Proposal to grow social housing through a $30 million loan

Christchurch City Council is considering a $30 million loan to the Otautahi Community Housing Trust (the Trust) to help them build 130 additional social houses for Christchurch.

Project status: Decision made
Open for feedback: 31 August 2018 to 1 October 2018

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Consultation has closed


We received 58 submissions on this consultation.

Consultation feedback(external link)
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The Social, Community Development and Housing Committee minutes recommending to Council to approve a loan of up to $30 million to the Otautahu Community Housing Trust.

Social, Community Development and Housing Committee minutes(external link)
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The Council resolution to approve a loan of up to $30 million to the Ōtautahi Community Housing Trust for the purposes of developing at least 130 new social housing units on the basis that all borrowings and costs are to be repaid by the Trust within 25 years of the initial advancement of funds.

Council resolution(external link)


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What is being proposed?

We need to increase the number of social homes within Christchurch to help address current and future need. However, we have a long-standing policy of operating our social housing activity at no cost to ratepayers. Existing social housing was initially financed through low or no interest loans from the Crown, with rent revenue funding the repayment. In order to keep our ‘rates neutral’ policy we need to come up with some different solutions.

A loan of $30 million to the Trust would help them to build an additional 130 social houses for Christchurch. The Trust will also replace 50 existing ‘old and cold’ Council units, with 50 new, warm, dry units. That would mean there would be 180 new units (50 replacements and 130 additional) which would benefit both existing tenants and those currently on the Ministry of Social Development’s social housing waitlist.

The Council will negotiate normal commercial terms with the Trust and any loan would be secured against the Trust’ assets.  The Trust will need to pay back the loan and all Council’s costs, with repayments starting before the new units are complete, so the Trust will need to fund this from existing revenue.

Why is this approach being proposed?

To ensure that the most vulnerable are housed, Council (and now the Trust) sets rents that are affordable.  At this level of rent, the return from Council’s portfolio is not enough to cover current operational and maintenance needs, and build the additional units that Christchurch requires.  If we want to continue to provide social housing at no cost to the ratepayer, we have to work with partners to build these new homes. 

Some community housing providers, like the Trust, can access additional revenue, which is not available to Council.  This additional revenue helps generate sufficient income to service loans and meet all operational costs.  However, while community housing providers may have sufficient revenue to service a loan, they may not have sufficient equity and security to be able to satisfy usual commercial lenders such as banks. The Council is in a position to help, provided normal lending criteria are met.

The Trust is currently in advanced negotiations for a long-term housing supply contract.  The contract, together with the rents paid from tenants will effectively guarantee sufficient revenue to meet all costs, including repaying all Council’s costs (the loan, interest and any administrative costs). 

The $30 million loan would not proceed if the Trust does not secure this long-term supply contract to Council’s satisfaction.   

How did this proposal come about?

Council wants new social housing to be built within Christchurch, to meet both current and anticipated needs. 

While Council has not set a target, community feedback through the Long Term Plan 2018-2028 consultation process suggested that a minimum Council needs to return to pre-earthquake levels, which would mean adding at least 366 units.

What alternatives has Council considered?

We have considered building new social houses ourselves. However, at this time we cannot guarantee that we can generate sufficient revenue from rents and other sources to meet all costs and still remain rates neutral.

We have also considered letting the Crown, through Housing New Zealand, meet social housing growth needs in Christchurch.  However, community feedback through Council’s Long Term Plan and other consultation processes tells us that the Christchurch residents think it is important for us to be involved in growing social housing.

We know that demand for social housing is increasing.  As at March 2018 there were 552 people in Christchurch city waiting for social housing – an increase of 120 people since March 2017. In the next ten years it is predicted that Christchurch will need an additional 150-180 units a year – for Council, who currently provides about 30% of social housing in the city, that would mean building 50 new units a year. We therefore believe it is not appropriate to do nothing.

Finally, we have considered if there are others we could partner with to grow social housing.  We know there are others with ideas and proposals in development, but we are not aware of any that are as advanced as the Trust’s proposal.  We welcome the opportunity to talk to others about their ideas and proposals as we know that the need for additional social housing is more than the 130 units under consideration in this proposal. 

What is the Otautahi Community Housing Trust?

The Otautahi Community Housing Trust (the Trust) is an independent community housing provider and the largest non-governmental social housing provider in the South Island.  It provides social housing services through properties it leases from the Council.  It is also looking to develop new social housing in its own right. 

What is social housing?

Social housing is not-for-profit housing programmes to help low income households and other disadvantaged groups to access appropriate, secure and affordable housing.
Council has been providing affordable accommodation to low-income residents of Christchurch for almost 80 years and currently owns 2,478 units located across the city and on Banks Peninsula.
While Council has not set a target for social housing, community feedback through the Long Term Plan 2018-2028 consultation process suggested that, as a minimum, Council needs to return to pre-earthquake levels, which would mean adding at least 366 units. As a result, Council resolved to make provision for a $30 million financing facility (repayable on a ‘rates neutral’ basis) to support the building of additional social housing in the city from 2018/2019.

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