The Government’s announcement yesterday that it would forgo dividends from Housing New Zealand for the next two years because it was ramping up house construction may also indicate that the proceeds from the sale of state houses are going to fall below its expectations.
As itfaces a bigger bill for the new houses it may also be facing lower than expected receipts for the house sales.
It was an untidy day for the Government with a series of confusing statements emerging from Ministers on social media and in the mainstream media.
And Labour spent the day capitalising on the confusion arguing that it showed a Government in retreat in the face of Labour’s weekend-long release of housing policy.
But by last night there was a clear narrative coming from the Beehive.
It appears that Ministers have yet to sign off Housing New Zealand’s annual Statement of Expectations.
Their last such statement (last year) forecast they would pay dividends to the Government of $54 million this year.
That $54 million has now been abandoned.
Finance Minister Bill English issued a statement last night saying: “Housing New Zealand has recently been working on its forward financial plan which has been updated to reflect an increased focus on increasing the stock of social housing.
“This revised financial plan proposes significant new capital for building houses.
As is usual for public entities requiring new capital the investment will be funded by retained earnings and fresh equity injections.
“The forecast dividends in the Budget that some have pointed to appear to be based on older HNZC numbers dating from almost a year ago.
“After Budget forecasts were finalised we were advised by HNZC that it is now forecasting a tiny surplus in financial year 2016/17 and is proposing that no dividend be paid.
“Due to the ramping up of HNZC’s social housing programme, it will require more capital, and we do not expect to receive a dividend in financial year 2017/2018 either.”
It is the phrase “increased focus on increasing the stock of social housing” which appears to be the game changer.
The Budget provided a package of $258 million spread over four years for social housing but only just under $6 million was for the “acquisition, modernisation or reconfiguration of Housing NZ state houses for social housing.”
Indeed the whole focus of the Government’s social housing policy has been to sell its social housing stock to social housing agencies.
Clearly, there ahs been a policy change and the Government is now back in the social housing ownership business.
Bill English has estimated that ultimately the sale of all the stock could bring the Government $5 billion.
But the sales process has hit some obstacles.
The only bidder for 348 houses on sale in Invercargill has pulled out.
The sale of 1124 houses in Tauranga is going ahead (at this stage) but at what price remains to be seen.
There are suggestions that the Government price hopes may have been set too high.
Not surprisingly Labour was cock-a- hoop at what it argued was the Government blinking after Andrew Little, and Phil Twyford launched a policy over the weekend to cancel the Housing NZ dividend and use the money to build more state houses.
Labour’s Finance spokesman, Grant Robertson said: “After years of insisting the dividend was necessary to ensure the Corporation was financially disciplined, Bill English suddenly decides — two days after Labour announced it would forego the dividend – it’s not needed.
“This is panicked and desperate policy on the hoof from a Government that has failed miserably to solve the housing crisis.”
But whether Labour can succeed in its bold aim of building 10,000 additional houses a year – half of them in Auckland – is open to question.
Both the Auckland Council and Housing Minister Nick Smith have recently suggested that the building industry in Auckland has reached capacity.
Last month Mr Smith said the building industry had now used up all its spare capacity and faced serious constraints with skilled labour, materials and equipment.
And Auckland Council CEO Stephen Town told the Auckland EMA last month that “Last year, we consented 9,000 (residential dwellings), and 6,000 were built. So the gap is the capacity of the industry to build the homes required.”
But the immediate problem for the Government is obviously trying to balance its books as it faces more spending on state houses and possibly less revenue from social housing sales.