Govt Approves Reforms to Empower CHPs in Social Housing Delivery

“Social housing plays a critical role in New Zealand’s housing market, offering affordable rental options for low-income tenants,” Minister Bishop stated.

The Government has approved a series of changes to eliminate barriers faced by Community Housing Providers (CHPs) in delivering social housing, Housing and Associate Finance Minister Chris Bishop announced today.

“Social housing plays a critical role in New Zealand’s housing market, offering affordable rental options for low-income tenants,” Minister Bishop stated. “CHPs are already housing around 13,700 households, and these reforms will enable them to do even more.”

Creating Equity Between CHPs and Kāinga Ora

The Government seeks to create a level playing field for CHPs and the state housing agency Kāinga Ora – Homes and Communities in accessing funding and resources for social housing projects. “We are neutral about whether the state or the community sector provides social housing, but we want to ensure CHPs are not at a disadvantage when it comes to financing and investment opportunities,” said Mr. Bishop.

Despite access to Income-Related Rent Subsidies (IRRS) since 2014, CHPs often struggle to secure finance at rates that reflect their lower risk profile, unlike Kāinga Ora, which benefits from government-backed borrowing.

To address these disparities, the Government has introduced several measures to help CHPs access finance and reduce costs:

Contract Adjustments to Attract Investors

Changes to IRRS contracts will make revenue streams more appealing to investors by removing clauses like “termination for convenience,” extending compensation terms, and improving funding approval processes for greater certainty.

Leasing for Quick Housing Supply

Increased use of leasing for newly built, unoccupied homes where it offers value for money, enabling faster delivery of social housing.

Capitalizing the Operating Supplement

Up to $70 million in capital funding will be available upfront for new housing developments, allowing CHPs to secure financing at more competitive rates.

Addressing Financing Challenges

The Reserve Bank is reviewing standardised risk weights for CHPs, with the Government advocating for reforms that reflect CHPs’ real risk levels. Minister Bishop emphasized that current banking practices penalize CHPs, limiting their ability to borrow competitively.

To further enhance CHPs’ financial capacity, the Government is exploring credit enhancement interventions. Options under consideration include:

Direct lending or guarantees to CHPs

Establishing a Crown intermediary for financing efficiencies

Guarantees for private lenders working with CHPs

Treasury and the Ministry of Housing and Urban Development (HUD) are tasked with analyzing these options, with recommendations expected in early 2025.

Impact on Social Housing Delivery

The reforms aim to increase competition between CHPs and Kāinga Ora, improving the cost-effectiveness of social housing projects. Minister Bishop noted, “By supporting CHPs’ access to suitable finance, we’re creating stronger economic cases for building more social houses. This ensures better value for money and enables us to house more people in need.”

The Government will continue collaborating with CHPs throughout the first quarter of 2025 to refine these measures and finalize the advice to Ministers.

Aiming for Growth and Efficiency

In the long term, these reforms are expected to enhance CHPs’ capacity to expand their social housing portfolios while fostering a more competitive and efficient housing sector. “Our goal is to deliver more homes for vulnerable families and maximize the impact of our investment in social housing,” concluded Mr. Bishop.