Council housing rents 'too low'
A clearer picture is beginning to emerge of the financial difficulties facing the Christchurch City Council's social housing service.
Although the rents collected by the council over the past 30 years have covered basic operating costs, they have not allowed the council to set aside sufficient funds for upgrading and replacing units. Now, with more than 80 per cent of the social housing portfolio approaching 45 years of age, a large proportion of the housing needs upgrading to make it fit for purpose for the next 45 years.
The rents charged by the council are about 50 per cent of market value. Housing New Zealand receives almost double the revenue for similar units.
In a report presented to yesterday's housing committee meeting, strategic property analyst Rob Hawthorne said the quakes had worsened City Housing's position with a direct funding shortfall of $26thmillion anticipated for repairs, strengthening and unit replacement.
As well, annual insurance premiums had risen from $500,000 to almost $2m, for reduced cover, and the pressure on the local building sector had resulted in significant cost escalation, he said.
Money needed to maintain the operation and serviceability of the original portfolio had been spent over the past 15 years on building 106 new units.
The balance of the council's housing fund was now insufficient to cover the $10m in deferred maintenance that had accrued since the earthquakes and the upcoming ''mid-life'' maintenance renewals and upgrades, forecast to cost about $50m.
At the end of May, the council's housing fund stood at $9.2m.
''City Housing would need to borrow but currently has insufficient income to cover the cost of this borrowing or pay the loan back,'' Hawthorne said.
Council community services finance manager Jason Rivett said the model was not broken but ''rents have not kept track with what we need''.
Options for putting the council's social housing service on a more financially sustainable footing are out for public consultation.
- The Press
Would you consider using your retirement savings to buy a home?Related story: Retirement savings used for first home