Chris Bishop: Housing Minister on the new loan scheme for community housing providers

The Housing Minister's working to strengthen our community housing sector with a new loan scheme. 

The Government will take on some of the risk of bank loans to eligible community housing providers. 

It says the move should lead to more social homes with better lending conditions and lower priced loans. 

Chris Bishop told Mike Hosking Kāinga Ora currently borrows through the Government's low rates, which gives them a competitive advantage. 

He's trying to create a housing system that delivers warm and dry social houses, no matter who owns them. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
To the next stage of the government's social housing approach
involves providers being able to borrow at discounted rates, with
the Crown guaranteeing eighty percent of that money. This involves
nine hundred million in total new lending up eighty million
or up to eighty million per provider. Chris Bishop is
Housing Minister, is back with this morning to you.

Speaker 2 (00:16):
Good morning.

Speaker 1 (00:16):
What sort of discount is it interest rate wise for
these people.

Speaker 2 (00:20):
Can be to one hundred and one hundred and fifty
basis points. What we're trying to do here is when
we do social housing through coying or Aura, right, they
just borrow through us. So they just borrow it the
low rates that the Crown gets right, that gives coy
or or a competitive advantage because their cost of borrowing
is a lot lower than community housing providers like the
Salvation Army. Right. What I'm trying to do is create

(00:41):
a housing system where it doesn't matter who owns the house.
Could be ko by the government, could be the Sallies,
could be an EWE, could be a whole range of
different providers. Doesn't actually matter who owns it. The key
point is we get new, warm, dry social houses for
vulnerable people. So we've got this loan guarantee working with
the banks on that. We're standing behind a thing called

(01:01):
the Community Housing Funding Agency, which is a separate thing
which is basically a loan aggregator, and we're standing behind
that as well, and that is lowering the cost of
borrowing for the community housing sector. The effect of lowering
the cost of borrowing is actually really good for the
Crown because ultimately we're the funder of all of this
stuff in the first place. So we're getting basically cheaper
social housing, cheaper borrowing and cheaper social housing, which means

(01:25):
we can do more social housing with the same amount
of money.

Speaker 1 (01:27):
Where's the risk you carry all of it? Or the banks?
I mean, the banks don't carry any risks, do they,
because you'd tick them off before they came to you,
and therefore they know they're getting the money from you,
so you carry the can I take it?

Speaker 2 (01:38):
Yeah? I mean. The point that the community housing sector
has been making to us for a long time. They've
been complaining about this is that they're basically borrowing on
commercial terms, when in reality they are far sounder propositions
than any other sort of commercial lender, and so it's
taken some time to get the banks around to persuading
them of that point of view. That's while we're doing.
The loan guarantee scheme is a short term sort of

(01:59):
intervention or we sort out the actual funding system. But yeah,
I mean, basically, you're right, we are taking a little
bit of risk, but it's a minimum amount.

Speaker 1 (02:06):
Does it sent to buy people to borrow more, build
more or we don't know.

Speaker 2 (02:12):
It will lower the cost of borrowing for the building
that they're already doing because we've contracted to you.

Speaker 1 (02:17):
That's my point. Will they borrow less to do what
they were doing, or will they borrow more to do more?

Speaker 2 (02:22):
If we fund them to do more, then they will.
And to give you an example in the budget twenty
twenty four places that we funded that of fifteen hundred
or so with the lower cost of borrowing. The net
effect of that is that we can actually turn what
was we thought was going to be about fifteen hundred
into about seventeen hundred seventeen fifty. Actually, now there's a

(02:44):
bit of complexity to that because it's got to wash
through and its new loans and everything's a little bit different.
But the short point is by doing this, we can
actually deliver more social housing for less money. It's great,
great news.

Speaker 1 (02:55):
Good the Dixon Street Department thing you up on that.

Speaker 2 (02:59):
Yes, yes.

Speaker 1 (03:00):
Explain to me how a state owned agency sells something
for a million, the people who buy it under a
first preference deal then flick it for three How does
that work?

Speaker 2 (03:09):
Well, the land's got a rite of FIRS refusal on it,
which means they got to offer it to the local EWE.
They did that and they negotiated them up. They went
out to the market before that and sort of tested
it a bit. Yep, it's on the box and I
think it's about three to four. But there was a
lot of interest in the market and actually buying it.
This is an earthquake prone building, it's a heritage listed but.

Speaker 1 (03:32):
The market paid three million dollars for it about three
minutes up for one.

Speaker 2 (03:37):
That with that, well, I get that, but we ultimately
don't control what the people who buy properties do with
it once they bought it.

Speaker 1 (03:45):
But I should. I know it's not your personal fault,
but I mean this business or first writer of refusal,
and I understood it to be when it came to
the Mari that you know, there was something culturally historically significant, sure,
but a duney old building that you can make a
couple of million dollars on by Wednesday. Is that part
of the treaty negotiation settlement process.

Speaker 2 (04:05):
Is it? Yeah? It was negotiated as part of the
settlement with Portnitkernicke Fano we back in I think it's
two thousand and seven. So they've got access to a
whole lot of land in Wellington that you know that
they that's part of their deal and where it periodically
comes up, they get offered it and sometimes they say yes,
sometimes they say no. So in this case they said
yes KAO negotiated with it. I get people's frustration, but

(04:28):
at the end of the day, like you're dealing with
basically an old dunger and you've got someone who wants
to spend a little bit of money doing it who
you could potentially do it up and that is ultimately
a good outcome for Wellington. But I appreciate the frustration
on the way through it.

Speaker 1 (04:42):
Nice to talk to you. It was always Chris Bishop,
who's the Housing Minister.

Speaker 2 (04:45):
For more from the Mike asking Breakfast, listen live to
news talks. It'd be from six am weekdays, or follow
the podcast on iHeartRadio.