Vote Building and Housing

Transcription

1 Office of the Auditor-General Briefing to the Social Services Committee Vote Building and Housing /16 Year 3 June 2015

2 2 Assistance to the Committee The Social Services Committee is conducting an Estimates examination of Vote Building and Housing (the Vote) for the 2015/16 financial year in accordance with Standing Order 338. The Controller and Auditor-General provides Parliament with assurance on the performance and accountability of public entities. The Office of the Auditor-General s assistance to select committees with their Estimates examinations is guided by the Code of Practice for the Provision of Assistance by the Auditor-General to Select Committees and Members of Parliament. To identify lines of enquiry in this briefing we have reviewed the following documents: the 2015/16 Estimates of Appropriations (Estimates); the Statement of Intent for the administering department (Ministry of Business, Innovation and Employment (MBIE)); the 2013/14 Annual Report of the administering department (MBIE) and of Housing New Zealand; and the Minister s response to the Standard Estimates Questionnaire (SEQ). We have also drawn from other sources, including information we have received as the statutory auditor of the administering department and of other entities in the sector. In some cases, we checked factual information with the department or other entities to ensure that our advice to the committee is accurate. We did not give the entities any contemplated or actual advice in this briefing. If the Committee would like further explanation or elaboration of any aspect of this report, please contact Colleen Pilgrim, Sector Manager, on (04) or on Colleen.Pilgrim@oag.govt.nz at the Office of the Auditor-General.

3 Vote context 3 From 1 July 2015, MBIE merges nine of its former 10 votes into two votes Vote Business, Science and Innovation and Vote Labour Market and renamed Vote Housing as Vote Building and Housing. The changes do not affect the level of funding or the control of the funding for portfolio Ministers or Crown Entities. The three Votes, have total appropriations of $4,054 million: Building and Housing ($ million); Business, Science and Innovation ($2, million); and Labour Market ($1, million). Of the $ million appropriations for Vote Building and Housing, $ million are departmental, and $ million non-departmental. Figure 1: Balance of new Vote structure in MBIE 2015/ % Vote Labour Market 55.85% 37.63% Vote Business, Science and Innovation Vote Building and Housing Figure 2: Vote Building and Housing 2015/16 ($million) Departmental 93 Non-departmental 172

4 4 Summary of key issues Vote overview, structure and trends Vote Building and Housing (the Vote) is the renamed Vote Housing. Appropriations sought for the Vote in 2015/16 total $ million (2014/15: $ million), including the 2015/16 component of the multi-year appropriations (MYA), Social Housing Fund. 1 The trend table (Estimates table 1.2) has been restated 2 to show the trend without the refinancing transfer, the reclassification of expenditure type, and community housing transfers that have occurred, and earlier, substantial, changes to the Vote when transfers to the Ministry of Social Development (MSD) took place. We have constructed a graph to show appropriations as at Budget, over the last five years to give a better idea of the magnitude of the changes. As well as the multi-category appropriation (MCA) Policy Advice and Related Outputs MCA, a new MCA has been created: Community Group Housing MCA. It consists of appropriations for community group housing market rent top-up, community housing rent relief and acquisition and improvement of community group housing. It totals $ million. Social housing reform Government s social housing reform focuses on increasing housing supply (government or third party), better matching government housing stock to social housing needs, and improving the quality of Crown-owned housing. The intention is to increase the housing supply, in part by increasing the involvement of third party providers of social and/or affordable housing services. Increasingly this involves working with community housing providers and local authorities, the latter through housing accords and special housing area provisions. There have been a range of initiatives, in the current and earlier Budgets, aimed at increasing housing supply. The Committee may wish: to be updated on the contribution that housing accords and the special housing areas initiative are making to increasing the supply of fit-for-purpose social housing; to ask about the impact of the Social Housing Fund to date in improving the total number and condition of homes delivered by third party providers; and to ask about the objectives of the Tamaki redevelopment initiative and about the provisions in the plan to build Tamaki Redevelopment Company s (TRC s) capability to take over and manage the government housing stock in the area, including any upgrading that would be required to meet the quality aims of the social housing reforms. The transfer to Vote Social Development of the role of purchase of social housing, and the transfer of some social housing provider development responsibilities to Vote Finance and Vote Māori Development, necessitate data systems and statistical analysis that operate across Housing New Zealand Corporation (HNZC), MBIE, MSD, the Treasury, and Te Puni Kōkiri if housing stock is 1 2 The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, page 7. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, pages

5 to be well matched to housing needs. The Committee may wish to ask what provision has been made in the Estimates to ensure that the data analysis under-pinning the social housing reform programme is capable of informing the match of available housing stock to housing needs. 5 Canterbury housing recovery The Minister states that there were 10,500 houses destroyed in the earthquakes. He has just announced the success of the Government s Christchurch Housing Accord developments, 3 reporting the building of 191 houses of the 1,000 houses being targeted through four initiatives under the Accord. Housing New Zealand has a programme to build 700 houses and repair 5,000. The Committee may be interested in the rate of recovery in housing supply in Christchurch since the earthquakes. KiwiSaver HomeStart The demand-driven appropriation for the KiwiSaver first home deposit subsidy uptake was increased by $7.038 million (23%) to $ million in the supplementary estimates for 2014/15, 4 when it was renamed and re-scoped, as the KiwiSaver HomeStart initiative. It is now a grant for people who meet the eligibility criteria, and provides up to $20,000 to new home buyers. 5 Further changes have been made in accordance with earlier policy initiatives, to give a total for the appropriation for 2015/16 of $ million (an increase of $ million or 109%). Reporting against the appropriation will not be required: it has been granted an exemption on the grounds that the information is unlikely to be informative because the appropriation is solely for payments of the grant. 6 Nevertheless, the Committee may wish to ask how the criteria for the two initiatives differ, what additional benefits the change from the subsidy to the grant is intended to achieve in terms of meeting the needs of first home buyers, and how the related trend in the number of first home purchases will be reported. Building Regulation and Control The Budget 2014 level of Building Regulation and Control was $ million. In the 2014/15 Supplementary Estimates, a one-off additional $3.080 million was appropriated for the National Building Consent programme, and $2.222 million to address the Royal Commission recommendations. 7 The Committee may wish to ask how effectively these two matters have been dealt with. Weathertight underspend The Weathertight Services appropriation was $ million in Budget 2014 and is $ million in Budget The appropriation is budgeted to be underspent by $6.185 million in 2014/15. The underspend is being used to fund the new HomeStart policy and promotional campaign, and building and housing policy advice. The underspend occurs each year, and presumably there are quite good estimates of the underspend for 2015/16 available. The Committee may wish to ask about the anticipated use of the 2015/16 underspend See Christchurch-Housing-Accord. The Supplementary Estimates of Appropriations and Supporting Information 2014/15 B.7, page 391. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, page 4. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, page 34. The Supplementary Estimates of Appropriations and Supporting Information 2014/15 B.7, page 395.

6 6 1 Vote overview, structure and trends Vote overview 1.1 Vote Building and Housing (the Vote) is the renamed Vote Housing. 1.2 The Appropriation Ministers are the Ministers of Building and Housing, for Social Housing, and for Housing New Zealand Corporation. 1.3 Appropriations sought for the Vote in 2015/16 total $ million (2014/15: $ million), including the 2015/16 component ($ million of the $ million total) of the multi-year appropriations (MYA), Social Housing Fund The MYA Weathertight Services: Guarantee Fee Subsidy expires on 30 June Vote structure and trends 1.5 The Vote has changed considerably in the last two years: At Budget 2014 total appropriations represented a decrease of $ million (61.4%) from the estimated actual in 2013/14. The estimated actual for 2014/15 for the former Vote Housing is $ million (including the 2014/15 component of the two MYAs, Social Housing Fund and Weathertight Services: Guarantee Fee Subsidy). 9 The bulk of the decrease in the Vote in 2014/15 was the transfer of the income related rent subsidy to Vote Social Development in late 2013/14 and in 2014/ Capital expenditure has reduced from $ million in Budget 2014, to $5.8 million (as part of the Community Group Housing MCA). Most of the reduction was because of the transfer of Refinancing of Housing New Zealand Corporation and Housing New Zealand Limited Debt to Vote Finance). 11 Funding for the upkeep of Crown housing stock is not an appropriation in this Vote As well as the multi-category appropriation (MCA) Policy Advice and Related Outputs MCA, a new MCA has been created: Community Group Housing MCA. It consists of appropriations for community group housing market rent top-up, community housing rent relief and acquisition and improvement of community group housing. It totals $ million The trend table (Estimates table 1.2) has been restated 14 to show the trend without the refinancing transfer, the reclassification of expenditure type, and community housing transfers The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol.10, page 7. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol.10, page 7. The Estimates of Appropriations 2014/15 Social Development and Housing Sector B.5 Vol.10, pages 4, and 10/11. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol.10, page 5. Vote Social Development provides a rent subsidy to Housing New Zealand to top up (to market levels) the rents that Housing New Zealand receives from social housing tenants. Housing New Zealand then provides for the upkeep of its housing stock as a part of its own operating expenditure. As shown on page 6 of the Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol.10. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, pages

7 $Million that have occurred, and earlier, substantial, changes to the Vote when transfers to the Ministry of Social Development (MSD) took place. We have constructed a graph to show appropriations as at Budget, over the last five years to give a better idea of the magnitude of the changes. The changes listed in paragraph 1.5 are reflected in the graph below There was also one-off funding between Budgets in the 2010/11 Supplementary Estimates of $697 million for the Weathertight Financial Assistance Package. 15 Fig 3: Trend in total appropriations, including forecast MYA component, in Budgets 2011 to 2015 ($ million) Budget Budget Budget Budget Budget The transfer of the income related rent subsidy to Vote Social Development in 2013/14 and 2014/15 (see paragraph 1.5), and the transfer of Refinancing of Housing New Zealand Corporation and Housing New Zealand Limited Debt (to Vote Finance) at the end of 2014/15, account for the major decreases in the graph. 2 Social housing reform 2.1 Government s social housing reform focuses on increasing housing supply (government or third party), better matching government housing stock to social housing needs, and improving the quality of Crown-owned housing. The social housing reform programme is a cross-agency initiative involving MBIE, HNZC, the Ministry of Social Development, the Treasury, and Te Puni Kōkiri. 15 The Supplementary Estimates of Appropriations and Supporting Information 2010/11 B.7, page 489.

8 8 2.2 There have been a range of initiatives, in the current and earlier Budgets, aimed at increasing housing supply. The intention to increase the housing supply involves working more with community housing providers and local authorities, the latter through housing accords and special housing area provisions. 2.3 The Government has housing accords in areas of particular housing need (Auckland, Christchurch, Wellington, Tauranga, Tasman, and Queenstown Lakes, to date), and supports special housing areas initiatives (in Auckland, for example). These include two major initiatives in Auckland: the Hobsonville Point development, and the Tamaki redevelopment. The Committee may wish to ask to be updated on the contribution that housing accords and the special housing areas initiative are making to increasing the supply of fit-for-purpose social housing. 2.4 The Social Housing Fund MYA (administered by MBIE) is intended for purchasing services (other than part-purchases of social housing tenancies) from, or providing services to, third party providers of social and/or affordable housing services. It will be extended this year, for two years, using the carry-forward of the $ million remaining in the existing MYA that expires on 30 June The Committee may wish to ask about the impact of the Social Housing Fund to date in improving the total number and condition of homes delivered by third party providers. 2.5 The transfer to Vote Social Development of the role of purchase of social housing, 17 and the transfer of some social housing provider development responsibilities to Vote Finance and Vote Māori Development, necessitate data systems and statistical analysis that operate across MBIE, HNZC, the Treasury, MSD, and Te Puni Kōkiri if housing stock is to be well matched to housing needs. Data on the social housing reform programme is on the MSD website. It appears not to provide an analysis linking housing stock and the housing register. 18 We suggest that the Committee seek information about the data analysis capability underpinning the social housing reform programme. 2.6 The most recent of the social housing initiatives is the proposal to transfer Housing New Zealand Corporation (HNZC) stock in Tamaki to the Tamaki Redevelopment Company (TRC). Provision has been made in Budget 2015 for the TRC Business Implementation Plan ($9.580 million over three years, 2014/15 to 2016/17). 19 The property that is to transfer (2,800 properties) is of significant value The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol.10, page 7. See See The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol.10, page 8. A $200 million loan plus ownership of 2,800 state houses, see

9 2.7 The Committee may wish to ask: The Committee notes the Government s initiatives aimed at increasing the supply of social housing, and is interested in the contribution that housing accords, the special housing areas initiative and the Hobsonville Point development are collectively making to increase the supply of fit-for-purpose social housing. Please provide an update on the development of housing accords and special housing areas. What is the five year trend for the total number of available (occupied and ready for occupation) social housing stock as at 30 June, by provider type (Housing New Zealand, local authority, and other providers)? What changes to this are sought? What evidence is there of the impact that the Social Housing Fund has had to date on improving the total number and condition of homes delivered by third party providers? 9 What provision has been made in the Estimates and the work programme to ensure that the data analysis under-pinning the social housing reform programme is capable of informing the match of available housing stock to the range of housing needs? What are the objectives of the Tamaki redevelopment initiative, and what measures are in place to assess whether those objectives are being met? What provisions are there in the Tamaki redevelopment business implementation plan to: - build Tamaki Redevelopment Company s capability to take over and manage the government housing stock in the area, including any upgrading that would be required to meet the quality aims of the social housing reforms? - ensure that the level of service to be experienced by the tenants will not change noticeably during or after transition? 3 Canterbury housing recovery 3.1 The 2014/15 appropriations for Christchurch Housing Developments ($ million) and for Christchurch City Council Home Ownership Initiative ($5 million) expire on 30 June 2015 and are not renewed for 2015/16. Canterbury Recovery: Building and Housing Assistance continues at a slightly reduced level ($1.482 million) in 2015/ These appropriations are not the funding required to rebuild state housing in Christchurch. The Government s housing response to date in Christchurch has included the investment programme by Housing New Zealand (including from its rental income stream, and insurance) to repair and redevelop its 5000 homes and build 700 new ones.

10 The Government s response also includes activity undertaken jointly under the Christchurch Housing Accord. When the Christchurch Housing Accord was first announced, the Repair 5000 programme was due to be completed by the end of On 8 May 2015, the Minister stated that there were 10,500 houses destroyed in the earthquakes. He announced the success of the developments under the Accord, reporting that 191 houses had been built of the 1,000 houses being targeted through four initiatives under the Accord The Committee may wish to ask: Please provide an update on the Canterbury housing recovery, showing trends in repairs and rebuilds against targets for each: - What are the current levels of need generally, and for social housing and when is it forecast that these needs will be addressed? - Will the Repair 5000 programme be completed by the end of 2015? - What further initiatives are planned under the Christchurch Housing Accord, and what impact will they have on the current levels of need? 4 KiwiSaver HomeStart 4.1 The demand-driven appropriation for the KiwiSaver first home deposit subsidy uptake was increased by $7.038 million (23%) to $ million in the supplementary estimates for 2014/15, 23 when it was renamed and re-scoped, as the KiwiSaver HomeStart initiative. It is now a grant for people who meet the eligibility criteria, and provides up to $20,000 to new home buyers Further changes have been made in accordance with earlier policy initiatives, to give a total for the appropriation for 2015/16 of $ million (an increase of $ million or 109% over the 2014/15 appropriation). 4.3 The Estimates documents state that reporting against the appropriation will not be required: it has been granted an exemption on the grounds that the information is unlikely to be informative because the appropriation is solely for payments of the grant. 25 Nevertheless, the Committee may be interested in the impact of this major initiative See 31 May See Christchurch-Housing-Accord. The Supplementary Estimates of Appropriations and Supporting Information 2014/15 B.7, page 391. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, page 4. The Estimates of Appropriations 2015/16 Social Development and Housing Sector B.5 Vol 10, page 34.

11 4.4 The Committee may wish to know to what extent the new initiative results in more first home buyers being able to get a home: 11 The Committee notes the move from the KiwiSaver first home subsidy to an expanded KiwiSaver HomeStart grant. What evaluation has there been of the trend for the number of first home purchases since the introduction of the Government s policy initiatives to address the issue, and how has it informed the design of the KiwiSaver HomeStart grant? How do the criteria for access to the two initiatives KiwiSaver first home subsidy and the KiwiSaver HomeStart grant differ, and what additional benefits is the change from the subsidy to the grant intended to achieve in terms of meeting the needs of first home buyers? How will the related trend in the number of first home purchases be reported? What uptake of the KiwiSaver HomeStart grant is anticipated in 2015/16 and out years, and how does this compare with the estimated level of demand? 5 Building Regulation and Control 5.1 The Budget 2014 level of Building Regulation and Control was $ million. In the 2014/15 Supplementary Estimates, a one-off additional $3.080 million was appropriated for the National Building Consent programme, and $2.222 million to address the Royal Commission recommendations The Committee may wish to ask: The Committee notes that, in the 2014/15 Supplementary Estimates, an additional $3.080 million was appropriated for the National Building Consent programme, and $2.222 million to address the Royal Commission recommendations. Please provide an update on the initiatives undertaken with the additional appropriations. Have they been completed, and if not, what further provision is planned? 6 Weathertight underspend 6.1 The Weathertight Services appropriation is consistently underspent. In Budget 2014 the appropriation was $ million, and is estimated to be underspent by $6.185 million. The estimated underspend is being used to fund the new HomeStart policy and promotional campaign, and building and housing policy advice. 26 The Supplementary Estimates of Appropriations and Supporting Information 2014/15 B.7, page 395.

12 In Budget 2015 the Weathertight Services appropriation is $ million. The underspend occurs each year, and presumably there are quite good estimates of the 2015/16 underspend available. 6.3 The Committee may wish to ask: The Committee notes the use of the underspent Weathertight Services appropriation in 2014/15 to fund the new HomeStart policy and promotional campaign, and building and housing policy advice. What level of underspend is estimated for 2015/16, and how is it intended to be used?

13 Glossary Appropriation Benefits and Other Unrequited Expense appropriations Capital expenditure appropriations Explanation of Movements in Departmental Net Asset Schedules Output Expense appropriations A parliamentary authorisation for the Crown or an Office of Parliament to incur expenses and capital expenditure, for a specified purpose. Appropriations are limited by their scope (limits on what the appropriation can be used for), amount (the maximum amount of expenditure allowed), and period (the timeframe over which the appropriation applies usually annual or multi-year). Authorises expenses incurred by the Crown (generally made to individuals for their benefit) for which no direct exchange of value is expected in return. Examples are the unemployment benefit and student allowances. These appropriations are non-departmental. Departmental: Authorises capital expenditure to be incurred by a department to acquire or develop assets for use by the department. Departmental capital expenditure funded from a department s balance sheet (proceeds of the sale or disposal of any of its assets together with any working capital held) is authorised by a permanent legislative authority (PLA), under the PFA. The department can seek additional funding for capital expenditure (shown as capital injections in the net asset schedule in the Estimates). Non-departmental: Authorises capital expenditure to be incurred by the Crown (excluding departments) to acquire or develop Crown assets, including the purchase of equity or a loan to a person or organisation that is not a department. Examples include equity injections for Crown entities, and Residential Care Loans to older people. A schedule showing the opening balance, projected movements, and closing balance of a department s net assets. Specifically, it includes the details of any retained surplus, capital injections, or withdrawals. Departmental: Authorise expenses to be incurred by a department in providing a class or type of outputs (goods and services). Non-departmental: Authorises expenses to be incurred by the Crown (excluding departments) in purchasing a class or type of outputs (goods and services) from Crown entities or other third parties. Multi-class Output Expense appropriation (MCOA) A single appropriation that covers more than one class of output expenses. This has now been replaced by the multi-category expenses and capital expenditure appropriation (MCA). 13

14 14 Other Expense appropriations Multi-category expenses and capital expenditure appropriation (MCA) Outcomes Minister responsible for appropriations Responsible Minister Vote Departmental: Authorises expenses to be incurred by a department not related to producing outputs. An example is the cost of the disposal of decommissioned Defence assets. Non-departmental: Authorises expenses to be incurred by the Crown (excluding departments) that are not output expenses, benefits, or borrowing expenses. An example is the cost of providing primary education. A single appropriation that enables separate categories of departmental and nondepartmental output expenses and other expenses, as well as non-departmental capital expenditure, to be grouped together provided all the categories contribute to a single overarching purpose. States or conditions of society, the economy, or the environment, including changes in those states or conditions. The Minister responsible for specific appropriations within a Vote. As several Ministers may now hold appropriations within a single Vote, each appropriation has a tag (M1.2 etc) identifying the Minister responsible for that line item. The Minister responsible for the financial performance of a department or Crown entity. In relation to an Office of Parliament, the Office of the Clerk and Parliamentary Service, the Speaker is the Responsible Minister. A grouping of one or more appropriations that are the responsibility of one or more Ministers and are administered by one department.