
10. Interest on the significant recent and forecast increases to debt is the main driver of the
forecast impact on OBEGAL, while organisational growth (e.g., FTE growth) was the
main driver of the cost growth between 2017/18 and 2022/23.
11. Most of Kāinga Ora’s revenue comes from the Crown in the form of the Income-
Related Rent Subsidy, which meets the difference between market rent and tenant rent
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(which is capped at 25% of a tenant’s income). In addition, there is some supplemental
income, including in appropriations for specific urban development activities.
s 9(2)(f)(iv)
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Net Debt Impacts
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12. At June 2018, Housing New Zealand held $2.7 billion in debt. Since then, significant
capital investment has been debt financed, bringing Kāinga Ora’s total debt to
$12.3 billion as at 30 June 2023.
13. Kāinga Ora’s debt is forecast to increase to $25.5 billion by June 2028, with an impact
on net debt of $13.2 billion (i.e., the net increase to borrowing) over the forecast
period.
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14. Kāinga Ora’s borrowing is driven by investment in the public housing portfolio, which
Kāinga Ora’s forecast assumes will be offset by $6 billion in revenue from the sale of
10,200 public homes over the forecast period. These sales partially offset the new
public houses built, such that Kāinga Ora forecast no change in the size of public
housing portfolio between 2025/26 and 2027/28 (additions are equal to demolitions and
sales). The Treasury does not consider this to be a reasonable assumption and have
identified other assumptions that undermine the efficacy of the forecast modelling; the
viability of their forecasting warrants further investigation.
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Various adjustments are made by Kāinga Ora and by the Treasury for reporting purposes.

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36. Kāinga Ora is preparing a business case to inform Budget 2024 decisions on the level
of funding for their urban development activities, some of which are legislatively
required. We can advise you on this further during the Budget 2024 process and will
continue to push Kāinga Ora to develop scalable options for Ministers to make
informed decisions.
There are several issues that warrant further analysis or action
37. From the work undertaken as part of the SFF Review, the key issues identified include:
a. Kāinga Ora’s debt forecasting, which feed into the Crown’s fiscal forecasts, are
based on significant assumptions the Treasury consider should be revised, and
which should be more transparent to HUD, Treasury, the Board, and Ministers
moving forward.
b. Kāinga Ora’s information systems are insufficient to provide the Kāinga Ora
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Board with the consistent information they need to govern effectively, and we
expect Kāinga Ora to deliver you with a plan for improving their capabilities by the
end of the year.
c. The Kāinga Ora Board has not been taking appropriate action to manage the
concerning financial sustainability issues faced.
d. It is unclear that value-for-money is being achieved from Kāinga Ora’s operating
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activities.
Establishing an independent review of Kāinga Ora

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38. Ministers have few levers for influencing Kāinga Ora’s decision making and
performance (refer Attachment 4). The Responsible Minister may review a Crown
entity’s operations and performance under s132 of the Crown Entities Act (2004),
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although this is seldom used explicitly. Before undertaking a review under that section,
the Responsible Minister must consult with the entity on the purpose and nature of the
review, and consider any submissions made by the entity on the proposed review.
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39. You and the Minister of Housing are the current Responsible Ministers for Kāinga Ora.
We understand that you intend to establish an independent review of Kāinga Ora.
40. An independent review can springboard off the findings of the 2023 joint review, feed
into savings options that should be provided by Kāinga Ora for Budget 2024, and
provide options for improving their ongoing operations to achieve the objectives
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outlined below.
41. We note that the Minister of Housing has requested that HUD develop a Cabinet paper
for consideration on 18 December 2023. We are working with HUD on the development
of a Cabinet paper, and seek your view around objectives, structure, scope, and the
level of involvement that you wish to have.
Objectives
42. Given Kāinga Ora’s significant impact on the Crown’s fiscal indicators and challenging
financial sustainability issues, we consider that the key objectives of an Independent
Review should be to improve Kāinga Ora’s financial sustainability and ensure they are
providing value for money by:
a. Identifying opportunities to improve cost effectiveness and value for money
across Kāinga Ora’s programmes, beginning with those areas that have the
highest levels of expenditure.

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Resetting the relationship with the Board
59. A refresh of the Board is also an opportunity to reset the relationship between the
Government and the agency through Board induction processes provided by your
monitoring agencies, and through regular face to face meetings with the Chair. Note
that a key aspect of your role as responsible Minister is to hold the Board accountable
for the performance of the entity. Meeting regularly with the Chief Executive has
potential to dilute that accountability and may reduce the Board’s ability to govern
effectively.
Refreshing the Letter of Expectations
60. In addition, a new Letter of Expectations provides an opportunity for Ministers to set
clear expectations regarding Kāinga Ora’s engagement in the review process, and to
position yourself as an active purchaser of housing outcomes, including regional
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targets.
61. Given current fiscal constraints this is also an opportunity to signal the expectations
that Kāinga Ora provide concrete savings options to feed into Budget 2024 and that
cash management policies will be tightened along with the debt drawdown framework.
62. As such, it is also recommended that Kāinga Ora’s Letter of Expectation is updated
prior to the Review commencing.
Additional levers
63.
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Other levers that you may wish to consider drawing on are outlined in Attachment 4.
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These include, with your powers under the Crown Entities Act, directly requesting
information, issuing direction to give effect to policy, and requesting a review.
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Next Steps
64. We expect the Minister of Housing will seek advice on the independent review and the
additional actions from HUD.
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65. Subject to ministerial preferences, the Treasury will engage with HUD to develop a
draft Terms of Reference for the independent review that can be used as a basis for
consultation with the Kāinga Ora Board.
66. We will also commence engagement with HUD and DPMC regarding agency roles and
cross-agency governance. As HUD is the primary monitor for Kāinga Ora, HUD will be
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the Agency lead for the review (unless Ministers direct otherwise).
67. We will work with HUD to report back to you and the Minister of Housing to confirm the
draft Terms of Reference, agency roles and governance prior to engaging with the
Kāinga Ora Board.

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11. Market rents are determined by prevailing market conditions for similar homes in the
same region. For example, median weekly rental prices for a 3-bed house are $745 in
Auckland Central and $560 in Palmerston North. These are then adjusted according to
several variables on house quality and tenancy services provided.
12. When Kāinga Ora build new homes that are not offset by demolitions or sales (i.e., they
grow the public housing portfolio), they can also seek the Operating Supplement (OS)
from the Crown to a cap of 100% of market rent. The OS is also appropriated for in the
Purchase of Public Housing Provision appropriation. It is intended to help meet the
difference between the market rent collected and the operating costs of a new home so
that Kāinga Ora have financial incentive to grow the portfolio (following Minister’s
decisions to do so). Operating Subsidy is relatively new, so it does not make up much
of Kāinga Ora’s current funding.
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13. There are two key implications of this funding model for operating public housing:
a There is more financial incentive to invest in housing in high-rent areas than low-
rent areas, which we hypothesise has caused Kāinga Ora to build fewer new
homes in the regions.
b The cost to operate many new homes (especially renewed homes where no OS
can be claimed) will not be sufficiently met by market rent, driving an operating
deficit.
Revenue for urban development activities
14.
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The Crown also pays Kāinga Ora to undertake various urban development activities.
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15. Some of the funding is appropriated for in the Homes and Communities appropriation,
with only $21 million per year appropriated for from 2024/25 onwards (compared to $82
million in 2023/24).
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16. It is mostly time-limited; the previous Government decided to only provide one year of
funding through Budget 2023 with the expectation that Kāinga Ora produce a business
case to inform decisions at Budget 2024. Kāinga Ora is preparing this business case.
We have set the expectation that it will provide detailed options for the level of funding
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for the urban development activities moving forward, (with clarity on which are
legislatively required), which we not available at Budget 2023.
17. There are various other activities, like Large Scale Projects, that are funded through
other Crown appropriations. Kāinga Ora also collect minimal revenue from 3rd party
sources, such as by leasing houses to Community Housing Providers.
18. Depending on Kāinga Ora’s financial management, there may be cross-subsidisation
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(e.g., revenue for public housing activities used for urban development activities, or
vice versa), but we have not confirmed this.
s 9(2)(f)(iv)

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Attachment 4: Levers for Influence

Responsible Minister(s) have relatively few levers to influence Kāinga Ora’s performance.
Ministers:
• Have influence through regular meetings with the Chair, and through the feedback
provided to the Board on performance reporting.
• Have the opportunity to influence the organisation’s direction and performance through
their input into the Statement of Intent, Statement of Performance Expectations, and in
the (usually annual) Letter of Expectations (LoE) to the Board.
• Have influence through funding settings and through feedback on investment proposals
that come to them for consultation.
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• Have the power to request information relating to the operations and performance of
the entity (s133). This power is rarely, if ever used. Ministers and their monitors usually
prefer to work with agencies to improve information provision over time and use the
LoE to signal where further improvement is needed. Failure to provide information may
be due to inadequacies in recording or data systems. A statutory request is of little help
in that circumstance.
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• May direct an entity to give effect to government policy (s103) or support a whole of
government approach (s107), but may not direct an entity in relation to any statutorily
independent function, or direct the performance or non-performance of a particular
“act” (s113). This power is rarely, if ever used. This is in part because it is sometimes
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seen as a nuclear option, and in part because of the limitations on what can be
directed. There are, however, some matters that a Board may feel run contrary to their
statutory duties and where use of this power may be appropriate.
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• My review the entity’s operations and performance (Crown Entities Act (2004) s132).
This power is rarely, if ever used. Ministers and their monitors usually prefer a more
collaborative approach to reviews because this improves the likelihood of review
findings being implemented. There are, however, some matters that a Board may feel
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run contrary to their statutory duties and where use of this power may be appropriate.
• Have power to appoint and remove members of the Board.
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Document classification: Client use
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GST 109 891 150

NZBN 942 903 052 9700
www.taylorfry.co.nz
Table of contents
1 Executive summary .............................................................................................................. 2
1.1 Population comparison ...........................................................................................................2
1.2 Outcomes analysis ...................................................................................................................3
2 Scope and research approach ................................................................................................ 4
2.1 Outline of approach ................................................................................................................ 4
Part A
Population comparison ................................................................................................................ 6
3 Kāinga Ora, Community Housing Provider and Accommodation Supplement populations ......7
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3.1 Population totals ..................................................................................................................... 7
3.2 Demographic variables ............................................................................................................8
3.3 Government service use ........................................................................................................ 10
Part B
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Outcomes analysis ...................................................................................................................... 22
4 Exploratory modelling ......................................................................................................... 23
4.1 Outline of modelling ..............................................................................................................24
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4.2 Limitations ............................................................................................................................ 25
4.3 Taxable income ..................................................................................................................... 25
4.4 Convictions............................................................................................................................ 27
4.5 Mental health and addiction service use ...............................................................................29
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4.6 Further descriptive statistics ................................................................................................. 31
Appendix A – Research approach ................................................................................................ 32
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A.1 Population definitions ........................................................................................................... 32

A.2 Exploratory modelling........................................................................................................... 32
IDI disclaimer
These results are not official statistics. They have been created for research purposes from the Integrated
Data Infrastructure (IDI) which is carefully managed by Stats NZ. For more information about the IDI
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please visit https://www.stats.govt.nz/integrated-data/.

The results are based in part on tax data supplied by Inland Revenue to Stats NZ under the Tax
Administration Act 1994 for statistical purposes. Any discussion of data limitations or weaknesses is in the
context of using the IDI for statistical purposes, and is not related to the data’s ability to support Inland
Revenue’s core operational requirements.
Confidentiality
To protect confidentiality, data is rounded to a multiple of 3. Results with small totals are suppressed. As a
result, data in tables and figures may not add up exactly to population totals and table totals may differ
slightly throughout the report.
Independent review of Kāinga Ora

Population comparison and outcomes research 1
1 Executive summary
The Government has commissioned an independent review of Kāinga Ora to look into the Crown agency’s
financial situation, procurement and asset management.
To support the review, Taylor Fry have been commissioned by the Ministry of Housing and Urban
Development to perform research to:
▪ Compare, with respect to a range of demographic and government service use factors, the Kāinga Ora
population (‘KO’), the Community Housing Provider population (‘CHP’) and the Accommodation
Supplement population (‘AS’).
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▪ Understand how outcomes differ for these populations controlling for, as best as possible with the
available data, differences in the underlying populations.
Figure 1 illustrates three time periods which have been used to define and construct the research:
Figure 1 – Data and outcomes timeline
Period C – Population characteristics Period B – Outcomes observation period
2017 2018 2019
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Period A – Population definition
▪ Period A – The year to 31 December 2019 – This has been used to define the KO, CHP and
AS populations.
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▪ Period B – The three years to 31 December 2022 – This defines the observation period over which we
observe outcomes for people in the three populations.
▪ Period C – The three years to 31 December 2019 – This defines the time window over which we define
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characteristics that describe people in the three populations.
1.1 Population comparison
Key points
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▪ The KO and CHP populations are materially similar. Across almost all factors, the populations are,
on average, very similar.
▪ A notable exception is region. The CHP population are more heavily weighted towards Auckland than
the KO population, reflecting the location spread of CHP and KO public housing stock.
▪ The AS population is notably different to the CHP and KO populations in several ways:
– Demographics – The CHP and KO populations are more weighted towards Auckland than the AS
population and are much more weighted towards Pacific People. These two points are somewhat
related – A relatively high proportion of Pacific People reside in Auckland.
– Government service use – The AS population appears to have more complex needs than the
CHP and KO populations. On average, the AS population:
– Spends a higher proportion of time on the JobSeeker Support benefit
– Has lower average income
– Has a lower proportion who have attained NCEA level 3

– Has a higher proportion who interacted with child protection services as a child
– Has a higher proportion accessing mental health and additions services.
The exception to this observation is that the KO population has a higher proportion of people with a
criminal conviction in the past three years.
1.2 Outcomes analysis

In this section, we describe the results of exploratory modelling, which attempts to identify which factors
explain variation in outcomes for the AS and KO populations and, specifically, the extent to which housing
status (AS or KO) explains variation.
Three separate models were developed initially, to predict taxable income, conviction rates, and mental
health service use over a three-year observation period to 31 December 2022. Note that the modelling
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cannot be used to estimate causal effects; i.e. even if a factor explains a high proportion of variation in an
outcome, it does not necessarily mean that one causes the other.
Key points
▪ The model used in this research suggests that the variation in taxable income, conviction rates,
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and mental health service usage can be primarily explained by the equivalent variables of the
preceding three years (to 31 December 2019). For example, the taxable income earned in the three-
year period to 31 December 2019 can explain almost all of the income variation in the three-year
period to 31 December 2022.
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▪ The model used in this research suggests that housing status (AS or KO) explains very little
variation in taxable income, conviction rates, and mental health service use. Or expressed in a
different way, whether a person receives AS for a full year or is in a KO public house for a full year
appears to explain very little variation in income, conviction rates and mental health service use over
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the subsequent three-year period.
▪ More importantly, the research findings suggest that there are differences between the KO and AS
populations, and they experience materially different outcomes. These differences can be explained by
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the underlying differences in the populations and their prior outcomes.

Due to the limited scope imposed by a short timeframe, this research did not disaggregate sub-cohorts
with different characteristics in the KO and AS populations and explored a limited set of outcome
variables. Therefore, variation in outcomes experienced by different sub-cohorts of the KO and AS
populations are not presented in this research.
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Note that this research does not rule out the possibility that there is a link between housing status
and these outcomes, nor does it rule out the possibility that there is a link between housing status and
other outcomes not considered in this research, e.g., specific health conditions, or housing quality.
Nevertheless, this research has identified interesting indications that warrant further investigation that
will lead to insights on better aligning housing support and people. We recommend that the further work
be carried out.
Note 2019 research by the Social Wellbeing Agency exploring the impact of public housing on people’s
wellbeing1. The research identified two key findings:
▪ Housing conditions generally improve for people placed in public housing
▪ Life satisfaction improves for people placed in public housing.
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Social Wellbeing Agency (2019) Measuring the impact of social housing placement on wellbeing

2 Scope and research approach
The Government has commissioned an independent review of Kāinga Ora to look into the Crown agency’s
financial situation, procurement and asset management.
The review is being supported by the Ministry of Housing and Urban Development (the ‘Ministry’) and
The Treasury.
To support the review, Taylor Fry have been commissioned by the Ministry to perform research to:
▪ Compare, with respect to a range of factors, the:
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– The Kāinga Ora population – The public housing population in Kāinga Ora (‘KO’) properties. We
define somebody who resides in a KO property as being in the KO state.
– The Community Housing Provider population – The public housing population in Community
Housing Provider (‘CHP’) properties. We define somebody who resides in a CHP property as being
in the CHP state.
– The Accommodation Supplement population – The population receiving Accommodation
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Supplement (‘AS’). Note that about two-thirds of AS recipients are renters2. We define somebody
who is receiving AS as being in the AS state.
▪ Understand how outcomes differ for these populations controlling for, as best as possible with the
available data, differences in the underlying populations.
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The research is also intended to support broader policy considerations of who public housing is best targeted
to and its role within the continuum of housing supports (including monetary supports such as AS). While
this document is for public release, its original purpose was to provide technical information to a
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specialised audience.
2.1 Outline of approach

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The research incorporates two phases covered by Parts A and B in this report:
▪ Population comparison – Descriptive statistics comparing the three populations with respect to a
range of factors. The populations incorporate people aged 16 and above.
▪ Outcomes analysis:
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– Descriptive statistics to compare outcomes for the three populations

– Exploratory modelling techniques to compare outcomes for the three populations after controlling
for differences in the underlying populations.
We used Stats NZ’s Integrated Data Infrastructure (‘IDI’) to perform the research.
Figure 1 illustrates three time periods which have been used to define and construct the research:
▪ Period A – The year to 31 December 2019 – This has been used to define the KO, CHP and AS
populations. Specifically, people who are in the KO state for the whole of period A are defined to be in
the KO population for this research. And equivalently for the CHP and AS populations.
▪ Period B – The three years to 31 December 2022 – This defines the observation period over which we
observe outcomes for people in the three populations.
2
Hyslop D and Rea D (2018) Do housing allowances increase rents? Evidence from a discrete policy change

▪ Period C – The three years to 31 December 2019 – This defines the time window over which we define
characteristics that describe people in the three populations.
The periods have been chosen to balance the need for recency of analysis with the need to have a long
enough observation period for outcomes to materialise over.
Figure 1 – Data and outcomes timeline

Period C – Population characteristics Period B – Outcomes observation period
2017 2018 2019 2020 2021 2022
Period A – Population definition
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The scope of our commissioned work does not include a full technical write-up of the research
approach. However, we provide more detail in Section 4.6. Also, the research code in the IDI is well
organised and commented.
Some limitations of the research are also described in Section 4.2, noting that the research approach has
had been designed to ensure it was achievable in a timeframe for it to inform the Kāinga Ora review.
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3 Kāinga Ora, Community Housing Provider and
Accommodation Supplement populations
In this section, we compare the KO, CHP and AS populations in relation to a range of demographic and
government service use factors.
Key points
▪ The KO and CHP populations are materially similar. Across almost all factors, the populations are, on
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average, very similar.
▪ A notable exception is region. The CHP population are more heavily weighted towards Auckland than
the KO population, reflecting the location spread of CHP and KO public housing stock.
▪ The AS population is notably different to the CHP and KO populations in several ways:
– Demographics – The CHP and KO populations are more weighted towards Auckland than the AS
population and are much more weighted towards Pacific People. These two points are somewhat
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related – a relatively high proportion of Pacific People reside in Auckland.
Government service use – The AS population appears to have more complex needs than the CHP
and KO populations. On average, the AS population:
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– Spends a higher proportion of time on the JobSeeker Support benefit
– Has lower average income
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– Has a lower proportion who have attained NCEA level 3
– Has a higher proportion who interacted with child protection services as a child
– Has a higher proportion accessing mental health and additions services.
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The exception to this observation is that the KO population has a higher proportion of people with
a criminal conviction in the past three years.
In this section, we present results of descriptive analysis to compare the KO, CHP and AS populations. We
show analysis by:
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▪ Demographic variables
▪ Variables based on Government service use data.
The analysis is purely descriptive (no modelling or standardisation is involved). The three populations are
defined as having been in the relevant state for the whole of the year to 31 December 2019.
Note that while descriptive analysis can be informative, it also has the potential to be misinterpreted.
Descriptive analysis charts that appear to show correlations between variables may actually be highlighting
correlations with other variables. For example, Pacific People are over-represented in the KO and CHP
populations. However, this is at least partly because a high proportion of Pacific People live in Auckland,
where housing affordability issues are acute, and a relatively high proportion of public housing is situated.
3.1 Population totals

Table 1 shows the size of the three populations (defined as being in that state for the whole of the year to
31 December 2019).

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Figure 3 – Gender
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▪ The gender profiles of the three populations are broadly comparable, with about 60% females.
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▪ The reason this is materially higher than 50% is because all three populations, and the welfare system
more generally, contain a large number of sole parents. The vast majority of sole parents are female.
Figure 4 – Prioritised ethnicity3

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▪ The ethnicity profile of the CHP and KO populations are materially different to the AS population. A
significantly higher proportion of the CHP and KO populations are Pacific People, and a significantly
lower proportion are NZ European.
▪ This partly reflects the regional spread of different ethnicities and, in particular, the high
concentration of Pacific People residing in Auckland, where housing affordability issues are acute, and
a high proportion of public housing is situated.
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People are allocated to a single ethnic group in an order of priority, even if they identify with more than one
ethnicity. Our priority ordering is Māori, Pacific, Asian, MELA, Other, NZ European.

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▪ In general, the average percentage for the three populations is materially similar for Sole Parent
Support (Figure 8 and Figure 9) and Supported Living Payment (Figure 10 to Figure 11), across all age
bands and genders
▪ For Jobseeker (Figure 6 to Figure 7), the pattern is different, with a higher percentage for the AS
population, particularly for younger ages and for males
▪ The proportions that received each benefit at any point in the preceding three years is fairly consistent
across the three populations:
– JobSeeker Support – AS 41.5%, CHP 41.5%, KO 40.2%
– Sole Parent Support – AS 24.2%, CHP 17.4%, KO 20.6%
– Supported Living Payment – AS 26.4%, CHP 24.4%, KO 22.3%.
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Figure 6 – Average % of preceding 3 years on JobSeeker Support benefit given received Jobseeker benefit
in that period and aged under 65
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Figure 7 – Average % of preceding 3 years on JobSeeker Support benefit given received Jobseeker benefit in
that period – by gender and by age band
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Figure 8 – Average % of preceding 3 years on Sole Parent Support benefit given received Sole Parent
Support benefit in that period and aged under 65
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Figure 9 – Average % of preceding 3 years on Sole Parent Support benefit given received Sole Parent
Support benefit in that period and under 65 – females by age band
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Figure 10 – Average % of preceding 3 years on Supported Living Payment benefit given received Supported
Living Payment benefit in that period and aged under 65
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Figure 11 – Average % of preceding 3 years on Supported Living Payment benefit given received Supported
Living Payment benefit in that period and aged under 65 – by gender and by age band
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3.3.2 Income
In Figure 12 and Figure 13, we show the average taxable income for each population (excluding benefit
payments), among people who receive taxable income.
▪ Incomes for people in the CHP and KO populations are higher than for the AS population. This is
particularly true for males.
▪ Note that the proportions that received taxable income at any point in the preceding three years is
fairly consistent across the three populations – AS 66.0%, CHP 71.1%, KO 70.5%.

Figure 12 – Average taxable income (excluding benefit payments) given taxable income in the period and
aged under 65
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Figure 13 – Average taxable income (excluding benefit payments) given taxable income in the period and
under 65 – by gender and by age band
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3.3.3 Convictions
In Figure 14 and Figure 15, we show the proportion of people in each population who were convicted of a
crime in the preceding three years.
▪ The proportion for the KO population is higher than for the AS and CHP populations, though by age
band and gender the relativities are less clear and consistent. Note that a higher proportion of the KO
population are under the age of 35, compared to the AS and CHP populations.

Figure 14 – Proportion with a conviction in the preceding 3 years
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Figure 15 – Proportion with a conviction in the preceding 3 years – by gender and by age band
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3.3.4 NCEA level 3 attainment

In Figure 16 and Figure 17, we show the proportion of each population who have attained NCEA level 3 by
31 December 2019. This is restricted to people aged 20 to 25 at 31 December 2019.
▪ Attainment rates for the CHP and KO populations are substantially higher than for the AS population.

Figure 16 – Proportion with NCEA level 3 or higher (age 20 to 25 at 31 December 2019)
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Figure 17 – Proportion with NCEA level 3 or higher (age 20 to 25 at 31 December 2019) – by gender
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3.3.5 Oranga Tamariki interactions

In Figure 18 to Figure 20, we show the proportion of each population who interacted with Oranga
Tamariki as a child. This is restricted to people aged 19 and 20 at 31 December 2019
▪ A higher proportion of the AS population interacted with Oranga Tamariki as a child, than the CHP
and KO populations.

Figure 18 – Proportion with Oranga Tamariki interactions (age 19 and 20 at 31 December 2019)
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Figure 19 – Proportion with Oranga Tamariki interactions (age 19 and 20 at 31 December 2019) – by age
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3.3.6 Mental health and addiction service use

In Figure 20 and Figure 21, we show the proportion of each population who accessed mental health and
addiction related pharmaceuticals in the preceding three years.
▪ A significantly higher proportion of the AS population accessed mental health and addiction related
pharmaceuticals, than the CHP and KO populations. This is particularly true at younger ages.

Figure 20 – Proportion with mental health/addiction pharmaceutical use in the preceding 3 years
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Figure 21 – Proportion with mental health/addiction pharmaceutical use in the preceding 3 years
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In Figure 22 and Figure 23, we show the proportion of each population who accessed acute mental health
and addiction services (inpatient and outpatient) in the preceding three years.
▪ A relatively high proportion of 16-24-year-olds in the AS population access acute mental health services
▪ For ages 35+, a relatively high proportion of the CHP population access acute mental health services.

Figure 22 – Proportion with acute mental health/addiction service use in the preceding 3 years
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Figure 23 – Proportion with acute mental health/addiction service use in the preceding 3 years
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3.3.7 Hospital discharges

In Figure 24 and Figure 25, we show the proportion of each population who was discharged from hospital
at least once in the preceding three years.
▪ The proportions are similar for the three populations and there are no clear and consistent differences
in patterns by gender and age.

Figure 24 – Proportion who have been discharged from hospital at least once in the preceding 3 years
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Figure 25 – Proportion who have been discharged from hospital at least once in the preceding 3 years
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4 Exploratory modelling
In this section, we describe the results of exploratory modelling, which attempts to identify which factors
explain variation in outcomes for the AS and KO populations and, specifically, the extent to which housing
status (AS or KO) explains variation.
Three separate models were developed initially, to predict taxable income, conviction rates, and mental
health service use over a three-year observation period to 31 December 2022. The modelling cannot be
used to estimate causal effects i.e. even if a factor explains a high proportion of variation in an outcome,
it does not necessarily mean one causes the other.
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Key points
▪ The model used in this research suggests that the variation in taxable income, conviction rates, and
mental health service usage can be primarily explained by the equivalent variables of the preceding
three years (to 31 December 2019). For example, the taxable income earned in the three-year period
to 31 December 2019 can explain almost all of the income variation in the three-year period to
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31 December 2022.
▪ The model used in this research suggests that housing status (AS or KO) explains very little variation
in taxable income, conviction rates, and mental health service use. Or expressed in a different way,
whether a person receives AS for a full year or is in a KO public house for a full year appears to explain
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very little variation in income, conviction rates and mental health service use over the subsequent
three-year period.
▪ More importantly, the research findings suggest that there are differences between the KO and AS
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populations, and they experience materially different outcomes. These differences can be explained by
the underlying differences in the populations and their prior outcomes.
Due to the limited scope imposed by a short timeframe, this research did not disaggregate sub-cohorts
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with different characteristics in the KO and AS populations and explored a limited set of outcome
variables. Therefore, variation in outcomes experienced by different sub-cohorts of the KO and AS
populations are not presented in this research.
Note that this research does not rule out the possibility that there is a link between housing status and
these outcomes, nor does it rule out the possibility that there is a link between housing status and other
outcomes not considered in this research, e.g., specific health conditions, or housing quality.
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Nevertheless, this research has identified interesting indications that warrant further investigation that
will lead to insights on better aligning housing support and people. We recommend that the further work
be carried out.
Note 2019 research by the Social Wellbeing Agency exploring the impact of public housing on people’s
wellbeing4. The research identified two key findings:
▪ Housing conditions generally improve for people placed in public housing
▪ Life satisfaction improves for people placed in public housing.
In this section, we present results of exploratory modelling to look at how individuals in different housing
populations experience different outcomes over the observation period (2020-2022). For ease of
comparison, and to focus on the groups with largest sample size, we have restricted our analysis in this
section to comparing people in the KO and AS populations.
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Social Wellbeing Agency (2019) Measuring the impact of social housing placement on wellbeing

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4.2 Limitations
Before discussing the results of the exploratory modelling, limitations should be noted, as they impact the
conclusions that can be drawn from the research.
▪ Differences in population – When we compare the KO and AS populations, we only have access to
information about their demographics and government service use. For example, there is no
information about untreated mental health. There are almost certainly differences between the two
populations which are not visible in our data. Differences in prediction may be at least partly explained
by differences in such unobserved factors, rather than a difference in housing status.
▪ Correlation vs. causality – The analysis we have undertaken cannot be used to infer causal relationships.
Rather, the exploratory modelling we have performed considers correlations between variables.
▪ Population definition – Housing status for the purpose of defining the populations has been defined
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based on being in a housing state for the full year to 31 December 2019. The relationships between
housing status and outcomes, as identified in the exploratory modelling, is limited to this definition of
housing status. Rather than any broader definition of being in a Kāinga Ora public house or in receipt
of Accommodation Supplement.
▪ Time constraints – Concessions in research design needed to be made to fit in with tight timescales.
These include:
▪
–
–
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Limiting our research population to people aged 16 and above.
Limiting our research to considerations of individuals i.e. not households.
Timeframes – The observation period used for this research covers the pandemic period. It is
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plausible that correlations between variables may be materially different during this period.
▪ Data limitations – There are known limitations to several of the IDI datasets, and many (such as
education and Oranga Tamariki) are only available for certain age groups or are unavailable for
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immigrants to New Zealand. We have indicated possible data restrictions in Table 2.
4.3 Taxable income

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We built a model of the taxable income in the three years after 31 December 2019 to try and understand
relationships to previous government service use and demographic factors. Note that the definition of
taxable income in this analysis does not include benefit payments.
The first output from modelling is Figure 27 which shows the top 5 most important variables for predicting
taxable income in the observation period, ranked by how much variation in taxable income they explain. In
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this scale, a value of 1 means that the variable explains all the variation in predicted future taxable income.
Figure 28 shows that predicted future taxable income is almost entirely predicted by past taxable income,
and other factors don’t play a large role.
While this may seem like a very intuitive result, it is nonetheless an important one. It tells us that very little
variation in taxable income is explained by factors other than past taxable income for the AS and KO
populations. Or expressed differently, once we control for taxable income in the past three years there is
relatively little variation in taxable income over the next three years.

Figure 27 – Top 5 variable importance for future taxable income model
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Further confirmation of the strong relationship between past taxable income and future taxable income
can be seen in Figure 28, which shows average total income in the three years after 31 December 2019,
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restricted to individuals who had any income. The data is shown by average total income in the three years
to 31 December 2019. In these plots, average income in the three years after 31 December 2019 is closely
aligned to average income in the three years to 31 December 2019.
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Figure 28 – Average annual taxable income during the three years after 31 December 2019 (for individuals
with > 0 income) – by average annual taxable income in the three years to 31 December 20195
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To analyse specifically the effect of housing status, when all other factors are kept the same, we look at
average predicted taxable income for people with different housing status. Table 3 shows that altering
housing status has little effect on predicting future taxable outcome when all other factors in the modelling
are kept the same. Or, expressed differently, once we control for all other factors in the modelling (notably
taxable income in the past three years), there is very little variation in taxable income by housing status.
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Each plotted previous income band is approximate to the nearest thousand. 10% of the entire population
(males and females) are in each band. This equates to roughly 10% of males and 10% of females in each band.

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4.5 Mental health and addiction service use
In this section, we look at the proportion of people who access any mental health/addiction services in the
three years of the observation window. This incorporates pharmaceutical use, acute mental health and
addiction services (inpatient and outpatient) and mental health and addiction related hospitalisations.
Figure 32 shows that there is a clear difference in mental health/addiction service use in the observation
period – The AS population are more likely to use mental health services.
Figure 32 – Proportion with any mental health/addiction service use over the observation period
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As in Section 4.3 and Section 4.4 we model how rates of mental health/addiction service use in the
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observation window depend on characteristics of the population before the observation window. This will
determine if the differences between rates of mental health/addiction service use for AS and KO
populations seen in Figure 32 is explained by housing status or underlying differences in the populations.
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Figure 33 shows that previous mental health/addiction service use is the most important factor in
predicting future mental health/addiction service use.
Figure 33 – Top 5 variable importance for mental health outcome model

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4.6 Further descriptive statistics
We also extracted descriptive statistics on jobseeker benefit status over the observation period, which is
displayed in Figure 35.
Figure 35 – Proportion receiving JobSeeker Support at any point in the three years to
31 December 2022 (subsets)
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BUDGET-SENSITIVE
Reference: T2024/784
Date: 22 March 2024
To: Minister of Finance (Hon Nicola Willis)
Deadline: Wednesday 22 March 2024
Kāinga Ora’s Impact on the Fiscal Forecasts

At the Housing Bilateral on Wednesday 20 March 2024, you expressed concern that
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Kāinga Ora is forecasting more debt than they are appropriated for by several billion.
This aide memoire outlines:
1. Our general approach to forecasting.

2. Our specific approach to including Kāinga Ora’s forecasts.
3. Options for addressing your concerns.
1. Our general approach to forecasting
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Under the Public Finance Act 1989 (PFA), the fiscal forecasts presented in the
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Treasury’s Economic and Fiscal Update must include all Government decisions and
other circumstances to the fullest extent possible. The fiscal forecasts represent the
Treasury’s best estimate of the Government’s fiscal performance and position over the
next five years. The Treasury is responsible for preparing the fiscal forecasts included in
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Economic and Fiscal Updates. As the Minister of Finance, you are responsible to advise
the Treasury of all government decisions that have a material economic or fiscal impact.
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Forecasting will always include some level of judgement. To guide our judgement, we
use a framework to consider when an item should be included in the forecasts. Matters
are incorporated into the fiscal forecasts if:
• a decision has been taken, or a decision has not yet been taken but it is reasonably
probable the matter will be approved; and
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• it is reasonably probable the situation will occur and the matter can be quantified
for particular years with reasonable certainty.
The fiscal forecasts are prepared using information provided by Government reporting
entities (including Crown Entities), based on their best professional judgement. In
general, the fiscal forecast information submitted by Crown Entities have been approved
by their Boards. The Treasury relies on Crown Entity Boards being accountable for the
accuracy and reasonableness of their fiscal forecast information.
In some instances, the Treasury may need to make a central adjustment to forecasts
provided from agencies to ensure the Government fiscal forecasts do represent a best
estimate. For example, an adjustment is put through to reduce core Crown expenses
(top-down adjustment) as most departments use appropriations which are upper limits
of spending to base their expense forecasts. Based on historical trends, our judgement
is using appropriation as a base for expenses overstates the Government’s expense
track.
Treasury:4944398v1 BUDGET-SENSITIVE 1
BUDGET-SENSITIVE
2. Our specific approach to including Kāinga Ora’s forecasts
The forecasts submitted by Kāinga Ora are based on housing targets set by the
Government but constrained by the amount of permitted borrowing and operating funding
approved by the Government. There is no growth in the public housing stock planned
past the 2024/25 year (see Appendix).
The capital investment forecast beyond the 2024/25 year is focussed on renewal and re-
fits of their existing housing portfolio. This includes 4,450 new builds each year, offset by
1,190 demolitions each year, and 3,140 sales each year, and is based on the Kāinga
Ora Board-approved Asset Management Strategy (see Appendix).
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s 9(2)(b)(ii)
There will be implications for Kāinga Ora’s

operating spend because of the significant new interest costs associated with the
renewals, but no direct impact on appropriations because Kāinga Ora’s operating
activities are not limited by appropriations. This is a significant driver of the operating
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deficit that we advised you on in December 2023 [T2023/1989 refers].
s 9(2)(b)(ii)
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The forecast that the Kāinga Ora Board approved includes borrowing that is currently
higher than the permitted borrowing. The need for this borrowing is mostly driven by the
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significant renewal pipeline.
To ensure the forecasts submitted to the Treasury are within the permitted borrowing
limits, Kāinga Ora assumes selling further housing stock. In the submission for the
preliminary fiscal forecasts, Kāinga Ora assumed sales proceeds from reducing the
housing stock of $1.8 billion above the $6 billion sales proceeds already in the Board-
approved forecast, which would result in a decrease to the total number of IRRS spots
that Kāinga Ora provide.
The Treasury’s judgement for forecasting purposes has been that it is highly unlikely that
the total social housing stock will decrease and that it is more likely the Government will
approve additional borrowings. Therefore, the Treasury has historically adjusted the debt
forecast upwards and returned the level of housing stock on the balance sheet to that
approved by the Kāinga Ora Board. For forecasting purposes, we rely on the Kāinga Ora
Board being accountable for this information.
BUDGET-SENSITIVE
An adjustment to borrowings of $1.8 billion by 2027/28 has been included in our

preliminary fiscal forecasts to better reflect the more likely outcome that the total housing
stock will not decrease.
At the 2023 Half Year Economic and Fiscal Update (HYEFU), the adjustment was $6.5
billion. The significant reduction since HYEFU is a result of Kāinga Ora identifying cost
savings that reduces the cost of their investment, though the build pipeline remains
equivalent. At the Bilateral, you mentioned that $3.8 billion was outside the debt limit;
this related to the adjustment at the preliminary HYEFU forecasts.
3. Options for addressing your concerns
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The renewal pipeline is based on a strategy approved by the Kāinga Ora Board, which
we have historically considered to be the best estimate of capital investment expected
over the forecast period (noting the Board is accountable). Kāinga Ora has not revisited
its capital pipeline assumptions since your Government has come into power.
To support the findings of the Kāinga Ora Independent Review, the Treasury is in the
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process of preparing advice on changes to support stronger monitoring, reporting,
lending facility agreement conditions, as well as Board composition and accountabilities.
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Option 1:
The Kāinga Ora Independent Review is likely to recommend that the Kāinga Ora budget
is refreshed and that the build programme is phased over a longer timeframe. In addition,
we expect recommendations on future growth of Kāinga Ora’s housing supply relative to
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the supply from Community Housing Providers.
We expect that Ministers will want to provide the Kāinga Ora Board with new
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expectations following the Kāinga Ora Independent Review, but this will happen after the
fiscal forecasts are finalised. You could leave the forecasts as they stand for BEFU under
the expectation that these will be revised to reflect government policy at HYEFU.
Option 2:
Ministers could advise the Kāinga Ora Board that until decisions are made to the
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contrary, Kāinga Ora’s debt limit will not be increased and set an expectation that the
renewals pipeline should be phased to ensure that the cost is within the existing debt
limits and not rely on a high volume of social housing stock sales. The Kainga Ora Board
would need to readjust its forecasts to reflect this expectation.
We consider there is space within the existing debt limit for Kāinga Ora to continue
building beyond the 2024/25 year based on our analysis of their forecasts.
s 9(2)(f)(iv)
Note that we expect the Kāinga Ora Board will receive new expectations from the
Minister of Housing following the Kāinga Ora Independent Review, but this will happen
after the fiscal forecasts are finalised. Kāinga Ora received an interim Letter of
Expectations from the Minister of Housing on 18 March. It did not mention the renewals
pipeline. An additional letter is an opportunity to communicate this expectation.
s 9(2)(f)(iv)
BUDGET-SENSITIVE
s 9(2)(f)(iv)
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Next Steps
Given the scale of the adjustments, we will ensure that going forward you are informed
of what is reflected in our fiscal forecasts.
Following your confirmation, we can progress one of the options outlined. We can
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discuss this with you early next week.
Following this, you will be able to consider findings of the Independent Review at the end
of March, and our advice regarding implementing its recommendations.
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Max Christie, Analyst, Housing and Urban Growth, s 9(2)(a)
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Geraldine Treacher, Acting Director, Financing Infrastructure and Urban Development,
s 9(2)(a)
Jayne Winfield, Chief Government Accountant, s 9(2)(a)
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BUDGET-SENSITIVE
s 9(2)(f)(iv)
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Formal stakeholder meetings
The below list details the formal mee�ngs undertaken by the Review Panel. This was also
supplemented by a wide range of more informal conversa�ons with individual panel members which
have also informed the Panel’s recommenda�ons.
Accessible Proper�es
Auckland Council
Community Finance
Community Housing Providers
Emerge Aotearoa
Ernst & Young
Fletcher Living
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Great South
Habitat for Humanity
Has�ngs District Council
Height PM
Housing Founda�on
Invercargill City Council
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Jennian Homes
Kāhui Tū Kaha
Kāinga Ora Board
Kāinga Ora Construc�on Programme Advisory Panel
Kay Saville-Smith
Leon Grandy
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Master Builders Associa�on
Members of Kāinga Ora Execu�ve and Management
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Ministry of Housing and Urban Development
Ministry of Social Development
Murihiku Regenera�on
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NZ Living
Ockham Residen�al
Oﬃce of the Auditor General
PSA Kāinga Ora Na�onal Delegates
Queenstown Community Housing Trust
Southland Chamber of Commerce
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Tāmaki Regenera�on Company

Te Matapihi
Te Pae Hakāri
Te Rūnanga o Ngāi Tahu
The Salva�on Army
Toitū Tairāwhi� Housing
[IN-CONFIDENCE:RELEASE EXTERNAL]
NAME DESCRIPTION Rate ($) per day Actual ($)
Bill English Independent Reviewer 2,500 64,986.00
Simon Allen Independent Reviewer 2,165 46,606.92
Ceinwen McNeil Independent Reviewer 2,165 50,705.44
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[UNCLASSIFIED]
Joint Report: Initial Government response to the Independent Review
of Kāinga Ora
Date: 19 April 2024 Report No: T2024/1095

HUD2024-004314
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File Number: [SH-18-1-1-1]
Action sought
Minister of Finance
(Hon Nicola Willis)
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Agree to the recommendations in this report 22 April 2024
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Minister of Housing
(Hon Chris Bishop)
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Brad Ward DCE Organisational s 9(2)(a) 
Performance (Ministry (mob)
of Housing and Urban
Development)
Geraldine Treacher Acting Director, s 9(2)(a) s 9(2)(a)
Financing Infrastructure
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(wk) (mob)
and Urban
Development (The
Treasury)
Note any
feedback on
the quality of
the report
Enclosure: No
Treasury:4933484v1 [IN-CONFIDENCE]
Joint Report: Initial Government response to the Independent
Review of Kāinga Ora
Executive Summary
You received the Independent Review of Kāinga Ora on 19 April.
1. The report put forward seven key recommendations, which vary in levels of
complexity, and the time required for implementation. Taken together, the
recommendations propose significant change to both Kāinga Ora and the social
housing system as a whole.
2. At this stage, given the significant Kāinga Ora financial losses, there is an
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immediate need to take action to improve its governance and financial
sustainability. We recommend that you accept and take action on the following
recommendations:
4A: Aligning contractual arrangements between Kainga Ora and CHPs
5A: Refreshing the Kainga Ora Board
5B: Issuing simplified direction to Kāinga Ora
3.
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6: Requesting a plan to improve financial performance
The other recommendations relate to significant changes or reforms. Given the
scale of change and potential for significant fiscal impacts, we recommend you
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receive further advice before accepting the following recommendations:
1: Consolidating Crown funding for social housing
2: Becoming a more active purchaser
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3: Increasing local management and ownership of social housing
4B: Addressing barriers to other social housing providers
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4C: Ensuring the funding model incentivises delivery and responds to needs
5C: Considering options to narrow the scope of Kāinga Ora
7: Phasing the response over the next 2-3 years
4. In light of this, we recommend taking a multi-phase approach to the response
including:
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Immediate actions on the accepted recommendations, including refreshing the

Board, sending a new letter of expectations, and beginning work on a new delivery
contract with Kāinga Ora.
A report back to Cabinet in June 2024 including consideration of whether to accept
the remaining recommendations, proposed approaches and an implementation
plan over the short and medium term to respond to and implement the other
recommendations.
Report back to Ministers in late 2024 on progressing the consolidation of funds,
feasibility of progressing locally based delivery approaches, approach to remit of
Kāinga Ora and levelling the playing field for CHP’s, Iwi and Māori providers.
5. In preparation for the release of the report, the Treasury and Ministry of Housing
and Urban Development are preparing a proactive release of previous information
leading up to the review and any relevant background papers that agencies
prepared for the review panel. A covering briefing will be prepared for Ministers by
1 May 2024 for consideration prior to the public release of the report.
[IN-CONFIDENCE]
6. The Kāinga Ora Board is broadly comfortable with the recommendations put
forward by the review but provided detailed feedback on the contents of the report.
The Independent Review Panel has considered this as part of the finalisation of
the report and provided a supplementary document to you outlining the Panel’s
approach to the Kāinga Ora Board’s feedback.
Recommended Action
1. Note that the Interim Report of the Independent Review of Kāinga Ora report has
been finalised following feedback from the Kāinga Ora Board;
2. Note that Sir Bill English is intending to send you the Final Report of the
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Independent Review of Kāinga Ora on 19 April 2024;
3. Note that the Final Report put forward the following seven recommendations which
vary in levels of complexity and implementation requirements:
a) Recommendation 1: Consolidating Crown funding for social housing
b) Recommendation 2: Becoming a more active purchaser
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c) Recommendation 3: Increasing local management and ownership of social
housing
d) Recommendation 4: Levelling the playing field between providers
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e) Recommendation 5: Improving Kāinga Ora governance
f) Recommendation 6: Requesting a plan to improve financial performance
g) Recommendation 7: Phasing the response over the next 2-3 years
Agree that the Government’s response to the Final Report will occur in the
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4.
following three phases:
a) Immediate actions on the accepted recommendations, including refreshing the
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Board, sending a new letter of expectations, and beginning work on a new

delivery contract with Kāinga Ora.
b) A report back to Cabinet in June 2024 including consideration of whether to
accept the remaining recommendations, proposed approaches and an
implementation plan over the short and medium term to respond to and
implement the other recommendations.
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c) Report back to Ministers in late 2024 on progressing the consolidation of funds,

feasibility of progressing locally based delivery approaches, approach to remit
of Kāinga Ora and levelling the playing field for CHP’s, Iwi and Māori providers.
Immediate Actions
5. Accept recommendation 4A to change the Kainga Ora contract to align with

expectations with Community Housing Providers.
6. Direct HUD to progress development and negotiation of a contract with Kāinga
Ora by June 2024.
7. Accept recommendation 5A to refresh the Kāinga Ora Board.
8. Note that selecting a high-quality candidate as Board Chair will be critical to the
long-term performance of Kāinga Ora.
[IN-CONFIDENCE]
9. Agree to advance conversations with potential candidates for vacant positions
including the Chair and that sufficient time is taken to find high-quality candidates.
10. Agree to send letters to existing Board members to inform them of your intent to
consider the composition of the Board.
11. Direct HUD to provide advice on new appointments to the Board.
12. Accept recommendation 5B to issue simplified direction to Kāinga Ora.
13. Accept recommendation 6 to request the Kāinga Ora Board develop a credible
and detailed plan by November 2024 to improve financial performance with the
goal of eliminating losses.
14. Agree to seek Cabinet agreement in June to reduce the investment decision
making rights of Kāinga Ora to the standard delegations in Cabinet Office Circular
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23(09) reflecting that the previous delegation granted under the Investor
Confidence Rating scheme does not align with the findings of the review.
15. Direct HUD, in consultation with the Treasury, to provide advice on additional
measures required to ensure the November 2024 plan meets Ministers’
expectations, including considering additional monitoring, a variation to the facility
agreement between Kāinga Ora and the Treasury, and transferring Kāinga Ora’s
16.
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debt appropriation to a tagged contingency.
Note that HUD, in consultation with Treasury, will monitor the progress developing
this plan and keep Ministers informed as needed.
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17. Direct HUD to draft a new letter of expectation for Kāinga Ora that outlines:
a) The scale and standard of the functions Ministers expect Kāinga Ora to perform
b) Budget 2024 outcomes
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c) A request for Kāinga Ora to develop and present to Ministers a plan to improve
financial performance by November 2024.
d) Reiterating value for money and progress towards savings targets is a
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Ministerial priority
e) Establishing a clear Board monitoring framework to hold management to
account for performance
18. Note the Treasury is beginning work on tighter debt reporting controls as agreed
by Joint Ministers (T2024/197 refers).
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Cabinet consideration in June 2024
19. Note HUD will provide you with advice in June on:
a) Principles to approach a consolidation of housing funding (Review
Recommendation 1)
b) Approaches for HUD to take a more active purchaser role (Review
Recommendation 2)
c) Approaches to taking placed based approaches to social housing delivery
(Review Recommendation 3 and 4D).
d) Approaches to address barriers to greater delivery by CHPs, Iwi, Māori and
other providers (Review Recommendation 4B).
[IN-CONFIDENCE]
e) A high level plan to undertake the policy work and factors to be considered for
further advice in November on funding settings and scope of Kāinga Ora
(Review Recommendations 4C and 5)
Release of Independent Report
20. Agree to a Cabinet paper being drafted covering the critical themes,
recommendations and approaches outlined in this briefing for lodging with Cabinet
Committee on 2 May, with a proposed release date of 13 May subject to Cabinet
approval.
21. Agree to proactively release materials covering all briefings leading up to the
review and relevant documents associated with the review at the same time as
releasing the Independent Review.
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22. Direct HUD and Treasury to provide Ministers with the proactive release material
by 1 May for consideration.
23. Discuss the Review report and the proposed Government response with officials
from HUD and Treasury.
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Geraldine Treacher Hon Nicola Willis

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Acting Director, Minister of Finance

Financing Infrastructure ..... / ...... / ......
and Urban Development
19 April 2024
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Brad Ward
Hon Chris Bishop
DCE Organisational
Performance Minister of Housing
.19 April 2024 ..... / ...... / ......
[IN-CONFIDENCE]
Joint Report: Initial Government response to the Independent
Review of Kāinga Ora
Purpose of Report
1. This report provides you with advice on the initial response to the Independent
Review of Kāinga Ora, which you received on 19 April.
2. It also provides supporting information for the public release of the review.
Independent Review of Kāinga Ora finalised after consultation with the

Kāinga Ora Board
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3. The Kāinga Ora Board provided feedback on the interim report to the panel on 15
April 2024. Ministers received this feedback from the Acting Chair of Kāinga Ora
on the same day. While the Board is broadly comfortable with the review
recommendations, they did provide detailed feedback on the contents of the report
4. The independent panel has assessed the Board’s feedback and made changes to
the interim report in response to this feedback. HUD and Treasury, as secretariat
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to the Review, supported the Panel in making these changes.
Approach to Recommendations in the Report

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5. The final report contains the following 7 recommendations (detailed in Annex One)
which have varying levels of complexity and implementation time-frames:
a. Recommendation 1: Consolidating Crown funding for social housing
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b. Recommendation 2: Becoming a more active purchaser
c. Recommendation 3: Increasing local management and ownership of
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social housing
d. Recommendation 4: Levelling the playing field between providers
e. Recommendation 5: Improving Kāinga Ora governance
f. Recommendation 6: Requesting a plan to improve financial performance
g. Recommendation 7: Phasing the response over the next 2-3 years
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6. Taken together, the recommendations propose significant change to both Kāinga

Ora and the social housing system as a whole.
7. Given the scale of change recommended and the potential for significant fiscal
impacts, we recommend taking time to fully consider the proposed changes.
8. This includes considering alignment of, and sequencing with, broader Government
priorities, including targets to reduce emergency housing use by 75%,
implementation of the Going for Housing Growth plan, and reform of the Resource
Management Act.
9. However, given the significant financial losses of Kāinga Ora, there is an immediate
need to take action to improve governance and financial sustainability.
10. Based on this, we propose responding to Final Report in the following three
phases:
[IN-CONFIDENCE]
• Immediate actions on the accepted recommendations, including refreshing the
• A report back to Cabinet in June 2024 including consideration of whether to
accept the remaining recommendations, proposed approaches and an
implementation plan over the short and medium term to respond to and
implement the other recommendations.
• Report back to Ministers in late 2024 on progressing the consolidation of funds,
feasibility of progressing locally based delivery approaches, approach to remit
of Kāinga Ora and levelling the playing field for CHP’s, Iwi and Māori providers.
Immediate Recommended Actions
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Recommendation 4A: Aligning Contractual Arrangements between Kāinga Ora
and CHPs
11. We recommend that Ministers accept the recommendation to align contractual
arrangements between Kāinga Ora and CHPs, and direct the Ministry of Housing
and Urban Development (HUD) to progress work required to achieve this.
12. We consider that placing consistent contractual requirements on social housing
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providers will allow Kāinga Ora performance to be benchmarked against CHPs,
enable Ministers to become more active purchasers, and provide additional levers
with which to hold Kāinga Ora to account for delivery.
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Recommendation 5A: Refreshing the Kāinga Ora Board
13. We recommend that Ministers accept the recommendation to refresh the Kāinga
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Ora Board. The review found significant challenges relating to governance and
financial management, including opaqueness of financial information.
14. Given the poor financial performance of Kāinga Ora and the significant scale of
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change required, we consider that change is needed to governance at Kāinga Ora,

including refreshing the board.
15. The minimum requirement is for the board is to have eight members. Currently:
a. The Board consists of seven members, following the resignation of the
Chair in April 2024.
b. two Board members terms expired in February 2024, but they have
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agreed to continue in the roles until further appointment decisions are

made.
c. Two other Board member terms will expire during 2024.
16. There is an immediate need to bring the Board to at least the minimum membership
requirements by appointing three Directors including the Chair.
17. There are two main approaches to refresh the existing Board:
a. Option One: Leave existing directors in their roles and appoint new
directors as their contracts expire, or
b. Option Two: Make discrete decisions on directors’ terms ahead of
contract expiration.
18. Option One would enable different skill sets to be incorporated onto the Board while
maintaining some continuity and avoiding ending directors’ terms early.
[IN-CONFIDENCE]
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b. Advice on approaches for HUD to take a more active purchaser role
(Review Recommendation 2)
c. Advice on approaches to taking placed based approaches to social
housing delivery (Review Recommendation 3 and 4D).
d. Advice on approaches to address barriers to greater delivery by CHPs,
Iwi, Māori and other providers (Review Recommendation 4B).
e. A high level plan to undertake the policy work and factors to be considered
for further advice in November on funding settings and scope of Kāinga
Ora (Review Recommendations 4C and 5)
Approach to Releasing Report

40. HUD officials are currently drafting a Cabinet paper covering the critical themes,
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recommendations and approaches outlined in this briefing for lodging with Cabinet
Committee on 2 May, with a proposed release date of 13 May subject to Cabinet
approval.
41. Given the volume of Official Information Act requests received by both the Treasury
and HUD to date, we will provide Ministers with a proactive release package on 1
May for consideration for proactive release alongside the review.
42.
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This release will cover previous advice provided to Ministers from the funding and
financing work undertaken by the Treasury and HUD prior to the review and any
documents relating to the establishment of the review.
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[IN-CONFIDENCE]
Annex One: Recommendations from the Final Report of the Independent Review
of Kāinga Ora
Recommendation 1:
To strengthen government accountability for social housing outcomes, Cabinet considers
consolidating government funding for housing outcomes under the Minister of Housing, who will be
supported by the Ministry of Housing and Urban Development to administer that funding on behalf of
the Crown, together with expectations of formal reporting of outcomes by a third party.
Recommendation 2:
To prioritise tenant outcomes and cost-effective provision of housing support and supply, the Minister
of Housing directs the Ministry of Housing and Urban Development to become an active purchaser
that takes a social investment approach to cost-effectively improving housing outcomes.
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Recommendation 3:
To better enable tenants and local communities to meet their diverse housing needs and aspirations,
government policy and investment leverages the advancements made in place based and specialised
approaches to increase local decision making regarding the management and ownership of housing
.
Recommendation 4:
To increase choice, diversity, and innovation, Government enables more providers to participate in
the provision of social housing by:
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a) the purchaser contracting with Kāinga Ora in a similar manner that it does with CHPs
b) addressing barriers to greater provision of social housing by CHPs, Iwi and Māori, and other
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providers
c) ensuring the funding model incentivises delivery where needed and is responsive to the
different needs of tenants
d)
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Recommendation 5:
To ensure that Kāinga Ora has the leadership and mandate to effectively implement the
recommendations of this Review, responsible Ministers:
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a) refresh the Board with a focus on the skills to implement the recommendations of this Review
b) issue simplified government expectations and direction to Kāinga Ora
c) report back to Cabinet with options to narrow the scope of Kāinga Ora activities to social
housing and ensure it has the leadership and governance expertise to deliver effectively,
including simplifying the Kāinga Ora Act and considering more commercially focussed
organisational forms such as company under Schedule 4A of the Public Finance Act 1989.
d)
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Recommendation 6:
Responsible Ministers set an expectation that the board will develop a credible and detailed plan to
improve financial performance with the goal of eliminating losses. The board should be held
accountable for implementing this plan through regular reporting to Ministers, supported by on-going
engagement between Kāinga Ora management, the Kāinga Ora board and the Monitor.
Recommendation 7:
To generate momentum toward the recommendations above, the Panel recommends the following
timeframe for key milestones:
Within 3-6months
• Strengthen Kāinga Ora governance by refreshing the Board including Cabinet decisions on
any necessary changes to Kāinga Ora legislation and entity form.
• Set new Ministerial expectations with HUD and Kāinga Ora.
• HUD and Kāinga Ora to agree a refreshed contract.
• Cabinet make decisions on consolidation of Crown funds to inform Budget 25.
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[IN-CONFIDENCE]
In 12-18 months
• Implementation of any change to Kāinga Ora legal entity.
• Active purchaser role of HUD developed and being implemented
• Place-based solutions in four locations being implemented, together with plans to establish
Community Housing Associations.
• Funding and delivery settings in place to support contestability and better outcomes for
tenants.
In 2-3 years
• Nationwide social housing investment strategy developed.
• Supported by place-based housing strategies and delivery plans for all tenures.
• Kāinga Ora no longer making operating losses.
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[IN-CONFIDENCE]
SENSITIVE
Sensitive
Office of the Minister of Housing
Office of the Minister of Finance
Cabinet Business Committee
Initial Response to the Independent Review of Kāinga Ora

Proposal
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1 Following the completion of independent review of Kāinga Ora, we are proposing an
initial response to respond to and implement the recommendations of the review
which includes:
1.1 immediate actions to improve Kāinga Ora’s governance and financial
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sustainability, and
1.2 a report back to Cabinet in August 2024 with proposed approaches and a
staged programme to respond to the other recommendations.
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Relation to government priorities
2 The independent review of Kāinga Ora was a priority under the Coalition
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Government’s 100 Day Plan [100-23-MIN-0011]. Responding to the independent
review of Kāinga Ora is item six on the Coalition Government’s 2024 Quarter 2
Action Plan.
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3 The proposed steps in this paper also contribute the Coalition Government’s drive to
get better value for money from public services and make them fiscally sustainable.
Executive Summary
4 The performance of Kāinga Ora has a significant impact on the Government’s fiscal
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position. On 18 December 2023, we announced an independent review of Kāinga Ora,

to be led by Sir Bill English, under section 132 of the Crown Entities Act 2004 to
provide assurance over the approach and delivery of significant programmes by
Kāinga Ora.
5 We received the final report from the Independent Review of Kāinga Ora on 19 April
2024. It made two broad findings. First, it found that Kāinga Ora is underperforming
and not financially viable without significant savings and funding and financing
settings that the Government has not yet agreed. Second, it found that the wider social
housing system is not delivering the results we need, and is lacking in transparency
and accountability, coupled with a poor understanding of tenant outcomes.
6 Specifically, the review finds:
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6.1 New Zealand’s social housing system is not socially or financially sustainable
and it is not delivering the homes and support people need.
6.2 There is a lack of transparency and accountability in the social housing

system, coupled with a poor understanding of tenant outcomes. This results in
decision-making that is remote from affected individuals, households and
communities.
6.3 Interventions and investments are not based on evidence of a long-term view,
with current settings incentivising higher-cost support in urban areas and
creating poverty traps for tenants.
6.4 Within this context, the performance of Kāinga Ora is deteriorating and its
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ability to maintain and renew its assets is at risk. Current institutional settings
and remit do not support role clarity and strategic focus, and there is scope for
improved governance.
6.5 Kāinga Ora is not financially viable under current settings, and this is further
compounded by limited attention to value for money and opaque
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apportionment of costs and revenue within Kāinga Ora, making it difficult to
identify the underlying drivers of financial results.
6.6 Asset procurement is not done transparently, and it is not providing value for
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money. Asset management costs are forecast to become unsustainable.
Tenancy management costs are growing, but there is little evidence that this
additional investment is improving service provision.
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7 The final report puts forward seven recommendations that propose significant change
for both Kāinga Ora and the social housing system.
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8 At this stage, given the scale of Kāinga Ora financial losses, there is a need for
immediate action to improve its governance and financial sustainability. Other
recommendations relate to changes or reforms which have the potential for significant
fiscal impacts, and therefore warrant further consideration.
9 In light of this, we are proposing taking a two-step approach to the response

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including:
9.1 Accepting and taking immediate actions on four of the recommendations,

including refreshing the Board, sending a new letter of expectations, and
beginning work on a new delivery contract between HUD and Kāinga Ora.
9.2 A report back to Cabinet in August 2024 by the Minister of Housing which
includes consideration of whether to accept the remaining recommendations,
and proposed approaches and a staged programme over the short and medium
term.
10 The Minister of Housing also intends to report back to Cabinet in late 2024 on
progress implementing actions agreed to in the August 2024 Cabinet paper.
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Background
11 On 18 December 2023, the Government announced an independent review of Kāinga

Ora as part of its 100-day plan [100-23-MIN-0011]. The objective of the review was
to identify ways to improve Kainga Ora performance and value for money, and to
manage the impacts of Kāinga Ora on debt and OBEGAL. Its scope was to cover, at a
minimum, financial viability, asset procurement and management, tenancy
management, remit and institutional arrangements.
12 The review was led by Sir Bill English supported by Simon Allen and Ceinwen
McNeil (the panel), with the Ministry of Housing and Urban Development and the
Treasury providing secretariat support.
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13 Kāinga Ora is a large Crown entity with expenditure of $2.5 billion in 2022/23 and
total assets of $45 billion at June 2023. It has a significant impact on the
Government’s financial statements, including on OBEGAL and net core Crown debt.
14 Kāinga Ora faces challenging financial sustainability issues, with an operating deficit
forecast to grow from $520 million in 2022/23 to over $700 million in 2026/27,
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driven by interest on the debt-financed capital investment programme. There has also
been a significant increase in staffing levels (over 2,000 additional staff since
2017/18) across various functions.
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15 Given the scope and scale of Kāinga Ora activities in the housing and urban
development system (including its critical role to deliver much needed social
housing), it is essential that there is a high degree of confidence that it is operating
efficiently and effectively and focusing on the Government’s priorities.
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16 The challenging conditions Kāinga Ora has had to face should not be ignored, with
interest rates and construction prices rising.
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Key findings of the Independent Review
17 The review focuses on the financial sustainability of Kāinga Ora within the context of
an underperforming social housing system. The reviewers say the system is not
delivering the best results for tenants or quality housing for the funding it receives.
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Kāinga Ora has scaled up in recent years to respond to deteriorating housing

affordability that is putting pressure on households and the government finances, but
it has come at a considerable cost.
18 Kāinga Ora is both impacted by these issues and exacerbates them. The review found
that Kāinga Ora has substantially increased its capacity to grow its housing stock and
improved quality of its stock. However, the imperative to increase the number of
houses rapidly has resulted in a high-cost structure and poor financial discipline. Its
financial performance has deteriorated, and its ability to maintain and renew its assets
is at risk.
Financial Performance and sustainability
19 A previous review commissioned in 2023, undertaken by the Treasury and HUD,

found that Kāinga Ora was spending more to procure than private developers, and that
property management and tenancy support costs and headcount have grown rapidly
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since 2017. It also found that Kāinga Ora’s forecasts were not underpinned by
rigorous decision making or evidence, relying on assumptions and substantive year-
to-year changes.
20 The reviewers say that it has become clear through the previous review and this
review that the board is presented forecast financial information which is based off
high level assumptions which do not have Ministerial approval or tangible plans to
execute, effectively banking on future Government funding to bridge the gap.
21 Specifically, on Kainga Ora’s finances, the review finds that:
21.1 Kāinga Ora has had the advantages of considerable autonomy underpinned by
easy access to debt compared to other providers which funds all new builds
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and financial losses, and access to 83% of Income Related Rent Subsidies
(IRRS). Despite this, insufficient focus on fiscal discipline, and low levels of
accountability have led to growing annual losses by Kāinga Ora.
21.2 Kāinga Ora has been reporting operating deficits before tax over the last 4
years. These deficits are forecast to grow to $700 million 2026/27, with debt
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forecast to increase to $23 billion.
21.3 Kāinga Ora’s forecast cash requirement from the Crown is $21.4 billion over
the next four years. This is equivalent to every New Zealander paying about
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$4,000 for this activity.
21.4 Kāinga Ora project that over a 60-year period that it is not able to maintain the
condition, amenity and suitability of its stock at current levels of IRRS
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funding. The cost of replacing the ageing assets will be significant over the
coming decades, which will require successive Governments to have
confidence in the procurement and maintenance of housing assets is
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undertaken efficiently, effectively and represents value for money compared to

other social investments.
21.5 Somewhat perversely the ownership relationship of Kāinga Ora to the Crown
plays a big part in hiding the real cost of delivering social housing and
enabling the Crown to offer stock in poor condition to tenants.
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22 On governance, the review notes that Kāinga Ora was established as a Crown Agent,
a type of Crown entity. Crown Agents are required to give effect to Government
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policy directions and operate relatedly closely to Ministers. However, Public Service
Commission guidance on Crown entities emphasises the importance of maintaining
clear roles and responsibilities between responsible Ministers, the Monitor and the
entity board.
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23 The panel’s view is that that this arrangement has not delivered the expected benefits,
in large part due to a breakdown of the different roles of Ministers, the Monitor, board
and management.
24 The panel notes evidence that there has not been a clear separation between the
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board’s governance role and operational management. They say they saw evidence
that the board has been acting more as an advisory function rather than governing.
25 The panel also notes that “similarly, the roles of responsible Ministers and the board
have become blurred. Frequent contact between Kāinga Ora management and
responsible Ministers has undermined the separation between the responsible
Ministers’ role and operational management.”
26 The panel finds that that internal budget board packs were lacking in information and
led to the board signing off on budgets that were not realistic. Budgets provided to the
board are not sufficiently clear or detailed. For example, in the May 2023 board
budget pack, there was no Statement of Financial Position, the budget assumes that
new lending of several billion dollars from the Government will be approved, the
build pipeline includes a line entitled “Zero Net Growth” describing disposals of an
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indeterminate kind of over 3,000 homes per year, and does not provide a budget
scenario where Kāinga Ora is limited to the funding agreed by the Government.
Asset Procurement and Management
27 The review finds that the breadth of Kāinga Ora activities, and challenges with
opaque apportionment of costs and revenue within their internal systems, makes it
difficult to identify the underlying drivers of financial results.
28 Despite the increase in developer-led acquisitions, Kāinga Ora is struggling to meet

its delivery targets. In the absence of acquisitions, their build programme would not
be meeting its annual targets. Over the last five years, it built on average 2,400 gross
homes each year, growing the stock by on average 1,600 net homes each year. Kāinga
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Ora forecasts procuring on average 4,600 new build homes each year and are already
not meeting this plan.
29 The review notes stakeholders provided anecdotal examples that Kāinga Ora has paid
above market value for land. This is said to often result from uncertainty about the
potential yield of those land purchases, which Kāinga Ora does not price in the same
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way as other participants. The consequence is that Kāinga Ora may own land parcels
that are not financially viable to develop. The cost of holding this land is not
adequately factored into decision-making by Kāinga Ora because the Kāinga Ora
Land Programme provided operating funding to compensate Kāinga Ora for holding
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costs.
30 The review finds that asset management costs are forecast to become unsustainable.
Kainga Ora has an aged portfolio, and the review notes that with the current property
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assessment and past investment in these properties, it is reasonable to expect that over
time the revenue stream (market rent) will not keep pace with the increased
maintenance costs associated with older house. Further, inflation of build and
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maintenance costs has been significant over this period and various supply chain
issues have been well documented. However, it also finds that the level of growth in
maintenance and FTE costs seen over these two years is well above what could be
reasonably expected to be driven by the factors above.
31 Kāinga Ora’s own independent review of maintenance activity highlighted limited

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whole of asset planning in assessing maintenance needs, limited management

oversight of maintenance partner activity with delegations set too low, and incomplete
data of asset condition and data mostly held by independent contractors.
32 The review notes that “based on our discussions with the board, we consider that there
is also scope to reduce costs through more flexible management of stock and
landholdings. We understand that the bar for divestment of property is currently
prohibitively high. If it is not economically sensible for Kāinga Ora to develop due to
the quality of the land or inability to fully utilise plan-enabled capacity, then
consideration should be given to divesting it to enable private development to take
place. A similar principle would apply to situations where the market value of
individual properties outweighs the benefits of redeveloping them into new social
housing. In both cases, the proceeds from any individual house sales can be reinvested
into more cost-effective provision of social housing.”
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Institutional remit
33 The review finds that the remit of Kāinga Ora is broad and has increased since its
establishment – often with large new funding streams attached, as with the Kāinga
Ora Land Programme and Large-Scale Projects. Its legislation, Ministerial letters of
expectation and Government Policy Statement on Housing and Urban Development
make for a complex web of overlapping and possibly contradictory expectations. The
review finds it does not appear that this expansion has not been accompanied by a
focus on value for money, or on connections back to the organisation’s overall
impact.
Recommendations
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34 The panel makes seven recommendations that propose significant change to both
Kāinga Ora and the social housing system:
34.1 Recommendation 1: To strengthen government accountability for social

housing outcomes, Cabinet considers consolidating government funding for
housing outcomes under the Minister of Housing, who will be supported by
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the Ministry of Housing and Urban Development (HUD) to administer that
funding on behalf of the Crown, together with expectations of formal reporting
of outcomes by a third party.
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34.2 Recommendation 2: To prioritise tenant outcomes and cost-effective
provision of housing support and supply, the Minister of Housing directs HUD
to become an active purchaser that takes a social investment approach to cost-
effectively improving housing outcomes.
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34.3 Recommendation 3: To better enable tenants and local communities to meet
their diverse housing needs and aspirations, government policy and investment
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builds on the advancements made in place based and specialised approaches to

increase local decision making regarding the management and ownership of
housing.
34.4 Recommendation 4: To increase choice, diversity, and innovation,

Government enables more providers to participate in the provision of social
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housing by:
a) the purchaser contracting with Kāinga Ora in a similar manner that it does
with Community Housing Providers (CHPs)
b) addressing barriers in order to increase provision of social housing by

CHPs, Iwi and Māori, and other providers
c) ensuring the funding model incentivises delivery where needed and is

responsive to the different needs of tenants
d) implementing alternative delivery models based on local decision-making

and specific tenant needs, with pathways for communities to manage
Kāinga Ora housing stock.
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34.5 Recommendation 5: To ensure that Kāinga Ora has the leadership and
mandate to effectively implement the recommendations of this Review,
responsible Ministers:
a) refresh the Kāinga Ora board with a focus on the skills to implement the
recommendations of this Review
b) issue simplified government expectations and direction to Kāinga Ora
c) report back to Cabinet with options to narrow the scope of Kāinga Ora
activities to social housing and ensure it has the leadership and governance
expertise to deliver effectively, including repealing the Kāinga Ora –
Homes and Communities Act 2019 and designating Kāinga Ora as a
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Crown Company under Schedule 4A of the Public Finance Act 1989 with
social and financial objectives.
34.6 Recommendation 6: Responsible Ministers set an expectation that the board

will develop a credible and detailed plan to improve financial performance
with the goal of eliminating losses. The board should be held accountable for
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implementing this plan through regular reporting to Ministers, supported by
on-going engagement between the Kāinga Ora board, Kāinga Ora
management and HUD.
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34.7 Recommendation 7: To generate momentum toward the recommendations
above, the Panel recommends the following timeframe for key milestones.
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Within 3-6 months In 12-18 months in 2-3 years
•Strengthen Kāinga •Implementation of •Nationwide social

Ora governance by any change to Kāinga housing investment
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refreshing the board. Ora legal entity. strategy developed.

•Cabinet decisions on •Active purchaser role •Supported by place-
any necessary of HUD developed based housing
changes to Kāinga Ora and being strategies and
legislation and entity implemented delivery plans for all
form. •Place-based solutions tenures.
•Set new Ministerial in four locations being •Kāinga Ora no longer
expectations with implemented, making operating
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HUD and Kāinga Ora. together with plans to losses.

•HUD and Kāinga Ora establish Community
to agree a refreshed Housing Associations.
contract. •Funding and delivery
•Cabinet make settings in place to
decisions on support contestability
consolidation of and better outcomes
Crown funds to for tenants.
inform Budget 25.
Approach to recommendations in the Report
35 The review makes recommendations about both Kāinga Ora and the wider social
housing system because the review panel considered the performance of Kāinga Ora
is significantly impacted by the performance of the wider system. Taken together, the
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recommendations propose significant change to both Kāinga Ora and the social
housing system.
36 The recommendations set a clear direction of travel for the social housing system, but
many details around implementation are left for responsible Ministers and the
Government to decide.
37 Given the scale of change recommended and the potential for significant fiscal
impacts, we propose taking time to fully consider the recommended changes.
38 This will include considering alignment of, and sequencing with, broader Government
priorities, including targets to reduce emergency housing use by 75%, implementation
of the Going for Housing Growth plan, and reform of the Resource Management Act.
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39 In addition, we will soon take a paper to Cabinet proposing a “first principles” review
of current government housing funds, with a view to improving value for money, and
establishing clarity about what the government is attempting to achieve with its large
number of (expensive) housing programmes.
40 However, there is an immediate need to take action to address Kāinga Ora
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performance and its fiscal impact. We must make changes now to improve its
governance and financial sustainability. We consider that the review makes strong
recommendations in this area that we should accept and progress as soon as possible:
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40.1 Recommendation 4(a): Aligning contractual arrangements across Kāinga Ora
and CHPs
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40.2 Recommendation 5(a): Refreshing the Kāinga Ora Board
40.3 Recommendation 5(b): Issue Simplified Direction to Kāinga Ora

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40.4 Recommendation 6: that Ministers set an expectation that the Kāinga Ora
Board will develop a credible and detailed plan to improve financial
performance with the goal of eliminating losses
41 We therefore propose responding to the report in two steps:

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41.1 Immediate actions on the accepted recommendations, which includes

refreshing the Board, sending a new letter of expectations, and beginning work
in a new delivery contract with Kāinga Ora.
41.2 A report back to Cabinet in August 2024 by the Minister of Housing which
and proposed approached and a staged programme over the short and medium
term.
42 The Minister of Housing also intends to report back to Cabinet in late 2024 on
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Immediate actions
43 We propose to accept the recommendations outlined above in paragraph 24, and

progress the corresponding actions immediately:
Action Next step
Establish a social housing contract with Kāinga Ora: We have directed HUD
to develop a contract and
Placing consistent contractual requirements on social initiative negotiations
housing providers will allow Kāinga Ora performance with Kāinga Ora.
to be benchmarked against CHPs, enable Ministers to
become more active purchasers, and provide additional
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levers with which to hold Kāinga Ora to account for
delivery.
Appoint new directors to the Board: We are already in

discussions with
There is an immediate need to bring the Board to at potential candidates for
least the minimum membership requirements by the roles.
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appointing two Directors including the Chair. Selecting
high-quality candidates will be critical to the long-term
performance of Kāinga Ora, particularly for the Board
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Chair, which will take time particularly given the
significance of the Independent Reviews findings.
Send a new letter of expectations to the Board: We have directed HUD

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to draft a new letter.
Over the past few years, Kāinga Ora has been issued
numerous letters of expectations as new functions have
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been established and have in some instances left

interpretation of the extent of activity to Kāinga Ora.
Simplified directions will enable the Board to govern
more effectively. Ministers can provide clarity and
simplified direction about the scale and standard of the
functions that Ministers expect Kāinga Ora to perform
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within the existing legislative expectations. This would

support the refreshed Board to meet expectations.
Request a plan from the Board: We will communicate

this request to the Board
We need a way out of the current financial position. The in the new letter of
refreshed Board will be best placed to drive this, so we expectations.
will request that they develop a credible and detailed
plan by November 2024 to improve financial
performance with the goal of eliminating losses as
quickly as possible. The plan should cover investment
scenarios, approach to Treasury and liquidity
management practices, detailed implementation plans.
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Other immediate actions

44 We also recommend that Cabinet agree to bring Kāinga Ora back in line with Cabinet
Office Circular 23(09), by reducing the delegation to the Board for individual
investment decisions to $35 million (from $50 million, transferred over under the now
defunct Investor Confidence Rating system).
45 We will also progress the following, related, actions that HUD and Treasury officials
have recommended:
45.1 Ministers set revised purchasing intentions for delivery in 2024/25,

strengthening regional delivery purchasing expectations and setting thresholds
for Ministerial consultation on changes.
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45.2 Implementing changes to the debt facility agreement between the Treasury and
Kāinga Ora to enhance reporting obligations as agreed by Joint Ministers.
46 In addition, we have requested that HUD, in consultation with the Treasury, provide
advice on additional measures required to ensure the November 2024 plan meets
Ministers’ expectations. This could include additional monitoring, a variation to the
social housing contract with Kāinga Ora.
Approach to remaining recommendations O

facility agreement between Kāinga Ora and the Treasury, and leveraging the new
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47 The panel indicated in recommendation 7 that the time horizon for their proposed
changes is over a few years given the nature and size of the system change required to
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achieve the end state.
48 It is proposed that additional advice is brought to Cabinet in August 2024 before

formally responding to the remaining recommendations.
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49 At this stage, we expect that this will involve consideration of:
49.1 Principles to approach a consolidation of housing funding
49.2 Approaches for HUD to take a more active purchaser role

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49.3 Approaches to taking increasing placed-based social housing delivery
49.4 Approaches to address barriers to greater delivery by CHPs, Iwi, Māori and
other providers
49.5 A high level plan to undertake the policy work on funding settings and scope
of Kāinga Ora.
Cost-of-living Implications
50 Reducing housing costs is critical to reducing the cost of living. Deteriorating housing
affordability is putting pressure on household and government finances. The actions
proposed in this paper intend to improve the performance of Kāinga Ora in providing
services to kiwis struggling with the cost of living.
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Financial Implications
51 There are no direct financial implications as a result of this paper. The immediate
actions are expected to result in substantial improvements to the financial
performance of Kāinga Ora and, in turn, the fiscal position over the coming years. We
will consider the fiscal implications of the approach to the remaining
recommendations when we report back in August 2024. Depending on the proposed
approach, these could be significant.
Legislative Implications
52 There are no direct legislative implications as a result of this paper. However, there
may be legislative implications of the response to the recommendations that we are
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still considering.
Population Implications
53 There are no direct population implications of this paper. However, housing is a

critical element of a productive and inclusive society. It is an enabler of a range of
other outcomes for tenants and communities, both socially and economically. This is
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evidenced through a broad range of longitudinal research and data. Kāinga Ora is a
key part of delivering these outcomes. It manages over 72,000 properties providing
homes to about 185,000 people.
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Population group How the proposal may affect this group
Māori (individuals and Proposals in this paper aim to improve outcomes for social
whanau) housing tenants. Social housing customers who identify as Māori
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make up 35% of the customer base. The disproportionate
representation of Māori experiencing housing need and demand
has increased, 52% of Housing Register applicants are Māori.
Children Proposals in this paper aim to improve outcomes for social
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housing tenants. Approximately half of the population in Kāinga

Ora public housing are children. Sole-parent families are the
largest cohort. Helping parents and caregivers live well will have
intergenerational benefits and reduce the cycle of disadvantage.
Disabled people Proposals in this paper aim to improve outcomes for social
housing tenants. Between March 2022 and April 2023
approximately 70% of Kāinga Ora customers were suffering, at
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one point in time or another, with a form of disability, and that

mobility concerns were most prevalent.
Human Rights
54 There are no inconsistencies with International Human Rights law or the Bill of
Rights Act 1990 from this paper.
Use of external resources
55 The report of the Independent Review of Kāinga Ora was the only external resource
used in the preparation of this paper.
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Consultation
56 The Kāinga Ora Board provided feedback on the interim report to the panel on 15
April 2024. Ministers received this feedback from the Acting Chair of Kāinga Ora on
the same day. While the Board is broadly comfortable with the review
recommendations, they did provide detailed feedback on the contents of the report.
57 The independent panel has assessed the Board’s feedback and made changes to the
interim report in response to this feedback. HUD and Treasury, as secretariat to the
Review, supported the Panel in making these changes.
58 The Department of Prime Minister and Cabinet and Public Service Commission have
been informed.
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59 The Housing Ministerial Group, made up of the Minister of Housing, Minister of
Finance, Associate Minister of Housing, Minister for Social Development, Minister
for Building and Construction, and the Parliamentary Under-Secretary for RMA
Reform, met on 10 April to discuss the interim report’s findings, and the
Government’s initial response.
Communications
60
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We intend to announce the Government’s response on 20 May 2024.
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Proactive Release
61 We intend to proactively release this Cabinet paper and the final report of the review
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in full on 20 May 2024, subject to Cabinet approval.
62 We also intend to proactively release a package of advice supporting documents

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related to Kāinga Ora and the review on 20 May 2024.
Recommendations
The Minister of Finance and the Minister for Housing recommend that the Committee:
1 note that in December 2023, as part of its 100-day plan, the Government announced
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an independent review of Kāinga Ora [100-23-MIN-0011 refers]
2 note that the final report of the Independent Review of Kāinga Ora has been delivered
3 agree that the Government’s response to the Independent Review occur in two steps:
3.1 Immediate actions on four of the recommendations, including refreshing the

3.2 A report back to Cabinet in August 2024 by the Minister of housing which
and proposed approaches and a staged programme over the short and medium
term.
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4 note that the Minister of Housing intends to report back to Cabinet in late 2024 on
5 accept, as part of the first phase of the response, the following Independent Review
recommendations:
5.1 Recommendation 4(a) to change the Kainga Ora contract to align with
expectations with Community Housing Providers
5.2 Recommendation 5(a) to refresh the Kāinga Ora Board
5.3 Recommendation 5(b) to issue simplified direction to Kāinga Ora
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5.4 Recommendation 6 that Ministers set an expectation that the Kāinga Ora
Board will develop a credible and detailed plan to improve financial
performance with the goal of eliminating losses
6 note that the Minister of Housing will direct the Ministry of Housing and Urban
Development to progress work to align contractual arrangements between Kāinga Ora
and CHPs;
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note that the Minister of Finance and Minister of Housing will refresh the Board of
Kāinga Ora by at least appointing a new Chair and two new directors;
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8 note that the Minister of Finance and Minister of Housing will issue a new letter of
expectations to the new Chair, simplifying direction and expectations, and requesting
the Board deliver a credible and detailed plan to improve financial performance by
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November 2024;
9 invite the Minister of Housing to report back to Cabinet in August 2024 on the
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response to the remaining review recommendations, including consideration of:
9.1 Principles to approach a consolidation of housing funding with final

recommendations in November 2024
9.2 Approaches for HUD to take a more active purchaser role

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9.3 Approaches to taking placed based approaches to social housing delivery
9.4 Approaches to address barriers to greater delivery by CHPs, Iwi, Māori and
other providers
9.5 A high level plan to undertake the policy work and factors to be considered for
further advice in late 2024 on funding settings and scope of Kāinga Ora
9.6 changes to the debt facility agreement between the Treasury and Kāinga Ora.
10 agree to reduce the delegation to the Board for individual investment decisions to $35
million, in line with Cabinet Office Circular 23(09) (from $50 million, transferred
over under the now discontinued Investor Confidence Rating system), superseding
any previous Cabinet decisions on the level of delegation to the Board
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11 approve the release on 20 May 2024 of:
11.1 the Final Report of the Independent Review of Kāinga Ora
11.2 this Cabinet paper.
12 note that we intend to proactively release a package of advice and supporting

documents related to Kāinga Ora and the Independent Review of Kāinga Ora on 20
May 2024.
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Hon Chris Bishop Hon Nicola Willis
Minister for Housing Minister of Finance
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COMMERCIAL-IN-CONFIDENCE

Joint Report: Kāinga Ora Spending, Funding and Financing Review

Date: 13 July 2023 Report No: T2023/1385

Action sought Deadline

Contact for telephone discussion (if required)

Name Position Telephone 1st

Geraldine Treacher Acting Director, s 9(2)(a) s 9(2)(a)

Minister’s Office actions

Return the signed report to Treasury.

Joint Report: Kāinga Ora Spending, Funding and Financing

3. In Budget 2023, Vote Housing and Urban Development received an additional:

b. $71.921 million in operating expenditure for Urban Development functions to

4. The public housing funding outlined above includes:

T2023/1385:Kāinga Ora Spending, Funding and Financing Review 6

b. Retrofits and renewals could be undertaken at a faster pace and/or over a

Customer Programme and Tenancy Support

a. Support good access to jobs, amenities, and services, and

a. Respond to far greater complexity in the Kāinga Ora customer base

c. Support customers to be well connected to their communities, lead lives with

need are supported and housed, and

increase in the cost of delivering tenancy support services. 7

T2023/1385:Kāinga Ora Spending, Funding and Financing Review 9

T2023/1385:Kāinga Ora Spending, Funding and Financing Review 11

Joint Report: Kāinga Ora Spending, Funding, and Financing Review –

Date: 01 September 2023 Report No: T2023/1416

Contact for telephone discussion (if required)

Name Position Telephone 1st Contact

Spending, Funding and

Minister’s Office actions (if required)

Return the signed report to Treasury.

Total Capitalised Costs

Independent Quantity Surveyor Analysis

ii. Kāinga Ora operating costs (including overheads).

Data and System Limitations

Agree / Disagree Agree / Disagree

Hon Dr Megan Woods

Joint Report: Kāinga Ora Spending, Funding, and Financing

a. The cost to build public housing over recent years.

b. Linking the cost to build public housing to Budget 2023 assumptions.

i. Validating build costs vs. non-build costs.

ii. Validating operating costs (including overheads).

iii. Validating methodologies for Developer-led projects, and the value-for-

b. Approximately $4 billion of borrowing up to June 2024 to meet the previous public

3. At an individual unit level, the broad financial assumptions included:

a. Up to $760,000 per new build (both additional and renewal),

21. With developer-led projects expected to be a significant proportion of delivery of

b. Compare that cost to a modest market home (i.e., KiwiBuild).

How these numbers compare to Budget 2023 funding

b. Kāinga Ora operating costs (including overheads).

c. Valuation methodologies for Developer-led projects, and the value-for-money that

This is likely to take several years to be fully implemented and operational.

Date: 15 December 2023 Report No: T2023/2157

Action sought Deadline

Name Position Telephone 1st Contact

Glenn Phillips Head of Crown Entity s 9(2)(a) s 9(2)(a)

Minister’s Office actions (if required)

Return the signed report to Treasury.

Treasury: 4900548v1 IN-CONFIDENCE

Geraldine Treacher Glenn Phillips