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Council Controlled Organisation Direction and Oversight
Committee
08 April 2025
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Haumaru
Housing - update to operating model because of funding changes
File No.: CP2025/04989
Te take mō te
pūrongo
Purpose of the report
1. To
provide an update on the Haumaru Housing operating model, following a change in
central government funding for social housing.
Whakarāpopototanga matua
Executive summary
2. The Haumaru Housing Limited Partnership (Haumaru Housing) provides
affordable housing services for older people. It is a joint venture between
Auckland Council and the Selwyn Foundation (Selwyn) and is a registered
community housing provider (CHP).
3. Last year central government changed the criteria for allocating the
Income-Related Rent Subsidy (IRRS) to community housing providers. The IRRS
subsidy that Haumaru receive is now capped at 950 units (64 percent).
4. Since then, Haumaru Housing have been considering their operating
model and the level of rent to charge new tenants that do not receive the IRRS
subsidy. They have decided to rent the vacant units at 50 percent of market
rent. Haumaru Housing believe this market rent subsidy is an appropriate
balance between affordable rent for older people who are struggling with
housing affordability, but still at a level where the organisation can remain
financially viable.
5. Council
and Selwyn will continue to monitor the financial performance of Haumaru
Housing. There are risks associated with unforeseen costs coming from an aging
housing stock or further funding changes from central government.
6. A
reduced income level for Haumaru Housing (than previously anticipated) will
likely reduce their financial capacity to fund and finance growth in the
housing portfolio, which is a goal of the partnership. However the Minister of
Housing recently announced financial support for community housing providers to
borrow funds at low interest costs for new social housing units (27 March
2025). The implications of this announcement for Haumaru Housing are still
being explored.
Ngā tūtohunga
Recommendation/s
That the Council Controlled
Organisation Direction and Oversight Committee:
a) whiwhi / receive the update from Haumaru Housing on their impact of
the reduction of central government funding.
b) tuhi tīpoka / note that Haumaru Housing will continue to
provide six-monthly performance reports to council, allowing shareholder
monitoring of their financial performance
Horopaki
Context
Auckland
Council set up Haumaru Housing to provide affordable housing for older people
7. Auckland
Council owns the majority of the property portfolio of 1,475
rental units across 62 villages, used to house older people across Auckland.
8. This property portfolio was established by the previous Waitakere,
Franklin, Manukau, North Shore and Papakura Councils. Auckland Council
previously managed the portfolio and in 2016 reviewed, and then standardised,
the rent at 30 percent of tenants pre-tax income. These
tenants are referred to below as ‘legacy tenants’.
9. Haumaru Housing was set up late 2016 as a joint venture (limited
liability partnership) to take on the provision of affordable housing for older
people and manage the portfolio. Council is a 49 percent shareholder and Selwyn
is the other 51 percent shareholder. Selwyn also assists with the operational
side of the Haumaru Housing business.
10. The partnership was set up to:
• access the income related rent subsidy (IRRS) provided by central
government.
Under this subsidy tenants are identified
from emergency or social housing registers. ‘IRRS tenants’
pay 25 percent of their net income as rent, with central government funding the
balance between the tenant’s payment and the market rent.
The IRRS funding is not available to
local authorities, however as council is a minority shareholder this
prohibition does not apply to Haumaru Housing.
Note that while the IRRS tenants
receive this subsidy, legacy tenants remain on the previous rate of 30 percent
of pre-tax income.
• improve the housing stock and tenancy management over time, ensuring they were fit for purpose
• use the expertise which Selwyn could bring to supporting older
people
• grow the number of units of social housing for older people.
Central
government have changed the way they fund community housing providers
11. Last year central government (the Ministry of Housing and Urban
Development) made changes to the IRRS funding criteria that had an immediate
effect on Haumaru Housing. The amount of IRRS funding Haumaru receive is now
capped at 950 units (64 percent).
12. The central government funding change came without notice. They have
advised that the change in funding criteria is to prioritise moving people out
of emergency accommodation.
13. In response to the funding cap, the Mayor, Haumaru Housing and
Selwyn have all written to the relevant Ministers, to ask that the IRRS funding
levels be reinstated. Central government have not agreed to this request.
Tātaritanga me ngā
tohutohu
Analysis and advice
The
change in central government funding criteria has required a review of the
Haumaru Housing operating model
14. Previously Haumaru Housing expected a gradual increase in the rent
they received, to effectively reach a market rent level for all units (through
the IRRS subsidy). The increase in revenue was
anticipated to contribute to the maintenance and renewal of their units and to
fund growth in the number of properties.
15. Following the
capping of IRRS funding, the Haumaru Housing Board has now
reviewed options for their operating model, including tenancy and asset
management. They have advised that they are seeking to achieve two outcomes:
· Continuing to provide housing for older Aucklanders struggling to
meet market rent, with secure, warm dry homes in well located communities
· Providing this housing in a way that does not compromise the
long-term financial sustainability of the organisation.
The
Haumaru Housing Board have now decided criteria and rent levels for new tenants
(that do not receive IRRS funding)
16. Haumaru Housing have advised that they are moving to a subsidised
market rent model for the vacant units that are not able to receive the IRRS
funding. There will be no central government funding top-up to a market rent
for these units, as happens with the IRRS units.
17. The relevant units will be refurbished and let to older adults at 50 percent of market
rent. Eligibility criteria (other than age), set by the board for subsidised
market rent tenants will include:
· Ability to live
independently
· New Zealand
residency and connection to the Auckland region
· Income, savings,
asset ownership and debt history.
18. The subsidised market rental model will mean there is an additional
variation in the levels of rent paid by different types of tenants. These are
summarised in table 1.
Table 1: Summary of rent levels to be
paid by Haumaru Housing tenants
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IRRS tenants
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IRRS tenants pay 25 percent of their
net income as rent, with central government covering the balance between the
tenants payment and the market rent for the property.
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Tenants in 950 ‘IRRS’
units
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Legacy tenants
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Legacy tenants pay 30 percent of
their pre-tax income (adjusted annually).
This level of rent was set by
Auckland Council prior to formation of Haumaru Housing.
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Tenants in remaining 525 units
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Subsidised market rent tenants
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Subsidised market rent tenants will
pay 50 percent of market rent (adjusted annually).
New tenants with rent level set by Haumaru Housing.
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19. Haumaru Housing have advised they have undertaken peer-reviewed
financial modelling, taking into account the impact on the whole business over
a 10-year period. They are satisfied that that the level of subsidised market
rent for tenants is financially sustainable, on the assumption that no
extraordinary changes are made to current policy, ownership and financial
settings by central government or shareholders.
20. Haumaru Housing is also satisfied that there is demand for a
subsidised market rent offering for older Aucklanders in housing need. No
difficulty is anticipated in finding older adults to fill the units with the
subsidised market rent.
21. It
has been noted that the different rent levels for tenants has the potential to
create issues in the villages. Haumaru Housing are conscious of this issue and
will look to manage this wherever possible. All tenants will continue to get
the same operational support, such as regular community manager contact, invitations
to village activities and repairs and maintenance.
Implications
and risks for council
22. The
government’s decision to cap the IRRS revenue that Haumaru Housing
receives, has been noted as a potential budget risk to council as shareholder[1].
With additional tenants in the vacant units (as they arise), this risk is
partially mitigated. However, council (and Selwyn) will continue to monitor
Haumaru Housing's financial performance and the impacts of this change, through
their six-monthly financial reporting.
23. Another
concern is the age of the housing stock, that Haumaru Housing inherited from
council. While the quality of the portfolio has been improved over the past
seven years, most villages were built before 1980, with an overall average age
of 48 years[2].
With less revenue than previously anticipated, there will be less funding for
asset management and replacement housing stock than previously anticipated.
24. With
reduced income levels (than previously anticipated), it may also be less likely
for Haumaru Housing to be able to find opportunities to grow the number of
housing units, which was another goal of the partnership.
Tauākī whakaaweawe
āhuarangi
Climate impact statement
25. Haumaru Housing’s Environmental Sustainability Strategy, and
its implementation is not expected to be impacted.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
26. Haumaru Housing services and actions contribute to outcomes in the
Auckland Plan and the Age-friendly Auckland Action Plan. This is not
anticipated to change.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
27. Information
on the reduction in central government funding has been sent to all local board
members. Local board members have been advised of the report today and are able
to send questions to the Chair for consideration.
Tauākī whakaaweawe
Māori
Māori impact statement
28. Currently 11 percent of Haumaru Housing tenants identify as
Māori (July 2024). Haumaru Housing are not proposing any criteria around
ethnicity for the new subsidised market tenants.
Ngā ritenga
ā-pūtea
Financial implications
29. In
the supporting materials for the 2025/26 Annual Plan consultation document, it
was noted the government’s decision to cap IRRS revenue that Haumaru
Housing receives presents a potential budget risk to council for the upcoming
financial periods.
30. As
noted above, the financial risk to the council, is alleviated with the move to
subsidised market rent tenants (in non-IRRS units). However, council will
continue to monitor Haumaru Housing's financial performance, especially in
light of this change, through the six-monthly financial reporting to the
council.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
31. The
key risk to council is the ongoing financial stability of Haumaru Housing as an
organisation, outlined above.
Ngā koringa ā-muri
Next steps
32. Haumaru Housing will continue to provide six-monthly performance
reports to council, allowing shareholders to monitor their financial
performance.
Ngā tāpirihanga
Attachments
There are no attachments for
this report.
Ngā kaihaina
Signatories
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Author
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Rachel Wilson - Principal Advisor
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Authoriser
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Alastair Cameron - Manager CCO/External Partnerships
team
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