Government will step in as future funder
Kāinga Ora Homes and Communities’ borrowing capacity has been extended by $2.75bn for the FY2022/23 year, with all future financing requirements to be sourced from the Crown, and not the private markets.
The New Zealand government agreed that borrowing from the Crown’s New Zealand Debt Management (NZDM) was cheaper and provides more certainty than borrowing from private sources.
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A spokesperson for Housing Minister Megan Woods said the state housing agency’s “total borrowing capacity is now $13bn which includes Crown and private debt,” the NZ Herald reported.
According to the June 30 annual Kāinga Ora report, there are $48.8bn assets offset by total debt of $9.7bn, up from $7.6bn the prior year.
Chris Bishop, the National Party’s housing spokesperson, said the debt capacity expansion was “a reflection of the fact that Kāinga Ora is a bloated, inefficient, dysfunctional organisation”.
“Now that the Crown is going to be the lender, it has an obligation to ensure some discipline and efficiencies there,” Bishop said.
A lower cost of borrowing has some merit, he said, as the agency had been forking out a higher premium in the private market.
“But I suspect private lenders have looked at the agency and said it’s barely a going concern as an organisation because it’s riddled with debt and they wanted a higher rate of interest,” Bishop told the NZ Herald. “So now the obligation is on ministers and the government to get KO into shape.”
Speaking about the $2.75bn new borrowing capacity, a Treasury spokesperson said borrowing from the Crown would save Kāinga Ora $16.5m.
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On the new borrowing capacity plus the level of existing Kāinga Ora private borrowing, around $66.3m would be saved, although this would take time to be realised as the current debt has an average maturity of six years.
“Any changes to forecast funding requirements for the Crown resulting from these announcements will be incorporated in the updated forecast core Crown borrowing programme, alongside the 2022 half-year economic and fiscal update in December,” NZDM said.
The office said it was working with Kāinga Ora to ensure that agency’s expenditure would be included in the Sovereign Green Bond Programme, NZ Herald reported.
“We are committed to ensuring New Zealanders in need have access to warm, dry homes,” Woods said. “We have added over 10,600 additional public homes through Kāinga Ora and Community Housing Providers, as well as over 4,000 more transitional houses.”
