Most Read Contributor in New Zealand, September 2016
The Government today released information memoranda to test
market appetite for social housing transfers in Tauranga and
The documents specify that it is a market sounding exercise
only, and not part of any formal procurement process.
The Government owns and operates 371 properties in Invercargill
and 1,257 in Tauranga. How many it will put up for transfer
will be decided according to the response it receives to the market
testing. 115 dwellings in Tauranga and three in Invercargill
have been excluded from sale because they are subject to iwi rights
of first refusal.
The two proposals differ in that the Government would prefer to
make a single transfer transaction in Tauranga, but is looking for
one to three transactions in Invercargill.
It is prepared to consider both lease and sale options.
Potential providers could include:
existing Community Housing Providers, and
providers who are currently operating in a related sector (a
description that would seem to take in Serco).
Providers will not be expected to provide all of the services
themselves. They could form a consortium or sub-contract
partners to bring in requisite skills.
The Government is looking for providers who can bring in
innovative thinking or new expertise to bring "a positive
change" for tenants. This may be through:
different approaches to interacting with tenants
enhancing links across social services
efficient housing stock management and maintenance, and
reconfiguring the portfolio of properties to better match
Two key contracts would be entered with the Government:
an Outcome Agreement with the Ministry of Social Development
(MSD) for tenancy and property management services paid
through an Agreed Rent per property, a proportion of which will be
paid by the tenant and the remainder through the Income Related
Rent Subsidy, and
a Sale and Purchase or Lease Agreement with Housing New Zealand
through Treasury's Transactions Unit, the value of which would
take into account the fact that the properties were to be used for
social housing. Whether a sale or lease will be
preferred is likely to be driven by strategic considerations and
perceived future demand for that social housing (i.e. lack of
demand would indicate ultimate disposal).
The memoranda contain new information that responds to some of
issues that potential participants have identified:
the Government will take vacancy risk provided social housing
properties are required and made available by a provider
providers will have specific maintenance obligations
the Government's rent supplement will be indexed to market
rent over the term of the Outcome Agreement
capital proceeds on any properties that are subsequently
divested will be shared between providers and the Government
properties will be encumbered as "social housing
properties" and the Government will take a second mortgage to
protect its position (although allowance is made for direct
agreements with debt funders where the circumstances require)
Outcome Agreements will contain step-in rights for MSD in case
of provider failure (a provision which would seem to allow an
intervention similar to the Department of Corrections in Mt Eden
providers will be responsible for rent collection from tenants,
but the Government can redirect tenant rental streams direct to
The Tauranga memorandum is available
here, and the Invercargill memorandum,
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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