Kainga Ora has cancelled construction of about 500 new homes, Newsroom investigations show, and the future of another 1500 is in the balance.
Among those to be cancelled are plans for 185 apartments on a 1.57 hectare site in Onehunga, which now sits empty after the previous tenants were evicted and the old flats were demolished. ※Our intention now is to subdivide the site so that it can provide a mix of both public and non-public housing,§ says chief executive Andrew McKenzie.
Also cancelled is the flagship net zero Nga Kainga Anamata passive housing project - one of just 17 global sustainability initiatives to feature on the world stage at the United Nations COP26 Climate Conference in 2021.
Previously, Kainga Ora’s carbon neutral housing manager Brian Berg had written at Newsroom: ※Construction of the project will now demonstrate New Zealand can build low carbon homes, and do so at scale.§
Now, the agency has changed tune. ※We have formally withdrawn our application for Resource Consent that was lodged with Auckland Council,§ Kainga Ora says, of the site at Cranbrook Place and Crossfield Road, in Glendowie. ※The Nga Kainga Anamata (innovation) component of this project will also no longer be progressed on this site.§
The news of the extent of the cancelled and reviewed projects comes days out from a scheduled report by Sir Bill English.
Housing Minister Chris Bishop launched the inquiry into Kainga Ora’s financial situation, procurement and asset management late last year, citing concerns about the the agency’s debt levels.
And on Tuesday morning, he spoke to an Infrastructure NZ financing conference at Te Papa in Wellington, confirming a big step away from state-run and state-financed house-building. He intends to enhance the Infrastructure Funding and Financing Act, to explore new funding and financing tools that support councils, and to create incentives for councils to facilitate the construction of more housing, he says.
Kainga Ora has removed details of many of its terminated projects from its website. For one development after another, the site now throws up the message: ※Page not found§.
But it confirms there are more big developments cancelled in Millwater north of Auckland, in Ohakune, and in central Nelson.
Others, like Wellington’s big 300-home Arlington development, an 80-unit redevelopment of the heritage Oag’s Building in New Lynn, and the nearby 25-house Mulgan St development in New Windsor, are paused pending review. A big 166 unit apartment complex on Elm St, by Avondale Racecourse, has been downsized and postponed until late 2027, at earliest.
And contractors have spent the summer demolishing the seven-storey, 173-bedroom former YWCA hostel at 103 Vincent St in Auckland’s CBD, that Kainga Ora bought for $11.65m in 2021 - but the agency has not yet made any plans to replace it.
Private developer Mark Todd, of Ockham, has just opened elegant new apartment blocks across Jordan Ave from Kainga Ora’s vacant lot, in Onehunga.
The last Labour government made the correct and necessary call to invest billions of dollars in much need state housing, he says. It’s not widely-known, but New Zealand has less than half the social housing of comparable nations in the OECD.
※Unfortunately, Kainga Ora’s performance in house building is the very definition of failure - slow delivery, high cost and poor design,§ he says. ※The sad thing is, New Zealand could have had twice as many beautiful, well loved state houses right now for the many billions spent, if the expertise of the top 10 house builders had been harnessed directly six years ago.
※What has transpired is a national embarrassment, particularly as many knowledgeable people in the sector have been ringing alarm bells in Wellington for some years.
※Kainga’s performance in the vertical apartment space has been particularly woeful, and I’m happy to see them quit delivering in this sector. Our neighbourhoods deserve better.§
The sale of blocks like Bonair Crescent in Millwater will come as little surprise to Treasury officials, who had briefed incoming ministers that Kainga Ora’s forecasts relied on the sale of 10,200 homes in coming years, just to balance its books.
That was, according to Prime Minister Christopher Luxon in his state of the nation speech, ※just one of the nasty surprises we’ve discovered since coming into government§.
The full extent of Kainga’ Ora’s pause, cancellation and sale programme isn’t yet clear.
Citing the Official Information Act clause on unreasonably prejudicing the commercial position of a third party, Kainga Ora’s chief executive has declined to provide a full list of projects being reassessed or put up for sale.
※There are some commercial sensitivities to this work, so we are unable to provide a list of projects currently being reassessed,§ McKenzie says. ※We are committed, though, to keeping communities informed about what is happening with planned projects in their area as decisions are made.§
However, the agency has confirmed the status of some specific projects on which Newsroom has sought information.
Bonair Crescent, Millwater (37 homes): After protracted disputes worsened by Kainga Ora’s failure to consult the community about its social housing project on the North Shore, and scrutiny from Housing Minister Chris Bishop when he was still in opposition, the agency’s now decided delivering public homes there is no longer financially viable, and will sell the land.
※Costs facing builders and developers across the country have risen significantly and the economic environment and property market have changed since Kainga Ora purchased this land in 2020,§ says Caroline Butterworth, the deputy chief executive for Auckland and Northland.
※We need to make sure we’re investing in the right places, at the right time - and this investment no longer stacks up. Selling the land makes the best economic sense in the current environment.’’
Jordan Ave, Onehunga (185 homes): In April 2023 Kainga Ora removed 62 old state homes that were at the end of their life and no longer fit for purpose. After initially looking to build apartment-style public housing across the entire site, McKenzie says it became apparent that would not deliver the return on investment the agency were seeking.
Kainga Ora hopes to make public its revised plans in the next 12 months. These will entail subdividing the site to provide a mix of both private housing, and public terraced housing and apartments.
※We then make a decision on the best option - continue with our initial plans for that project, rescope it, or sell the land.§
Andrew McKenzie, Kainga Ora
Teitei Drive, Ohakune (44 homes): Kainga Ora has withdrawn as the developer of the proposed mixed housing development, saying it’s become clear that the Crown Infrastructure Partner funding will not be sufficient to complete the project as it was originally scoped back in 2021.
Graeme Broderick, regional director for Taranaki, Whanganui and Manawat迂, says the Teitei Drive development is no longer financially viable and the agency can’t deliver the intended affordable housing outcomes.
※We have made the difficult decision that it is not feasible for us to proceed with this development,§ he says. ※We understand that our decision will be disappointing for the individuals and families in Ohakune who are currently in need of housing.
※We remain committed to working closely with Ruapehu District Council and Ngati Rangi to explore opportunities to deliver public and affordable housing, as together we recognise the need for more housing across the Ruapehu District.§
Glenpark Avenue, New Plymouth (33 homes): For now, Kainga Ora is proceeding with only six homes.
In a letter to neighbours, it says: ※While we are progressing with these homes, we are going to take some time to take another look at the remaining sites to ensure we can deliver something that works well for the community and the people and whanau in need who will call this neighbourhood home.§
Arlington development, Wellington (300 homes): The previous complex, including a 10-storey tower block, was demolished in 2020, with the first homes in the new development to be finished by 2023.
These were to be a mix of terraced housing and six-storey apartment blocks, spread across 1.7 hectares with shared amenities including a playground, a community centre, community gardens, offices, and an orchard. This didn’t happen.
Kainga Ora construction general manager Patrick Dougherty told The Post that confirmed ※cost escalation since the project began§ meant the whole project was getting a rethink.
No substantial groundwork on the site is yet underway. But, says Kainga Ora this week, it’s continuing to work on the plans, and progressing towards applying for a resource consent.
Achilles Ave/Rutherford St, Nelson (175 homes): Kainga Ora conditionally agreed to buy the sites off Nelson City Council in 2021, intending to build a mix of social and affordable housing. The development was also subject to due diligence on the sites.
Now, regional director Julia Campbell says thorough investigations have shown that is not financially feasible for Kainga Ora to provide that mix on the sites, and it won’t proceed with its development.
But it remains committed to providing more public housing across Nelson. ※Our early plans suggest we could provide up to 270 new homes in the coming years,§ she still insists. ※This includes our proposed plans for new homes in Examiner and Nile Streets, on the city fringe, which are progressing well.§
Hamilton St, East Gore (24 homes): Kainga Ora’s resource consent application for its proposed housing development in East Gore is on hold while it considers feedback from affected parties, the Southland Times reports.
Kainga Ora proposes building 24 homes of various sizes on the site of the former Longford Tavern, which was demolished a year ago.
Regional director Kerrie Young said an application for resource consent had been lodged and was being processed by the Gore District Council - until Kainga Ora asked that it be put on hold.
＆Market conditions can change’
Kainga Ora has around 6,300 homes under construction or contracted to be built, Andrew McKenzie says, of which only 5 percent have been cancelled.
There are another 2000 homes in planning phases. ※A small portion of those homes may not proceed due to the outcome of our feasibility assessments,§ he adds.
※Like other prudent developers, we constantly review and assess the feasibility of our planned projects to ensure they can still be delivered within budget and that the original business case still stacks up.§
Kainga Ora’s planning also takes into account the supply intentions for additional social housing across the country, as outlined in the Public Housing Plan.
※We put a significant amount of work into the planning, design and consenting stage of a new housing development to ensure that it is of a high quality, meets local regulatory requirements, and fits well within the neighbourhood. That work can be time-consuming and market conditions can change as we work through that process.§
He points out that over the past three years, the cost of building a home using traditional project processes has risen dramatically - with material and labour costs up by nearly 40 percent. ※Naturally, that impacts on our budgets.§
At the same time, he says Kainga Ora has also been transforming its approach to building homes, developing a new housing delivery system that dramatically improves pre-construction and on-site performance. The time taken to design, consent and build homes has been reduced significantly, project delivery times are much more reliable, and cost is much lower.
The agency has tested it on specific typologies of housing and knows that it is a far better process to use for home delivery, McKenzie says.
※Given the rising cost of developing land and building houses, and the opportunity created by our new system, we have been reassessing projects where construction has yet to start, on a case-by-case basis, to determine if they are still financially viable, and whether there are more cost-effective options available,§ he concludes.
※Typically, this involves firstly exploring the delivery options we have across a region for achieving our portfolio aspirations, and then examining how that specific site meets our needs, delivery risks the site might have, project financial feasibility and its fit with our preferred delivery method. Based on this analysis, we then make a decision on the best option - continue with our initial plans for that project, rescope it, or sell the land.§
McKenzie rejects Mark Todd’s criticisms of the delivery, design and cost of Kainga Ora homes.
He says their design requirements differ from private developers, to cater for the needs of public housing tenants. Often they exceed legislative controls, such as the Building Act, the Building Code and the Healthy Homes Standards. All their new properties can be adapted for a range of lifetime needs, can withstand accelerated wear, and are fit for purpose for vulnerable people and those in need of public housing, with increased environmental, health and safety features.
※Mr Todd’s claims about the poor design of our developments are a slight on the experienced and high quality private sector architects and designers we employ to design our homes,§ he says.
He provided Newsroom with a list of local and national awards that Kainga Ora developments have won, or been shortlisted for - he says these are ※testament to the quality§ of much of the agency’s portfolio.
Correction: This article has been changed to say there were 44 houses proposed for Teitei Dr, not 130, and that the purchase of the Achilles Dr site was conditional.