Kāinga Ora's board told former Prime Minister Sir Bill English and his reviewers they were on the wrong end before the release of its report condemning the agency's performance and governance.
When it emerged on Tuesday that Engels had effectively been appointed to chair the review in a text message exchange with Housing Minister Chris Bishop before Cabinet approved the inquiry, the much-maligned council's views have been released under the Official Information Act.
English's review faulted Kāinga Ora for its loans and disbursements, rental and maintenance services, construction contracts and relationships with builders and alternative social housing providers, and the board for not having sufficient financial information. His review recommended eliminating funding for the housing function to the overseeing Department of Housing and Urban Development (HUD) and splitting public housing into at least five Crown corporations across the country.
Before the review was published by Bishop last week, a draft was submitted to Kāinga Ora for comment. His response was not released by Bisschop in a large file of background documents, but appeared on Tuesday after an OIA request.
An exchange of friendly, informal text messages was also issued between Bishop and Engels, in which Engels offered to assist with the review.
“Excellent, let's do that,” Bishop responded on November 29.
English: “I'll help if it's a short, sharp review. No public entries or field trips.”
Bishop replied: “Absolutely not. Three people. You and two others… HUD and Trsry will provide the secretariat. No involvement of KO. Independent.”
Labor has since seized on that 'no involvement from KO' to say the Bishop had a set agenda against the housing agency and says subsequent feedback from Kāinga Ora was ignored.
English and the other reviewers, businessman Simon Allen and urban development expert Ceinwen McNeil, have so far received $274,000 of the $500,000 the government allocated for the investigation in December. That amount came from a HUD budget line to provide temporary housing for people in urgent need of accommodations.
Once the English review was finished in draft, it went to Kāinga Ora, who replied in mid-April, just before English submitted it to Bishop four days later.
The Kāinga Ora paper begins with the acting board chairman, John Duncan, saying the directors were “broadly comfortable” with England's recommendations on the broader social housing system, including having HUD as the sole funder.
But detailed assumptions and comments in the draft about Kāinga Ora's finances are needed, including repeatedly correcting the assessment about the sources of funding and the responsibility of other agencies for programs and costs in the system.
And it challenges English to omit from his review an appendix detailing feedback the reviewers heard at industry meetings – which ultimately remained in the report, but with a note that the claims had not been verified.
That attachment, including anonymous comments about the board's own performance, relationship with CEO Andrew McKenzie and Kāinga Ora's maintenance, finances, costs and relationships, is described by the board as inappropriate and contains errors and omissions.
There had not been sufficient careful checking, according to the board's feedback.
More specifically, Kāinga Ora tells English that his draft review confused the agency's funding (from the government through the income-related housing benefit) with the cost of borrowing (borrowing to build houses). It also claims its research failed to understand that the Ministry of Social Development was responsible for Māori housing, and failed to understand why private developers' land costs could be lower because they did not have to redevelop existing sites.
Regarding Kāinga Ora's financial performance, the feedback documents summarize: “The conclusion that Kāinga Ora is not financially sustainable ignores the fact that we maintain a strong balance sheet, with fungible assets and very strong current and expected rental flows. Our longer-term financial models show that the situation is improving dramatically.
“Given the savings we are starting to make, the Kāinga Ora board believes the organization is financially sustainable. However, to continue the growth of new social housing, changes to financing and the financing model are required to better reflect current market conditions.”
The agency tells English that it has requested a financial and financing review led by the Treasury Department and HUD and approved by former Treasury Secretary Grant Robertson in 2022, and believes the overall financing system needs further attention has.
“The review appears to reconcile concerns about the performance of the social housing system with the performance of Kāinga Ora. The review must accurately identify the systemic changes required so that those outside the Kāinga Ora mandate can be addressed by the appropriate systemic player.”
Bishop announced that the government had agreed to English's recommendation to renew the board and appoint former Spark chief executive Simon Moutter as chairman. It also stopped funding additional social housing through Kāinga Ora.
A report to Cabinet on other recommendations, such as establishing HUD as the sole funding authority, and establishing contestability between a much smaller Kāinga Ora and new regional housing associations, would follow from July. The new Kāinga Ora chairman must submit a detailed “and credible” financial operational plan to the government by November.
Labour's housing spokesman Kieran McAnulty said: “The review was presented to the government just four days after Kainga Ora's response and no changes appear to have been made as a result.
“It was misleading for the minister to tell cabinet that there was broad support for the review within Kainga Ora, when it is clear from their response that the opposite was the case.”
It had exposed serious and credible errors and incorrect assumptions, McAnulty said.