The great state house sell off – small groups need not apply

Written By: - Date published: 12:19 pm, July 21st, 2015 - 9 comments
Categories: class war, housing, john key, making shit up, national, paula bennett, same old national, slippery, you couldn't make this shit up - Tags:

Remember the Government announcement that the sale of Housing Corporation houses was to build local capacity in the social sector?  Well it looks like only those organisations that have an existing capacity to purchase at least a hundred houses need apply.

From Stuff:

Charities wanting to take part in state house sales have been told, be prepared to buy big or don’t bother.

A document provided to charities and financial players who had expressed an interest in the Government’s state house “transfers” shows that the Treasury is only interested in buyers prepared to buy “at scale”.

In January John Key signalled the Government would look to sell 1000-2000 state houses to charities this year, as part of a plan to provide more social housing.

In May Finance Minister Bill English and Social Housing Minister Paula Bennett said the first houses to be sold would be in Invercargill and Tauranga.

Treasury has revealed that all of the houses in each city – 370 in Invercargill and 1250 in Tauranga – could be sold to a single buyer. At a minimum, Treasury would look at selling at least 100 houses to each buyer because of the cost of transactions.

“Our current thinking is that we will transact at scale, the upper end being the entire portfolios in each region and the lower end potentially being one or two hundred,” Treasury told potential buyers.

“Transacting at scale” is synonymous with “selling at a fire sale”.

Originally the policy was all about capacity building in the social sector.  Now it seems that the existing capacity will need to be significant before an organisation can even think about being involved.

The language used by the Government has changed dramatically over time.  For instance back in November last year Paddy Gower asked Paula Bennett this question:

… we’ve talked to some community housing providers, and they’ve said, ‘Yes, in practice, this is a good idea, but how do we get into this. It’s too much for us to do. There’s too much development required. We don’t have the capacity to do this overnight’. In fact, one of them said to us, ‘We are worried that this is about destroying the state-housing sector’.

Bennett replied in this way:

So it’s by no means about destroying the state-housing sector. In fact, it’s the complete opposite. I well accept that they’re not up to capacity, and that’s part of us starting somewhere and making a difference. So the income-related rents makes a big difference. That follows the individual and can go to a provider, but we have to start somewhere. So some of it is some of those state houses going to those community housing providers. It means they have an asset. They can then partner with either developers or with banks and borrow more money that they can build more.”

The sell off was being proposed supposedly as a means of giving local organisations the chance to get an asset and develop capacity but the reality was that it was an ugly sell off of housing required for the most needy.

Bennett kept spinning this idea that it was all about local capacity building.  For instance in May of this year 3News reported this:

Ms Bennett says providers in other regions have also expressed interest. “This is a great opportunity for these areas to deliver services locally. We know that vulnerable New Zealanders do better when services are delivered by local people for local people.

To afford the purchase of a hundred plus houses and the management of tenancies for each will require major resources.  The Australian company Horizon Housing has expressed interest.  Locally only the likes of Salvation Army could even think about doing this and the Sallies have ruled out any involvement.  Major Campbell Roberts set out a very good test that ideally would be met before any privatisation and redevelopment of properties occurred.  He said previously that if the Salvation Army became involved it would be “morally wrong for the army to force tenants out for redevelopment without their consent, and that any state houses that are sold should go to genuine local community organisations part-governed by the tenants themselves.”

So be prepared for the end result to not be the strengthening of local organisations so that social services can be provided locally but to be a wholesale sale of state houses at a knock down price.

9 comments on “The great state house sell off – small groups need not apply”

  1. wyndham 1

    “So be prepared for the end result to not be the strengthening of local organisations so that social services can be provided locally but to be a wholesale sale of state houses at a knock down price.”

    Along similar lines, the sale of our electricity companies was to provide funds for schools and hospitals – – – yes, charter schools and damn all money for our southern DHB.

  2. Draco T Bastard 2

    Nope, not surprised. The sale of the houses was always obviously a give away of state assets to the rich and most likely foreign rich at that.

    National always kowtows to the most powerful and walks all over the less powerful to do it.

  3. Bill 3

    Notice how there never was any talk of promoting housing cooperatives or any such like? Even the charities level was far too large scale. I guess overseas money can grab some nice property portfolios now…or maybe it’ll serve as a sop to the richer Pakeha who have been feeling a bit squeezed on that front of late?

  4. dukeofurl 4

    Heres another group that could afford 100+ houses ( thats the minimum not max)

    Why Madrid’s poor fear Goldman Sachs and Blackstone

    “Last year Madrid’s city and regional governments sold almost 5,000 rent-controlled flats to private equity investors including Goldman Sachs and Blackstone. At the time, the tenants were told their rental conditions would remain the same.

    But as old contracts expire, dozens of people have received demands for higher rent, been told their rents will increase dramatically, been threatened with eviction or moved out to escape the insecurity. Thousands of Spain’s poor now depend for their homes on the generosity of private equity.

    http://www.reuters.com/article/2014/10/24/us-spain-housing-specialreport-idUSKCN0ID0GP2014102

    Naturally say $ 40 mill plus ( based on power company selloff) will be spent by the government to local advisors who produce all the paperwork for such deals-

  5. This can’t be separated from the discussions around overseas investment in the NZ housing market. I had many concerns over the way the PLP handled the issue of the Auckland housing bubble and foremost among them was the – largely – uncritical acceptance that private ownership of houses is the best way to meet the core human right to live in a decent, secure and affordable home.

    Home ownership for most people, actually means long term indebtedness to a lender – these days often a predatory and foreign owned bank.

    Home ownership becomes a better option than renting when:
    there are insufficient controls on landlords / inadequate tenant protection;
    there’s a shortage of rentals so prices get pushed up;
    there’s a guarantee of a real capital gain i.e. a gain that takes account of ALL costs and which you’re in a position to realise; and,
    there’s a predominance of landlords who are small scale investors whose income from the rental is vulnerable to shifts in interests rates, rises in other costs etc.

    It also becomes an attractive option when there is a social stigma attached to renting. This stigma NEVER applies to the rich who rent or lease high end property, but it grows in strength and virulence the further down the social scale you go – and at the bottom are those who rent state or council housing. The reasons for this are complex – and not confined to NZ.

    One of the best ways to dampen a housing market wildfire is to invest in social housing – attack the stigma that attaches to it and look at creative solutions – partnerships with local housing cooperatives, options to rent to buy with a fixed term state mortgage – the options are many and varied if the political will is there.

    But doing what is best, what is logical and good for the country, what creates jobs and builds communities would bring the government into conflict with global economic forces – and we are a debtor nation.

    • Draco T Bastard 5.1

      +1

      Selling state assets/houses is nothing more than the government turning into serfs for the corporations.

  6. Stuart Munro 6

    Thatcher’s state housing sell offs were one of her most popular policies. If only she’d reinvested the money in building more, Britain would not be an economic wasteland with at best a nomadic precariat.

    Not even a pretence of public interest on the part of the thieving Gnats however – remember this when they come to trial – due process need not be followed, if we follow their example we can proceed directly to the executions.

  7. DH 7

    For those genuinely interested I’d recommend reading HNZs annual report which explains pretty clearly why the beancounters want to sell off the state houses. It also explains why English needs to discount them so heavily and why the discounts make a sale unviable.

    http://www.hnzc.co.nz/our-publications/annual-report

    Briefly; HNZ charges market rents for all state houses, the Govt pays HNZ for income related subsidies so HNZs rental income is much the same as the private sector would receive. HNZ had an operating surplus of $200 million from rental income of $1.067 billion and $16 billion of houses. Most of HNZs costs are fixed and the private sector will not be able to do much better. $200 million is a 1.5% return on equity and if capital gain is off the table, which it is with social housing, then the numbers can’t possibly work. (HNZ made a capital gain of $2.2billion last year)

    HNZ can run a cash surplus only because it has very little debt, it owns state houses freehold, and there isn’t a social housing provider in the country who can buy state houses without borrowing the money. The minute they load up with the debt they run into deficit. English has to discount the properties massively to make the numbers work and those discounts will cancel out any fiscal advantages that might be gained from selling the houses.

    Treasury will also have their eyes on the $1.8 billion in deferred tax which looks to be ‘off the books’ as far as the Crown accounts are concerned and basically gives English $1.8billion to play with.

    It’s a right old rort.

  8. DH 8

    I hope the lack of comments on this thread are due to everyone reading HNZs annual report from cover to cover but… that would be wishful thinking.

    I’ll add some more fuel to the fire……

    The beancounters have finally realised that charities aren’t loaded up with cash and that social housing only works if the providers are not burdened with debt. That basically rules out large scale social housing. They’re looking to the Aussies because they seem to have a bit more cash but, in truth, they don’t. The Aussies will only be in it to make a buck, it’s their way.

    This large scale sell-off is a sign they’ve recognised a crack in the way HNZs houses are valued and see an opportunity to give these ‘charities’ some free money courtesy of the taxpayer. The state houses are valued for the purpose of housing; valuers look at the potential rental income, property location, structures etc and come up with a market value which HNZ update each year.

    Many state houses are on land which can be subdivided and when valued for that purpose they’re worth far more than what the books say they’re worth. HNZ can’t really value them for subdivision because they’re not supposed to be selling them, so numerous state houses are undervalued.

    This purpose of this large scale sell off looks to be intended for buyers to flog off all the really valuable land which they’ll be buying at bargain basement prices as part of a bulk deal. That, along with the heavy discount a bulk buyer will receive, will (theoretically) give them the cash to cover the rest of the houses.

    Can probably work out the numbers, I’m thinking they’ll discount the portfolio by about 15% from book value. With the buyer selling off around 15% of the most valuable land that should give them 40-50% equity which should be enough to make it work for them. Will also cost the taxpayer $billions.

    They used to shoot looters yet we watch our country being looted under our very noses & the perpetrators constantly get away with it.

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