Social Housing Sub-Committee

SOCIAL HOUSING SUB-COMMITTEE
MEETING
TUESDAY, 28 OCTOBER 2014
AGENDA
Meeting to be held in the Committee Room 2,
Civic Centre, Commerce Street, Whakatane
at 12:00 noon
Lunch will be available in the room from 11.45 am
Marty Grenfell
CHIEF EXECUTIVE
24 October 2014
A403714
WHAKATĀNE DISTRICT COUNCIL TUESDAY, 28 OCTOBER 2014
COUNCIL - AGENDA
TABLE OF CONTENTS
ITEM SUBJECT PAGE NO
1 Membership .............................................................................................. 4
2 Apologies .................................................................................................. 4
3 Confirmation of Minutes ........................................................................... 5

3.1 Minutes Social Housing Sub-committee 1 October 2014 ............................................................ 5
4 Reports ..................................................................................................... 8
4.1 WDC Community Housing Provider Report ................................................................................ 8
COUNCIL - AGENDA
1 Membership
Mayor Tony Bonne
Deputy Mayor Judy Turner
Councillor Scott Jarrett
Councillor Alison Silcock
Robert Bruere
Enid Ratahi-Pryor
2 Apologies
There were no apologies at the time of compiling the agenda.
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COUNCIL - AGENDA
3 Confirmation of Minutes
3.1 Minutes Social Housing Sub-committee 1 October 2014
Details of SOCIAL HOUSING SUB-COMMITTEE MEETING HELD IN

Meeting: COMMITTEE ROOM 2, CIVIC CENTRE, WHAKATĀNE ON
WEDNESDAY, 1 OCTOBER 2014 COMMENCING AT 12.05
PM
Present: Councillors S Jarrett, A R Silcock and J A Turner, E

Ratahi-Pryor and R Bruere
In Attendance: J Reweti (General Manager Community and Economic

Development), P Chapman (Manager Community Services),
C King-Hazel (Community Services Administrator) and H J
Storey (Administration Officer Community)
Visitors: H Simonsen and B Doherty – The Property Group
Apologies His Worship the Mayor A A Bonne
1. CONFIRMATION OF MINUTES: 8 SEPTEMBER 2014
Refer to pages 5-8 of the agenda.
RESOLVED:
THAT the minutes of the Social Housing Sub-committee meeting held on Monday, 8 September 2014
be confirmed as a true and correct record.
Jarrett/Ratahi-Pryor
CARRIED
2. COMMUNITY HOUSING PROVISION
Refer to page 8 of the agenda and pages 8a- of the tabled items.
Ms Simenon gave a power point presentation and provided an outline of community housing at a
national and local level and the changes since the 1970’s when local authorities were provided with
low interest loans to build pensioner houses through to the social housing reforms in recent years.
She noted that legislation in 2014 has demonstrated social housing changes and 2015 would see
Independent Transaction Unit where a framework would be developed for Stock Transfers and the
unit commenced.
Key points noted were:
Developers and providers had a different focus

Advantages and disadvantages from overseas experiences were noted
The government needed to develop a long term national strategy
Mix of capital and transfers, creating right conditions, capacity and capability building and
recognition of the sector and profession
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COUNCIL - AGENDA
No capital funding or access to IRSS is available to local authorities

Provision of assets rather than cash
The condition of stock for transfer and stock nearing the end of its life would likely be factored
into any transaction
3. WORKSHOP SESSION
A session was held to determine the Council’s list of priorities when considering what they were
seeking in a Community Housing Provider:
1. Ensure that existing tenants were secure in their tenancies as some were vulnerable or had
high needs requiring support. The intention was that they would be no worse off with the
change in provider - eg pay same level of rent
2. Must be a registered Community Housing Provider (attract IRRS). This was considered as a
criteria
3. Current stock/numbers retained for pensioner housing. This was considered a criteria
4= Provision of good wrap around support services to be delivered locally by local providers as
a home visit type support not just a phone link
4= Locally based support/face which was connected to the community
5. Provides plans for improving stock – eg modern amenities and additional items such as scooter
parking
6. Able to demonstrate growth, expansion leveraging – eg would pitch for stock transfers in
Whakatāne District
7. The provider to have locally based governance structure in Whakatāne or possibly Rotorua
for the Murupara units if they were transferred separately. Would accept Bay of Plenty based
and an option where governance to include a Council nominated representative on the board
Other points included:
Reflect the demographic makeup of the community and the ability to work with Māori. This
was considered criteria
Community Housing Provider’s rent setting policies to be based on the income of tenants and
the ability to provide affordable/social housing
It was noted that at present there was no provision of special funding for community housing support.
Funding was accessed through health or the Ministry of Social Development for things other than
housing. The Government wants Community Housing Providers to look after those most in need and
they do not wish to fund separate contracts. The funding was accessed through portfolios that already
existed.
The key elements required to become registered as a provider are good governance, operational
management, financial management, tenancy management and asset management and they needed
to be registered as a charitable entity so that any surpluses go back into the entity. They are also
required to be a provider of social and/or affordable housing.
4. ASSESSING THE IMPACT OF TRANSFER
Mr Doherty noted that a benchmark and requirements needed to be set and said that a lot of work
was done towards this in 2010 when the Council previously looked at the divestment of the properties.
The following points were noted:
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COUNCIL - AGENDA
Supply and demand of rental housing in Whakatane

Impact of Council requirements for Community Housing Provider on market values – the more
criteria placed on the property the more limited the market will become
It was noted that there was not a lot of discretionary income with tenants – it was unsettling
to them to increase rentals even if it was a small amount
Where a provider had access to government funding the providers could potentially set rents
lower than commercial providers
Existing tenants were to be no worse off. When new tenants were sought, they would have to
demonstrate what the charges would be.
A query was raised as to whether there was an option to place a time limit (say 2 years from
the handover ) on providers increasing rentals for any new tenants
A large percentage of the current tenants would be eligible for accommodation subsidies and
were paying 80% of the rental market value
Query potential providers on the method of setting rental for properties
Were there methods available to stop commercialisation from occurring once an existing tenant
left
Carry out an amenity assessment – condition of portfolio, identify deferred maintenance,
redevelopment potential, the opportunities that could result from the transfer
Seek information from other local authorities carrying out a similar exercise.
THE MEETING FINISHED AT 1.55 PM
Confirmed this day of
CHAIRPERSON
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4 Reports
4 Reports
4.1 WDC Community Housing Provider Report
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COUNCIL - AGENDA
4.1 WDC Community Housing Provider Report (Cont.)
HOUSING AND COMMUNITY

DELIVERING AFFORDABLE PROPERTY SOLUTIONS TO THE COMMUNITY SECTOR
THE PROPERTY GROUP LIMITED’S REPORT FOR

WHAKATANE DISTRICT COUNCIL
Assessment of the Transfer of Whakatane District Council’s

Pensioner Housing to a Community Housing Provider
23 OCTOBER 2014
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COUNCIL - AGENDA
TABLE OF CONTENTS
1. Executive Summary............................................................................................................................ 4

1.1 Community Housing Provision ............................................................................................... 4
1.2 Assessment of Portfolio ............................................................................................................ 4
1.3 Key findings ................................................................................................................................ 5
1.4 Conclusions and Next Steps ..................................................................................................... 5
2. Introduction ........................................................................................................................................ 7
2.1 The Brief ...................................................................................................................................... 7
2.2 The Approach ............................................................................................................................. 7
2.3 Overview of Report ................................................................................................................... 8
3. Background.......................................................................................................................................... 9
3.1 Social Housing in New Zealand ............................................................................................... 9
3.2 Social Housing Reform ............................................................................................................. 9
3.3 Local Authority Housing......................................................................................................... 10
3.4 Whakatane District Council – Key considerations for Portfolio Disposal ..................... 10
4. Market analysis .................................................................................................................................. 12
4.1 Supply and Demand................................................................................................................. 12
5. Whakatane District Council Housing Portfolio Assessment............................................... 14
5.1 Amenity Description................................................................................................................ 14
5.2 Tenant Profile ........................................................................................................................... 19
5.3 Rental Analysis of the Portfolio ............................................................................................. 19
5.4 Valuation of the Portfolio ....................................................................................................... 22
5.5 Income and Expenditure ........................................................................................................ 26
5.6 Rent Setting Options for CHPs ............................................................................................. 27
5.7 Land Status Issues .................................................................................................................... 31
6. Community Housing Provision...................................................................................................... 33
6.1 Community Housing Provision Internationally................................................................... 33
6.2 Community Housing Provision in New Zealand ................................................................ 35
6.3 Government Policy direction ................................................................................................. 36
6.4 Community Housing Regulation and Accreditation ........................................................... 36
7. Community Housing Providers – Assessment of Interest ........................................................ 39
7.1 Summary of Interviews with Community Housing Providers .......................................... 39
7.2 Summary of Interviews with Interested Community Organisations ............................... 43
7.3 Other Community Housing Providers.................................................................................. 44
8. Summary of Findings ....................................................................................................................... 46
8.1 What is happening in the local market? ................................................................................ 46
Whakatane District Council: Assessment of 2

The Transfer of Whakatane District Council’s
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8.2 What does the Portfolio Assessment Tell Us? ..................................................................... 46
8.3 Are there any Suitable Community Housing Providers that are interested? .................. 47
8.4 What are their Key Considerations? ...................................................................................... 47
8.5 What are the Key Considerations for Council? ................................................................... 47
8.6 Will the Transfer of the Portfolio to a CHP Improve the Delivery of Affordable
Housing for Older People in Whakatane?........................................................................... 48
9. Conclusions and Next Steps ....................................................................................................... 49
9.1 Support for the Decision to Transfer the Portfolio ............................................................ 49
9.2 Key Considerations for a Transfer ........................................................................................ 49
9.3 Timing of an REOI Process ................................................................................................... 49
9.4 Next Step - Clarify the Transfer Process and Council’s Expectations ............................ 50
A p p e n d i x o n e – Government Agencies and their Roles in the Implementation of SHRP
LIST OF TABLES
Table 1: Replacement Cost and Depreciated Replacement Value of Portfolio................................18
Table 2: Market Rents for Council’s Portfolio ......................................................................................21
Table 3: Market Value for Council’s Portfolio .....................................................................................23
Table 4: Rating Valuations for Council’s Portfolio ...............................................................................23
Table 5: Social Value for Council’s Portfolio ........................................................................................25
Table 6: Capitalisation of Income Less Support Service Costs...........................................................31
Table 7: Assessment of CHPs against Criteria and Priorities..............................................................45

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1. EXECUTIVE SUMMARY
The provision of social housing in New Zealand is undergoing significant change, with the
position of the community housing sector set to expand. Driven by government’s Social
Housing Reform Programme, recent initiatives include opening up access to the Income Related
Rent Subsidies for registered Community Housing Providers (“CHP”) and the development of
legislation setting out the regulations and performance standards for CHPs. Government has
also signalled plans to transfer 20% of state housing stock to the sector. Local authorities have
been excluded from Government reforms and many, like Whakatane District Council
(“Council”), are now reviewing their future role in the provision of social housing.
Council has resolved in principle to consider through the LTP process a transfer of its pensioner
housing portfolio to a registered CHP. To progress this, Council has requested information on
those organisations which may be interested and an up to date assessment of the portfolio.
1.1 Community Housing Provision
The Community Housing Sector in New Zealand is still considered relatively small; it currently
collectively owns an estimated 5000 units and manages and leases around 2000 more. CHPs
provide a diverse range of accommodation and support services across the housing continuum,
from the provision of emergency housing, transitional and medium term housing, long term
social rental housing and affordable home ownership programmes. The provision of housing
support services, often referred to as ‘wrap around services’, that go beyond a standard tenancy
management function is characteristic of most CHPs. Levels of support vary from linking and
referring tenants to appropriate agencies to the direct provision of social or health services and
depend on the needs of the tenant group, the capacity of the CHP and the relationships they
may have with other providers.
While many CHPs do provide these services, the portfolio size of most organisations does not
allow for housing support services to be funded through rental income streams and at present
general housing support is not funded by the government as a specific service. CHPs providing
tenancy support services either fundraise or cover services through other contracts.
1.2 Assessment of Portfolio
The overall value of the Whakatane portfolio has only marginally increased (4%) since 2010, with
a significant decline in value of the Murupara block (by 50%). The current market value of the
two blocks assessed as single entities is $4,550,000 for the Whakatane blocks and $110,000 for
the Murupara block. This is reflective of the market in general, which is viewed as slow due to
stagnant population growth. A ‘social’ value, based on restricting the rents charged to 80% of
market reduces the block values to $2,975,000 and $80,000 respectively.
Although 30 to 50 years old, the units are generally in good condition, with little outstanding
maintenance or upgrade work. Tenant occupancy is high and while there are no waiting lists to
verify demand, statistical data indicates Whakatane will experience rapid growth in the
proportion of the population aged over 65 years over the next 20 years. Rents are affordable for
tenants, set at 80% of the market.

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1.3 Key findings
For the purposes of this report, interviews were carried out with five CHPs and two community
organisations to gauge interest in Council’s pensioner housing portfolio. Information was
assessed against the criteria and priorities. CHPs included those who had previously expressed
interest and larger, national providers. Of the five interviewed, two are registered CHPs.
All of the five providers indicated they would be interested in purchasing the portfolio, provided
it proved to be financially viable. Two mentioned leasing might prove to be more viable. All of
the organisations interviewed indicated existing tenants would be retained and rents would
remain at an affordable level. All of the providers also indicated their interest was dependent on
the financial viability of the project. Feedback on the ability of CHPs to provide housing
support services was mixed, with some indicating they would need to consider partnering with
local providers or others to ensure the support needs of tenants were met.
The findings of this report support Council’s analysis that transferring the portfolio to a CHP
would best respond to the issues raised in the Social Housing Review. There is interest from
registered CHPs, which have a clear mandate to provide social housing now and into the future.
They have existing housing portfolios and all providers intend to grow, including in the
Whakatane area. Three of those interviewed have the current capacity and capability to become
large providers. Only one provider currently specialises in housing for older people, but two
others indicated the provision of housing for older people is part of their plan for growth.
Registered CHPs are able to access government funding in the form of the IRRS subsidy and
possibly future state stock transfers or capital funds.
CHPs also provide housing support services that go beyond tenancy management for their
current housing customers. However, some did express concerns that they may not be able to
resource the support needs of these tenants within their existing infrastructure, and would have
to consider providing resource support through directly employing a support person, building
referral relationships and/or partnering with local service providers.
It is also unlikely in the short term that a CHP would undertake significant modernisation works
to the units. The quality of the units is currently good and would be likely to meet an acceptable
letting standard for a CHP for the current client group in the short term. Cash flow analysis
would also show that heavy capital investment is more likely to be a medium to long term goal
for most providers. However, the units do not meet standards for those CHPs who provide
housing for people with disabilities and in the short to medium term these providers would
possibly look to upgrade and/or redevelop to enable housing for their target group.
1.4 Conclusions and Next Steps
1.4.1 Support for the Decision to Transfer the Portfolio
The information we have gathered for this report supports a decision to transfer Council’s
pensioner housing portfolio to a registered CHP. There are a number of CHPs that are
interested and would be likely to respond to a REOI process.
Transferring the portfolio to a registered CHP provides Council with a degree of comfort that
the organisation has been assessed against government-approved standards, has effective
governance and management practices, is financially sound, and has the appropriate tenancy and

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asset management policies, procedures and systems to own and manage social housing.
Registered CHPs undergo an annual monitoring process and as charitable organisations,
surpluses are redirected to the ongoing operation and growth activities of the organisation. They
are able to access government funding in the form of the IRRS subsidy (although not currently
available for existing tenants) and possibly future state stock transfers or capital funds.
1.4.2 Key Considerations for a Transfer
The transfer will need to include a number of key considerations for CHPs and Council. These
considerations include that the purchase of the portfolio is likely to be at a social value. The
degree of difference between a market and social value will be dependent on aspects such as:
1. The impact of any terms and conditions imposed on the purchaser (i.e. restricting
use for pensioners only, restricting rents to below market).
2. The need for the CHP to fund support services from the rental income.
3. The need for the CHP to service debt from the rental income.
4. The requirement by the CHP to carry out any capital work to ensure the
properties are fit for purpose for the CHPs target group (i.e. creating accessible
units).
A well designed REOI process would draw out detailed information from potential partners with
regard to their short, medium and long terms plans for the ownership and management of the
portfolio and how these align with Council’s expectations.
1.4.3 Timing of an REOI Process
While it is recommended that an REOI process is developed as soon as possible, it should be

noted it is possible that the full range of potential providers may not come forward until the
future of other local authority and state housing transfers are announced. This may impact on
the quality and quantity of responses received. However, this could also serve to set up a
provider for future growth, as should state stock be offered in Whakatane, owning Council’s
portfolio may increase the economic viability for a CHP to provide housing in the area.
Indications are there will be further clarification around the scope and process of transfers of
state stock early in 2015, however, detailed information may not be known for some time.
1.4.4 Next Step - Clarify the Transfer Process and Council’s Expectations
Should Council confirm a decision to transfer the portfolio through the LTP process, Council
should proceed as soon as possible to the development of a plan for the transfer process. This
plan should include:
1. Developing the terms and conditions of the transfer including preferred options and
controls.
2. Designing the REOI process.
3. Designing the post-REOI negotiation process.
4. Developing a tenant communications and management plan.
5. Developing a risk management plan.

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2. INTRODUCTION
Council has resolved to investigate the transfer of its pensioner housing portfolio to a CHP. As
part of this process, Council requires information from the market to clearly understand the
opportunities that exist and the impact of a transfer on Council. This information will be used
to provide a clear objective and direction for the provision of social housing in Council’s Long
Term Plan for 2015-2025.
2.1 The Brief
The Property Group Limited (“TPG”) has been engaged by Council to prepare a report on the
interest and capacity of community housing providers to purchase Council’s Pensioner Housing
portfolio (‘the portfolio”).
The report includes information on the community housing sector, the impact of recent changes
in legislation and the current and future position of the sector in the provision of social housing.
It also includes an analysis of existing CHPS and community organisations that may be interested
in purchasing the portfolio from Council, including:
 Profiling the organisation, including their capacity and capability to own and manage the
portfolio.
 Key considerations for the organisation with regard to a transfer.
 An assessment of the local connections each organisation has with the Whakatane
community.
The report also includes an assessment of Council’s portfolio, updated market values, supply and
demand information, the current income and expenditures for the portfolio and a summary of
the condition of the portfolio.
2.2 The Approach
The findings of this report are derived from the following information sources:
 Council – including reviews conducted to date, policy and portfolio specific information
and a workshop held with Council’s Social Housing Sub-Committee.
 Property specialists and generally available property information, including property
valuations, legal information and market information.
 Direct valuation advice has been obtained through the engagement of Brian Phipps
from Bay Valuation Services (“the Valuer”)1.
 Publically available information on the Community Housing Sector.
 Interviews conducted with CHPs and interested community organisations. These
providers were selected on the basis that they had previously expressed interest in
Council’s housing portfolio and/or they had local connections to the community.
1
Note: This is the same valuer used in the 2010 report on the pensioner housing portfolio for Council

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2.3 Overview of Report
The report is divided into eight sections:
1. Introduction to the report.

2. Background information on social housing.
3. Market analysis.
4. Whakatane District Council’s Housing Portfolio Assessment.
5. Community housing provision.
6. CHPs – assessment of interest.
7. Summary of findings.
8. Conclusions and next steps

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3. BACKGROUND
3.1 Social Housing in New Zealand
Social housing in the New Zealand context is a form of affordable housing which includes
assistance for those who otherwise cannot meet their own needs in the market. Assistance
generally is in the form of subsidies to improve affordability, but may also include elements of
support, and generally targets those with particular social, health or economic needs.
Social housing in New Zealand is primarily provided by central government, with over 69,000
housing units across the country. Local authorities collectively make up the next largest
contributor, holding around 11,000 units, predominantly provided for older people. Not-for-
profit organisations make up a small but growing proportion of the overall provision, with an
estimated 5,000 units.
3.2 Social Housing Reform
Since the initiation of the Housing Innovation Fund in 2003, successive governments have been
looking for ways to ‘share’ the responsibility of the provision of social housing with the
community housing sector.
The Social Housing Reform Programme (SHRP) of 2010 provided strong direction for the
future of the provision of social housing, clearly indicating the role of government and support
for the sector. The report by the Ministerial appointed Housing Shareholders Advisory Group
titled Home and Housed2 described 19 key recommendations, within four initiative areas. Initiative
Area II included recommendations for the involvement of third party suppliers, or CHPs to:
1. Transfer capital or dwellings to CHPs to meet 20% of the provision of social housing
by this sector (date later set for 2020).
2. Support the sector through making available Income Related Rent Subsidy (IRRS) to
registered CHPs.
3. Leverage capital for the development of new stock.
4. Establish locally based urban renewal agencies as special purpose joint ventures between
the Crown and local government.
The reform programme draws heavily on overseas direction; in particular the direction social
housing has taken in Australia and the United Kingdom. In both countries community housing
providers play a prominent role in the provision of social and affordable housing.
2
Housing Shareholders Advisory Group (2010) Home and Housed

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3.3 Local Authority Housing
The role of local government in social housing was supported by central government through
subsidised loans through the 1960s and 1970s, which saw a dramatic increase in the number of
units. Today, local government is a significant provider of social housing in New Zealand. As at
the 2013 Census, there were 11,310 households and 16,317 people living in rental housing
provided by local authorities. In total, 67 local authorities provide rental housing, with the
smallest providing four units and the largest providing 2600 units. Most authorities provide
between 25 and 150 units (66%), with 10% providing over 300 units.
Housing is predominantly provided as long term rental accommodation for older people, with
95% of councils providing specifically for older people and 88% providing only for those aged
65 years and older. The configuration of stock reflects this target group, consisting primarily of
low rise, multi-units, the majority of which (66%) are one bedroom units and bedsit or studio
units (23%). A smaller proportion of local authority housing is made up of two or more
bedroom units (11%). In some areas the main supply of housing for older people is provided by
the local authority3.
As noted in a previous report prepared by TPG for Council in 2010, most housing programmes
run by local authorities are expected to be self-funding and because of the affordable nature of
the housing, income generated has often not been enough to meet the costs of upgrading and
redeveloping stock. As a result a large proportion of stock owned by local authorities is outdated
and does not meet the needs of older people of today.
In addition, due to the lack of growth, the development of housing has not kept pace with
demand and many local authorities consider Council-owned housing has little impact on the
overall provision of affordable housing in their regions. Councils have also questioned the ‘value
for ratepayer money’ aspects of retaining pensioner housing and along with this, considering
whether the provision would be better placed elsewhere. Since the mid-1990s a number of
Councils undertook the full or partial sales of their housing stock to community organisations,
the private market or Council-owned entities (see TPG report for Council 2010). Recent central
government reform has ignited the debate around the role of local authorities in housing, as
discussed in section 6 of this report.
3.4 Whakatane District Council – Key considerations for

Portfolio Disposal
In June 2014 a review of social housing by Council raised six key issues:
1. The demand for affordable housing is set to increase in Whakatane, as house prices
remain high relative to the high proportion of low income households in the region.
2. The Whakatane population is ageing but there is a lack of appropriate and affordable
housing.
3. Central government housing reform excludes councils accessing social housing funding.
4. Council doesn’t have a clearly defined objective for owning pensioner housing against
which to measure performance.
3
Saville-Smith, K., Fraser, R. (2014), Local Government Housing, Older Tenants and Adverse Natural Events. CRESA Report on the Local
Government Survey June 2014.

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5. There is a gap in the social housing market for those providers that meet more than just
tenant’s housing needs.
6. Council’s housing stock is ageing.
Council identified six options based on these issues. Option 5 – to seek improved and more
affordable social housing provision through ownership by an approved community housing
provider was signalled as Council’s preferred option and supported through public consultation.
This investigation was commissioned to gauge interest by CHPs in the acquisition of the
portfolio and to assess the impact of the transfer.
As part of an ongoing consultative process Council established the Social Housing Sub-
Committee, made up of the Mayor, Councillors and community representatives. A workshop
was held with the Sub-Committee to identify key criteria for a provider and to confirm priorities
for a possible transfer.
Criteria for a preferred provider included:
1. Being registered as a CHP

2. The provider reflecting the demographic of the community, for example works with
Maori, vulnerable people and/or older people.
3. Retaining current housing numbers (79) for pensioner housing.
4. Protecting the rights and welfare of existing tenants, including tenancies being
protected and tenants being no worse off financially.
Priorities in order of importance for a suitable provider included:
1. Having local connections and ability to provide locally based support for tenants.
2. To demonstrate plans for improving the existing stock.
3. Having plans for growth, including further growth in Whakatane.
4. Having locally based governance, or was open to including local representation at the
governance level.
These criteria and priorities formed the basis of information gathered through interviews with
CHPs.
Notwithstanding Council’s commitment to the above criteria and priorities, we understand the
sale of the portfolio outright, to an appropriate purchaser is the preferred option for transfer.
This potentially enables a clean exit for Council and the opportunity to focus resource on other
aspects of the business. Prior to undertaking any transfer process, Council must also include the
sale of the housing in the Draft Long Term Plan due to be released for consultation early 2015.
Setting criteria for the sale of the portfolio will have the effect of limiting the market. The
impact on the value of the portfolio is discussed in the Section 5.

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4. MARKET ANALYSIS
This section looks at supply and demand for pensioner housing in Whakatane and Murupara.
We consider it appropriate to deal with the Whakatane and Murupara markets in isolation as they
have significantly different market drivers.
4.1 Supply and Demand
4.1.1 Whakatane
The local market is consistent with the majority of provincial residential markets outside
Auckland. The most recent market high was during the period of 2005 – 2007, with the market
slowing significantly in the 2009 – 2010 period. During the 2011 and 2012 market activity did
increase, however overall prices continued to soften and remained a ‘buyer’s market’. The
current market remains flat and overall it is considered on average that prices have dropped by
15% from their peak in 2007.
The Valuer engaged by TPG has made the following observations in relation to local demand for
rental investment property:
 Demand in Whakatane has been low with only three sales of units taking place since
January 2010.
 These sales were for smaller scale rental properties i.e. a block of three two bedroom
units and two blocks of five one bedroom flats, with the most recent having sold in
March 2013.
 There are currently four blocks of flats on the market with these receiving limited
interest.
 One bedroom rental accommodation is in low demand especially where there is no
garaging available. Average rentals for this type of housing stock are within a range of
$180 to $190 per week inclusive of water rates and mowing.
 Demand for this type of accommodation is from younger singles and pensioners.
The Valuer, due to limited local sales evidence of units in the region, has also considered wider
evidence from Rotorua. Limited sales evidence shows a range of market yields varying from
6.5% to 9.77% as estimated net returns on sale prices. Yield variability is a result of many factors
such as the age of complexes, rental demand, scale of development and location among other
considerations.
In summary, the demand for pensioner rental housing in Whakatane is considered fair to
average. We understand the waiting list for Council’s pensioner units is negligible however the
occupancy rates are stable and available units do seem to fill relatively quickly through referrals
and word of mouth. This combined with an ageing population would indicate future demand
for pensioner housing should remain steady and over time start to increase.

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4.1.2 Murupara
The Murupara market has a very low level of activity with property values being generally
depressed. In 2013 and to date this year there have 10 residential property sales (including three
sections). There have been no sales of rental investment properties within the town over the last
six years. The demand for one bedroom accommodation is perceived as low. Rental levels are
considered to be unchanged from the last review undertaken by Council in November 2012 and
which was effective from 1 July 2013.
In summary the ability to sell units in Murupara will be difficult and we see little if any demand
coming from commercial investors. The small scale of the housing villages and the isolation of
the town and the lack of financial viability also mean in our opinion interest from some CHP’s is
unlikely. There may have to be strategic consideration given to not re-letting units for pensioner
housing and/or considering relocation of tenants to Whakatane if Council wishes to divest these
units.

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5. WHAKATANE DISTRICT COUNCIL HOUSING

PORTFOLIO ASSESSMENT
The following section of the report provides an assessment of Council’s housing portfolio. This
includes a description of the amenity, land status, tenant profile, rental analysis, value of the
portfolio and income and expenditure.
Various terms to describe the housing portfolio are used throughout this section and their use
and meanings include:
 Portfolio – all of the housing units in their entirety.

 Block – the portfolio is viewed as two distinct blocks – the Whakatane block and the
Murupara block.
 Village – a cluster of units based at one address.
 Unit – an individual rental unit.
 Double unit – one bedroom unit with a double sized bedroom.
 Single unit – one bedroom unit with a single sized bedroom
 Property – generic term used to describe land, buildings and both land and buildings.
5.1 Amenity Description
The following descriptions of the six villages comes from a combination of Council’s own Asset
Management system (SPM), together with reports carried out by GHD in the 2011/2012
Community Property Asset Management Plan. We have supplemented this information with
our own inspections of the units together with information sourced from the valuation updates.
These descriptions are a brief snapshot of each village and any prospective purchaser would need
to undertake their own detailed asset inspections as part of a wider due diligence process.
5.1.1 Whakatane Block
Alice Stone Flats (65 Goulstone Road, Whakatane)

The Alice Stone village is the largest of Council’s pensioner housing complexes and also enjoys substantially
more space around the units in terms of general site layout. There is an undeveloped site fronting the street in
the north-west corner that provides the option to increase the number of units. The Valuer in undertaking his
market assessment has factored in an increased value of $70,000 relating to the underlying value of the surplus
land.
Configuration 28 units within eight blocks providing 25 single bedroom units
and three double bedroom units.
Age 1973 apart from one building built in 1984.
Gross Floor Area 1,251 m2 (Average unit size 44.7 m2)

External Condition Good
Internal Condition Fair to good
Council’s SPM Asset Data
 Cost Replacement Value $2,961,400

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 Depreciated Replacement Value $1,479,384
General comments:
 No immediate capital upgrades identified.
 Village enjoys substantial communal amenity areas including a shed for mobility scooter storage purposes.
 Comments from Council staff indicate this is the most popular of the Whakatane villages.
Lovelock Court (1 Spence Lane, Whakatane)

Lovelock Court is in a cul de sac with a central courtyard providing sealed car parking. The village is well located
to the Whakatane Hospital and is in close proximity to the Mary Shapely retirement village.
Configuration 22 units within four buildings providing 18 single bedroom units
and four double bedroom units.
Age 1972
Gross Floor Area 988 m2 (Average unit size 44.9 m2)

 Depreciated Replacement Value $1,152,454
General comments:
 Overall site development limited.
 The design of the complex results in quite close proximity living with very little separation between
buildings and units. Interviews with Council staff indicate this is a consideration in terms of tenant
placement and mix. Younger or more active tenants could have an impact on the balance of the
occupiers in terms of increased activity and noise levels.
Allandale Court (145 King Street, Whakatane)

Allandale Court is located off a shared right of way that is utilised with the adjoining Disabilities Resource
Centre. The site is generally L-shaped and has uncovered sealed parking adjoining the units.
Configuration 11 units within five buildings providing nine single bedroom
units and two double bedroom units.
Age 1968 and 1981

 Depreciated Replacement Value $609,596
General comments:
 Overall site development limited and the site does contain a large protected tree at the front boundary.
 It is noted two of the lower lying units were flooded in 2010 during a heavy rain event and required

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repairs. The complex is located next to the Wainui-Te-Whara stream and stop bank. We understand
Council has carried out storm water improvements to alleviate the risk of future flooding, however this
would be an issue that any prospective purchaser would likely investigate. This report has made no
specific allowance for any increased storm water risk on the basis that remedial drainage improvements
are satisfactory.
Veronica Flats (19 Apanui Avenue, Whakatane)

Veronica Flats are located on a corner site with a sealed driveway having access from both sides of the road
corner. The site is L-shaped and has limited uncovered sealed parking.
Configuration 11 units within three buildings providing nine single bedroom
units and two double bedroom units.
Age 1965
External Condition Fair to good

 Depreciated Replacement Value $ 492,533
General comments:
 Overall site development limited but the majority of the units enjoy good siting with a northerly aspect.
 There is a lack of sealed car parking but there is green space that could be developed for additional parking
if required.
5.1.2 Murupara Block
Hardy Flats (9 Kowhai Avenue, Murupara)

The Hardy Units compromise two transportable one bedroom homes situated on a regular shaped site. Off
street car parking is provided via a freestanding double carport
Configuration Two one bedroom freestanding units.
Age 1983
Gross Floor Area 87.2 m2 (Individual unit size 43.6 m2) with 26.4m2 timber decks

Internal Condition Good
 Cost Replacement Value $222,458
General comments:
 Overall site development limited and apart from the small size of the units there is nothing specific that
identifies these units being for the pensioner housing market.

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Murphy Flats (20 Kowhai Avenue, Murupara)

The Murphy Flats are located on a wide street frontage double allotment site with limited site layout. Off street
car parking is provided via a tar sealed parking area at the front.
Configuration Five units within two buildings providing four single bedroom
units and one double bedroom unit.
Age 1971 and 1975
Gross Floor Area 187.4 m2 (Individual unit size 37.5 m2)

Internal Condition Average
 Cost Replacement Value $379,017
General comments:
 Overall site development limited.
 Design of units somewhat unusual with high vaulted ceilings and wood-burner heating that may not always
be ideal for the elderly market.
 The internal design layout in terms of bedroom configuration is unusual being open plan to the lounge and
somewhat impractical.
5.1.3 Summary of Village Amenity and Condition Factors
Council staff have indicated that over the last 12 months all of the Council’s 72 pensioner units
within Whakatane have had their roof spaces insulated and all but four units have had insulation
fixed between the floor joists. Polythene has previously been laid to the ground under the floors
of these 68 units. The four units that have not had under floor insulation are due to inadequate
space for this to be installed or they have concrete floors.
The interiors of the units are generally in fair to good condition recognising their age, and are
progressively being redecorated. Internal redecoration generally occurs after a long term tenancy
has ended so as not to disrupt current occupation unless remedial work is required. We have
been informed by Council staff that 75 percent of the total number of Whakatane units have
been refurbished or redecorated and that all units now have modern vanity units, toilets and
ovens.

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The following table is a summary of Council’s Asset information in terms of estimated

replacement costs of the villages. It indicates that if the 79 units were built today they would
cost in the vicinity of $8 million. The depreciated replacement cost approach has allowances
made for deprecation on the estimated remaining life of the assets. It does highlight that cost
valuation methodology levels are now well in advance of market values. The condition grade
index shows all the villages are in a good condition based on Council’s Asset Management
database.
Table 1: Replacement Cost and Depreciated Replacement Value of Portfolio
Pensioner Housing Asset Information (Sourced from Council's SPM - Surveyed 1/6/2013)
Cost Depreciated Condition

No of Replacement Replacement Grade Index4
Complex Units Value CRV/Unit Cost DRC/Unit (CGI)
Alice Stone Flats 28 $2,961,400 $105,764 $1,479,384 $52,835 2.05
Lovelock Court 22 $2,182,490 $99,204 $1,152,454 $52,384 1.94
Allandale Court 11 $1,051,902 $95,627 $609,596 $55,418 1.98
Veronica Flats 11 $1,069,634 $97,239 $492,533 $44,776 1.93
Hardy Flats 2 $222,458 $111,229 $152,750 $76,375 1.66
Murphy Flats 5 $379,017 $75,803 $227,170 $45,434 1.96
Totals 79 $7,866,901 $99,581 $4,113,887 $52,075 1.92
5.1.4 Tenant survey of property condition
We note that a survey of tenants was carried out as part of the 2011/2012 Community Asset
Management Plan. This survey highlighted the following key findings:
 A significantly larger number of respondents (79%) indicated that there was something
in their unit that needed fixing. This has increased from 69% in the 2005 survey. We
note however Council has done significant decoration since this survey as well as the
demands of the elderly would be considered higher than standard residential tenants.
 Respondents were surveyed as to whether the style of their unit met their needs. They
were also asked whether the style and layout of the village that they were in met their
needs. 89% indicated that the style of their unit met their needs (up from 68% in 2005).
83% indicated that their village met their needs, which is consistent with the 2005
survey results.
4
Definition from SPM software of CGI - Condition Grade Index (CGI) is the average condition grade of assessed
components weighted by their gross replacement cost. If less than 2.0, it’s likely that the building is in a good to very good
condition with only a few components in a poorer condition. A CGI of less than 1.5 suggests that the building is in a very
good condition without any component in a poorer condition. If greater than 2.5, then there are a higher proportion of
components in a poorer condition.

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 Respondents were asked if they thought their rent was reasonable and if they would pay
more for improved accommodation or services. 76% of respondents indicated that the
current rent was reasonable for the standard that it was. This figure has gradually
declined from 88% in 2005, and 81% in 2007. 73% then indicated that they would not
be willing to pay more for improved accommodation or services.
5.2 Tenant Profile
At the time of this report, there were 83 tenants occupying 77 units. Only two of the 79 units
were vacant and 6 units were tenanted by couples. The majority of tenants were female, at 54%,
with 46% male tenants. The average length of tenancy is five years, with the longest tenancy 21
years and the most recent tenant moving in less than one month ago. The majority of tenants
who move out of the units do so as they become less able to live independently.
The age of the tenants ranged from 52 years to 92 years, with an average age of 72 years, and 13
tenants under the age of 65 years. The ethnicity of the tenants was consistently spread across all
villages with 44% Māori and 56% from European descent. The primary source of income for
tenants is superannuation, with tenants under the age of 65 years being recipients of other forms
of welfare benefit.
5.3 Rental Analysis of the Portfolio
5.3.1 Current Council Rents
Under existing Council policy, all tenants are expected to pay a rental set at 80% of market rents.
Current passing rentals are recorded as follows:
Whakatane
Alice Stone (Single) $136.00 per week
Alice Stone & Veronica Flats (Double) $144.00 per week
All Others (Single) $132.00 per week
All Others (Double) $144.00 per week
Murupara
Murphy (Single) $56.00 per week
Murphy (Double) $60.00 per week
Hardy (Double) $68.00 per week

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5.3.2 Market Rents for the Portfolio
The following table summarises the Valuer’s assessment of current market rentals. Under
Council’s current policy, rentals are reviewed every two years with the next review effective from
the 1 July 2015. We understand historically rental reviews have generally been accepted by
tenants, which are most likely a reflection of Council’s 80% rule making them concessionary to
market. The net annual differential between assessed social rent levels and that presently being
paid by tenants is about $44,928.00 per annum.

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Table 2: Market Rents for Council’s Portfolio
Current Social weekly Annual social Annual rent at Variance

Annual rent at Council present
Property Property address Type Units market rent if set at rent at 80% of present Council from current
full market rate weekly rent
weekly rent 80% of market market levels market
Whakatane
Double 2 $190.00 $19,760.00 $152.00 $15,808.00 $140.00 $14,560.00 36%
Allandale Court 145 King Street Single 9 $180.00 $84,240.00 $144.00 $67,392.00 $132.00 $61,776.00 36%
$104,000.00 $83,200.00 $76,336.00
Double 4 $190.00 $39,520.00 $152.00 $31,616.00 $140.00 $29,120.00 36%
Lovelock Court 1 Spence Lane Single 18 $180.00 $168,480.00 $144.00 $134,784.00 $132.00 $123,552.00 36%
$208,000.00 $166,400.00 $152,672.00
Double 3 $195.00 $30,420.00 $156.00 $24,336.00 $144.00 $22,464.00 35%
65 Goulstone
Alice Stone Flats Road Single 25 $185.00 $240,500.00 $148.00 $192,400.00 $136.00 $176,800.00 36%
$270,920.00 $216,736.00 $199,264.00
Double 2 $195.00 $20,280.00 $156.00 $16,224.00 $144.00 $14,976.00 35%
Veronica Flats 19 Apanui Avenue Single 9 $180.00 $84,240.00 $144.00 $67,392.00 $132.00 $61,776.00 36%
$104,520.00 $83,616.00 $76,752.00
Murupara
Hardy Flats 9 Kowhai Ave Double 2 $85.00 $8,670.00 $68.00 $6,936.00 $68.00 $6,936.00 25%
Double 1 $75.00 $3,825.00 $60.00 $3,060.00 $60.00 $3,060.00 25%
20 Kowhai
Murphy Flats Avenue Single 4 $70.00 $14,280.00 $56.00 $11,424.00 $56.00 $11,424.00 25%
$18,105.00 $14,484.00 $14,484.00
Totals 79 $714,215.00 $571,372.00 $526,444 36%

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In relation to the Whakatane portfolio the full current rentals are now considered to be on
average $15 per week per unit below current market rates. This increase under the current policy
cannot be captured by the activity until 1 July 2015. The increase would result in an average
increase of $12 per week per unit under Council’s current social housing policy: equivalent to a
9% average increase.
In relation to the Murupara units there is very limited evidence and the Valuer has assessed no
change to market rental levels.
Rental adjustments to full market would result in an average 36% increase; equivalent to an
increase of $48 to a $51 per week per unit increase on current social rentals being charged.
It should be noted, however, there may be a degree of political risk to Council if a purchaser
increased rentals to market without a transition period i.e. if Council did not make the 80% of
market rental a condition of sale. While tenants may not be significantly worse off financially if
they qualify for increased accommodation subsidies, the perception in the wider community of
raising rents to market levels may be different.
5.4 Valuation of the Portfolio
The valuation of the portfolio has been assessed using three different methods – a market value
for the sale of each village individually, a rating valuation and a ‘social valuation’ assessed on the
block sale of units retained at a social rental.
5.4.1 Market Value – for Benchmark Purposes
The table below summarises individual sale values for the housing villages. The Valuer has
assumed that each unit will be sold individually, and future purchasers will be able to charge full
market rents with no other conditions imposed that would affect cash flows.
Based on the need for a proposal to transfer the portfolio to be included for consultation in the
Long Term Plan, and the knowledge that the market will support rental increases, we have made
the critical assumption that prospective purchasers will factor proposed 1 July 2015 rental
increases into their purchase decision. The values below assume market rentals effective from 1
July 2015 will be achieved.

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Table 3: Market Value of Council’s Portfolio
Market
Average % Change
Property Value Land Improveme
Property No. unit from 2010
address No value nts
value Values
covenants
Whakatane
Allandale
145 King Street 11 $860,000 $360,000 $500,000 $78,182 -2%
Court
Lovelock
1 Spence Lane 22 1,530,000 $ 490,000 $1,040,000 $69,545 6%
Court
Alice Stone 65 Goulstone
28 1,950,000 $ 560,000 $1,390,000 $69,643 6%
Flats Rd
Veronica 19 Apanui
11 $850,000 $ 290,000 $560,000 $ 77,273 2%
Flats Avenue
72 5,190,000 1,700,000 $3,490,000 $72,083 4%
Murupara
9 Kowhai
Hardy Flats 2 $40,000 $ 5,000 $35,000 $20,000 -60%
Avenue
20 Kowhai
Murphy Flats 5 $100,000 $10,000 $90,000 $20,000 -44%
Avenue
7 $140,000 $ 15,000 $125,000 $20,000 -50%
Totals 79 $5,330,000 $1,715,000 $3,615,000 $67,468 1%
5.4.2 Rating Valuations
For comparison purposes we have also outlined the Rating Valuations (as at 1 September 2013)
which are generally completed using mass appraisal methodology. The rating valuations are
based on an unencumbered market basis and are unlikely to have specific reference to actual
passing rentals and costs.
Table 4: Rating Valuation of Council’s Portfolio

%
Difference
Average
Property Capital Value Land Improvement from
Property No. unit
address (Rating) value s Assessed
value
Market
Value
Whakatane
Allandale 145 King
11 1,150,000 $350,000 $800,000 $104,545 34%
Court Street
Lovelock
1 Spence Lane 22 $1,830,000 $ 470,000 $1,360,000 $83,182 20%
Court
Alice Stone 65 Goulstone
28 $2,100,000 $ 540,000 $1,560,000 $75,000 8%
Flats Rd
Veronica 19 Apanui
11 $920,000 $ 280,000 $640,000 $ 83,636 8%
Flats Avenue
72 $6,000,000 $1,640,000 $4,360,000 $83,333 16%
Murupara
9 Kowhai
Hardy Flats 2 $61,000 $ 5,000 $56,000 $30,500 52.5%
Avenue
20 Kowhai
Murphy Flats 5 $150,000 $11,000 $139,000 $30,000 50%
Avenue
7 $211,000 $ 16,000 $195,000 $30,143 51%
Totals 79 $6,211,000 $1,656,000 $4,555,000 $78,620 17%

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For the purposes of this exercise we have assumed the portfolios relating to Whakatane and
Murupara would be considered as separate blocks. The remote nature and smaller scale of the
Murupara Villages combined with the perceived lack of demand from a CHP in our view means
this block should be treated as a separate entity.
We have therefore considered the sale of the individual villages to be best presented as two
separate entities or blocks being:
1. The four Whakatane villages presented as one entity to the market as a block sale.
2. The two Murupara villages presented as one entity to the market as a block sale.
The Valuer in considering the block value has made deductions from the assessed individual
village values to reflect selling expenses (commission and legal), profit and risk margins together
with a contingency allowance.
The assessed block values as follows:
Whakatane Portfolio (4 Villages – 72 units) $4,550,000.00

Murupara Portfolio (2 Villages – 7 units) $ 110,000.00
5.4.3 Social Housing Value
The table below summarises expected sale values at a ‘social housing value’. This value assumes
each property is to be sold individually, and that rentals will be restricted to 80% of the current
market rental value. This is the only social criteria applied at this stage and is consistent with the
methodology applied in the 2010 report.
Restricting a purchaser by capping rentals at 80% of market shows a significant reduction in

portfolio values in the order of 34% in comparison to unrestricted market values. This is prior
to any other deductions being made for any further criteria Council may wish to impose on a
purchaser.
There is an argument that a discounted market rental will result in higher occupancy, but we do
not consider this to be a significant consideration in the current Whakatane market where there
is limited competition in the sector. It may have some impact on the Murupara units but is also
considered to be negligible.

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Table 5: Social Housing Value for Council’s Portfolio

Market Value % Discount
No. of Average
Property Property address as social Land value Improvements from market
Units unit value
housing values
Whakatane
Allandale Court 145 King Street 11 $555,000 $225,000 $330,000 $50,454 -35%
Lovelock Court 1 Spence Lane 22 $1,000,000 $ 315,000 $685,000 $45,455 -35%
Alice Stone Flats 65 Goulstone Rd 28 $1,310,000 $370,000 $940,000 $46,786 -33%
Veronica Flats 19 Apanui Avenue 11 $550,000 $ 185,000 $365,000 $50,000 -35%
72 $3,415,000 $1,095,000 $2,320,000 $47,431 -34%
Murupara
Hardy Flats 9 Kowhai Avenue 2 $30,000 $ 4,000 $26,000 $15,000 -25%
Murphy Flats 20 Kowhai Avenue 5 $80,000 $ 8,000 $72,000 $16,000 -20%
7 $110,000 $ 12,000 $98,000 $15,714 -21%
Totals 79 $3,525,000 $1,107,000 $2,418,000 $44,620 -34%
The analysis suggests that rental restrictions would reduce the market value by about $1.8
million.
In regard to selling the units under a block sale basis (with conditions restricting rentals to 80%
of market) as a single portfolio, rather than as individual villages, the valuer has assessed the
values as follows:
Whakatane Portfolio (4 Villages – 72 units) $2,975,000.00

Murupara Portfolio (2 Villages – 7 units) $85,000.00
For the purposes of this exercise we have again assumed the portfolios relating to Whakatane
and Murupara would be considered as separate blocks. The ability to receive a significant
financial sale (if any) for the Murupara Villages under a Social Housing criterion from a CHP
may be limited.
5.4.4 Commentary on Impacts of Future Social Housing Criteria on Realisation
As mentioned in the previous section, the Social Housing Sub-Committee developed proposed
criteria and priorities for the transfer of the pensioner housing to a CHP. These included
protecting the tenancy terms and conditions of existing tenants, continuing to provide for
pensioners, and operating at a local level.
All of these criteria if adopted in full or part will impact on and reduce the likely transfer price in
comparison to a standard market investment basis. At this stage we cannot be specific as to the
level of price deduction as this will be a matter for negotiation between the parties.
The provision of additional services will need to be accounted into the cost of running the
portfolio. Additional services will attract higher staff costs either directly or via a local provider
contract in terms of providing ‘wrap around services’. Costs will also be increased in relation to
governance, and limiting tenant profiles to pensioner housing may restrict the ability for the
CHP to obtain some forms of funding.
We have undertaken a sensitivity analysis later in this section (see 5.6.1), allowing for additional
costs associated with providing tenancy support services to consider potential impacts this will
have on net cash flows.

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5.5 Income and Expenditure
The current Council policy states the Council’s investment in pensioner housing will continue to
be self-funding without rates input. This policy was last reviewed on the 10th October 2010.
5.5.1 Expenditure
We have been supplied reports relating to the Council pensioner housing activity as follows:
Operational Expenses Actual 2012 Actual 2013 Actual 2014 Budget 2015
General $2,008 $42,805 $64,717 $56,997
Alice Stone $51,282 $58,836 $59,821 $58,053
Allandale Court $21,373 $26,650 $22,642 $29,577
Lovelock Court $40,871 $43,458 $38,383 $42,000
Veronica Flats $21,273 $22,335 $25,556 $27,481
Hardy Flats $6,609 $6,378 $7,357 $9,958
Murphy Flats $32,100 $8,550 $8,103 $8,418
Total $175,515 $209,012 $226,580 $232,484
Capital Costs Actual 2012 Actual 2013 Actual 2014 Budget 2015
Pensioner Housing $68,582 $151,078 $93,444 $171,929
The 2015 year is budgeted to have $404,413 spent on general operational costs and capital
upgrades. On the current rentals being charged we have estimated revenue of $505,000
(approx.) after allowing for a 4% vacancy (equivalent to two weeks vacancy per unit).
It is noted that Council has made significant capital upgrades in recent years as well as planning
to upgrade water pipework. Due to this expenditure, it is not anticipated ongoing expenditure
will be as high as that budgeted for this year. We also understand that the costs relating to
operational expenses include various Council overheads which reflect the structure of a larger
Council organisation. These overheads would not usually be relevant to the management
structure of a CHP.
However, while Council’s costs provide a guide, any prospective CHP purchaser will undertake
their own financial due diligence on the portfolio. It would also be common practice to not only
look at the passing rental income but to also factor in any likely rental increases. Each CHP’s
circumstances will vary depending on their resources, their ability to raise capital and potential
leverage from other social housing they may own. This differs from an open market process
where the sole driver will usually be the investment dynamics and the ability to maintain and
grow net income for profit.

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5.5.2 Predicted Income and Expenditure for CHPs
The social housing criteria that Council will require as a condition of sale will influence each
CHP’s opinion of financial viability.
For the purposes of this analysis we have undertaken a cash flow analysis on the following two
options:
1. No restrictions on the CHP in setting rentals to market.

2. That the 80% market rental policy will continue to apply in the immediate future and be
protected by a legal mechanism
In terms of estimating rental income for CHPs we have used the same allowance of 4% for
vacancy (an average of two weeks per year per unit). We are aware that Council’s portfolio is
showing approximately 97% occupancy over the last three years but we have adopted a slightly
more conservative allowance.
Expenditure items have been based on actual known costs or market-related estimates. We have
also made allowances for property management costs in relation to standard market fees. This
level of property management does not cover any social input that we will consider separately
under a social housing management allowance. The costs of this allowance will vary depending
on the level of support a CHP can or is willing to provide.
5.6 Rent Setting Options for CHPs
We have included two scenarios for rent setting for CHPs. The rationale for these two scenarios
is that a registered CHP may be eligible to receive IRRS if they house eligible tenants. This
means they can charge a full market rent as illustrated in Option 1.
Currently IRRS is only available for new tenants. It is expected that existing tenants and new
tenants that are not eligible for IRR will be charged a social rent, set at no more than 80% of the
market. This is Option 2.
These options also distinguish between rents charged for double units and those charged for
single units. The Whakatane block is presented first, followed by the Murupara block.

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5.6.1 Option 1 – Full Current Market Rental as at 1 July 2015
Whakatane Market Rental Income
Weekly
Number Market Annual Market
Gross Rental of Units Rental Rent
Double Units (Alice Stone & Veronica) 5 $195.00 $50,700.00
Double Units (other) 6 $190.00 $59,280.00
Single units (Alice Stone) 25 $185.00 $240,500.00
Single units (other) 36 $180.00 $336,960.00
72 $687,440.00
Less 2 Weeks Vacancy $26,440.00
Total Income $661,000.00
Expenditure
Rates $66,270.00
Water rates $9,700.00
Insurance $50,400.00
Property Maintenance $55,600.00
Refurbishment & Capital Allowance $28,800.00
Property Management 10.00% $68,744.00
Total Expenditure $279,514.00
Nett Cash Flow Prior to Debt
Servicing $381,486.00
Current Market Portfolio Block Value (rentals increased to

full current market) - Effective from 1 July 2015 $4,550,000.00
Projected Return (assuming rentals are reviewed to market
on 1 July 2015) 8.38%
The above values are considered representative of unrestricted market value with no allowance
made for any social housing criteria.

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We have undertaken a similar analysis for the two Murupara villages on a full market rental basis
as follows:
Murupara Market Rental Income
Weekly
Market Annual Market
Gross Rental No Rental Rent
Double Units (Hardy Flats) 2 $85.00 $8,840.00
Double Units( Murphy Flats) 1 $75.00 $3,900.00
Single units (Murphy Flats)) 4 $70.00 $14,560.00
7 $27,300.00
Allow 2 Weeks Vacancy $1,050.00
Expenditure
Rates $7,040.00
Insurance $4,900.00
Nett Cashflow Prior to Debt Servicing $5,434.00
Current Market Portfolio Block Value (rentals increased to full

current market) - Effective from 1 July 2015 $110,000.00
Projected Return (assuming rentals are reviewed to market on 1
July 2015) 4.94%

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5.6.2 Option 2 – Social Housing Rental as at the 1 July 2015
Whakatane Social Rental Income
Weekly
Market Social Rent @ Annual Social
Gross Rental No Rental 80% Rent
Double Units (Alice Stone & Veronica) 5 $195.00 $156.00 $40,560.00
Double Units (other) 6 $190.00 $152.00 $47,424.00
Single units (Alice Stone) 25 $185.00 $148.00 $192,400.00
Single units (other) 36 $180.00 $144.00 $269,568.00
72 $549,952.00
Allow 2 Weeks Vacancy $21,152.00
Expenditure
Rates $66,270.00
Water rates $9,700.00
Insurance $50,400.00
Net Cashflow Prior to Debt
Servicing $263,034.80
Current Social Portfolio Block Value (rentals increased to

80% of current market) - Effective from 1 July 2015 $2,975,000.00
Projected Return (assuming rentals are reviewed to 80% of
market on 1 July 2015) 8.84%
The above analyses provide a benchmark value on standard investment dynamics with the only
effective allowance for social housing being the rent restricted to 80% of market rates. Until the
social housing criteria that Council wish to impose on a CHP have been fully decided, it is
difficult to gauge what level of discount will be applicable to the assessed cash flows.
5.6.3 Impact of Funding Housing Support Services
Factors that would result in higher costs for a CHP include the following:
 The provision of tenancy support services over and above the tenancy management
function will need to be provided by additional staff or contracted to a local provider.
Additional support costs will also incur corporate overheads such as car running costs,
office accommodation and general administration services.
 It will also be necessary to make allowances for corporate governance costs. This could
vary depending on whether the CHP already has well set-up systems and whether the
costs of running another 72-79 units can be leveraged off existing activities.

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The costs associated with the supply of additional support services and associated costs could be
in the vicinity of $80,000 to $120,000 per annum. This estimate is based on a salary of $60,000
per annum and includes an overhead component of 1.3 - 2.0 times of the salary cost. This
overhead component includes direct personnel costs and indirect organisational costs such as
additional compliance and governance costs. This could result in the net cash flows of the
Whakatane portfolio reducing to levels in the range of $140,000 to $180,000 per annum.
Direct capitalisation of yields in the 8.5% to 10% range would indicate social housing portfolio
values ranging from approximately $1.5 to $2 million dollars.
The table below illustrates this via a simple direct capitalisation approach.
Table 6: Capitalisation of Income Less Support Service Costs
Lower Allowance Higher Allowance

Estimated Maintenance Nett Income (Social Rental) $263,034.80 $263,034.80
Allowances for Additional Social Housing Support Services
Low range $80,000.00
High Range $120,000.00
Projected Net Income (prior to debt servicing) $183,034.80 $143,034.80
Direct Capitalisation
Analysis
Yields @ 8.50% $2,153,350.59 $1,682,762.35

9.00% $2,033,720.00 $1,589,275.56
9.50% $1,926,682.11 $1,505,629.47
10.00% $1,830,348.00 $1,430,348.00
The above analysis indicates the investment value of the villages in relation to the assessed
market value is uneconomic. Allowances for social housing criterion and limiting rentals to 80%
of market will only further reduce the economic viability. If Council wishes to divest the units to
a CHP the expectation of realising revenue from a sale is considered limited.
5.7 Land Status Issues
The land status reports prepared in September 2009 for Council highlighted that there was a
potential requirement to offer land back to the original owners for the Alice Stone Flats and
Lovelock Court. Preliminary advice provided by TPG indicated that an exemption to the
Section 40 (s40) offer back requirements of the Public Works Act 1981(“PWA”) could be
possible if the units were sold as a block.
TPG’s Legal Counsel have provided further advice on this aspect with regard to the proposal
that Council is looking to facilitate a sale to a CHP with criteria protecting the existing tenants
and the use for pensioner housing. This legal advice was provided to Council in a separate
report.

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This advice, based on recent case law and recognising that Council wishes to enhance the
delivery of pensioner housing by sale to a CHP, concludes that it would be unreasonable to offer
the land back to the original owners under s40 of the PWA.
The risk of a challenge to an exemption from offer back under s40 PWA would be lessened if
controls were tightened in regard to transferring the assets to a CHP. Two suggestions would be
to have an express statement as to how the land could be used by the purchaser, and also to
provide for a first right of refusal to Council to repurchase the land should it be put up for sale.
This could be protected by legal instruments such as a registered encumbrance on the relevant
titles.
This option may of course have financial implications for Council and may not be feasible,
however we suggest it should be considered if the proposal develops, to ensure any s40 PWA
risk is sensibly minimised.

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6. COMMUNITY HOUSING PROVISION
6.1 Community Housing Provision Internationally
As previously mentioned, moves in this country to share the City West Housing Trust
responsibility for the provision of social and affordable Salford, UK
housing with the community sector reflect the direction Established in 2008, City West owns and
taken in other countries, including the United Kingdom and manages 14,642 housing units. The Trust
provides general social rental and has 430
Australia. Until the late 1970s social housing in the United staff. City West:
Kingdom was predominantly provided by local councils.  A Top 50 provider in the UK
Social housing reform introduced at this time saw the  Provides flexible options for housing for
development of not for profit Housing Associations and older people that includes 24 hour
the transfer of stock to these associations. Now over 60% support
of all social housing is owned by Associations; the  Completed over 70 housing projects
equivalent of 2.5 million homes5.
 Completed upgrades of all properties to
meet Decent Home Standard
The development of the community housing sector in
 Develops neighbourhood plans and
Australia was somewhat slower than in the UK. State-
focuses on safe communities
owned and managed stock still dominates provision,
 Focuses on customer involvement –
however, funding for capital programmes for the state have
from dealing with complaints to
been declining for many years. In the 1980s a number of representation on the board
state housing authorities began devolving their housing www.citywesthousingtrust.org.uk
services to non-government organisations and in 1990 the
National Housing Strategy began promoting the development and growth of community
housing providers. A national target of 35% of all social housing to be owned by CHPs was set
and was achieved well within the set timeframe. In NSW alone, CHPs own 30,000 properties.
St George Community Housing As in the UK, support for the provision of social
NSW, Australia housing by community providers Australia was based
St George Community Housing was on the concept that increasing the range of social
established over 30 years ago and is the housing options would benefit tenants through
largest provider in NSW managing over
4,300 housing units. improved choice and would benefit government as
SGCH: the purchaser of competitive (therefore more
 Is registered as a Tier 1 (growth) CHP efficient) social housing services.
 Provides housing to very low to
moderate income people
 Provides training, employment,
education and engagement services
 Partners with developers and investors
to achieve social housing outcomes (e.g.
Bonnyrigg)
www.sgch.com.au
5
Pawson, H., Davidson, E., Morgan, J., Smith, R. & Edwards, R. (2009) The Impact of Stock Transfer in Urban Britain Joseph Rowntree
Foundation, UK

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Other widely acknowledged benefits included:
 The ability of community organisations to attract additional investment.

 More flexible, locally based solutions to housing need, providing greater choice.
 Better outcomes for people, with greater levels of more appropriate support.
 Responsiveness in meeting the needs of specific tenant groups6.
The growth of the community housing sector in both the UK and Australia was largely due to
significant transfers of housing stock. This was usually at no or low cost to the provider, with
provisos that providers used assets to leverage further growth. As a result significant and rapid
growth has occurred, particularly in later years.
As the sector has grown and the need for securing publicly funded assets became greater, various
states have responded by introducing legislation and regulation. South Australia was one of the
early states to respond, with the South Australia Cooperative and Community Housing Act and
South Australian Community Housing Authority in 1991. The Authority is responsible for the
funding and regulation of all community housing organisations registered under the Act,
including monitoring financial, tenancy and asset management practices7.
In New South Wales, the Office of Community Housing is responsible for regulation of the
sector. The Office operates a performance based tiered registration system for community
housing providers, with audits awarding providers a grade8. The regulation system adopted by
CHRA is very similar to that of the NSW Office of Community Housing.
In the UK, government established the national ‘Housing Corporation’ to regulate and monitor
the performance of Housing Associations and to dispense capital funding. Regulation is
undertaken on a risk management basis – many smaller registered associations are monitored via
self-reporting while more aggressive auditing may be undertaken of larger organisations in
receipt of significant government funding9.
Lessons from the UK and Australia that show common ingredients for the success of the
community housing sector include:
1. Ensuring there is a long term, national strategy designed to support the sector.
2. Adequate investment – through capital and asset transfers, from government and
private sectors.
3. Creating the right conditions for development and growth – inclusionary zoning,
regulation and accreditation.
4. Capacity and capability building for providers.
5. Recognition of the sector and the profession10.
6Capital Strategy/SGS Economics and Planning (2007) Affordable Housing: The Community Housing Sector in New Zealand, for Centre for
Housing Research, Aotearoa New Zealand

7 Community Housing Council of SA Inc. (2006) An International Perspective on the Community Housing Sector
8 http://www.rch.nsw.gov.au/
9
Pawson, H., Davidson, E., Morgan, J., Smith, R. & Edwards, R. (2009) The Impact of Stock Transfer in Urban Britain Joseph Rowntree
Foundation, UK
10 Cadman, A. (2014) Unravelling Housing: A Report on a Tour Supported by the Winston Churchill Memorial Trust

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6.2 Community Housing Provision in New Zealand
The Community Housing Sector in New Zealand is still considered relatively small and
emerging. The sector collectively currently owns an estimated 5,000 units and manages and leases
around 2,000 more. It is characterised by a diverse number of small to medium sized players,
with their origins often in the health or social service sectors, from church-based origins, or
those that have developed to provide housing specifically for a particular project.
Examples of some of the larger organisations in New Zealand include:
 Accessible Properties – that manages 1,100 units (owning approx. 200) nationally,
providing predominantly for people with intellectual and physical disabilities.
Established as the property arm of IHC in 2005.
 Trust House – that owns and manages 500 houses in the Wairarapa area, transferred to
them by central government in 1999. Trust House is the only provider of social housing
in the Wairarapa area, with no state housing provision.
 The Salvation Army – that has a long history of providing social housing in New
Zealand and owns around 300 units nationally, providing predominantly for
independent older people.
CHPs provide a diverse range of accommodation and support services across the housing
continuum, from the provision of emergency housing, transitional and medium term housing,
long term social rental housing and affordable home ownership programmes. While most own
at least some of the houses they provide, many provide social housing through leased properties
from the private sector and Housing New Zealand.
The provision of housing support services, often referred to as ‘wrap around services’, that go
beyond a standard tenancy management function is characteristic of most CHPs. Levels of
support vary from linking and referring tenants to appropriate agencies, to the direct provision
of social or health services. The level of direct provision depends on the needs of the tenant
group, the capacity of the CHP and the relationships they may have with other providers. While
many CHPs do provide these services, the portfolio size of most organisations does not allow
for housing support services to be funded through rental income streams and at present general
housing support is not funded by the government as a specific service. CHPs providing tenancy
support services either fund raise or cover services through other contracts.
Community Housing Aotearoa (CHA) is the peak body established in 2004 to provide a
collective voice for the sector. Its work programme currently includes a stock take of the
provision of housing by the sector and contributing to Government’s social housing reform
programme. Contributions include advocating for greater resource, committing to long term
planning and supporting choice and diversity across the community housing sector.

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6.3 Government Policy direction
The Social Housing Reform Programme clearly targets CHPs as the key to the future provision
of social housing in New Zealand. There are three key initiatives worth mentioning:
1. The enactment of the Housing Restructuring and Tenancy Matters (Community

Housing Provider) Regulations 2014. This legislation provides the criteria and
performance standards for the registration of CHPs. It also provides the process for
revoking registration.
2. The provision of Income Related Rent Subsidies for registered CHPs, through
contracting with MSD. The availability of this subsidy allows CHPs to receive full
market rents while eligible tenants pay only 25% of their household income on rent.
3. The transfer of state housing assets to CHPs. Government has committed to
transferring 20% of the state housing portfolio (approx. 15,000 units) to the sector over
the next five years and has set up a joint Treasury and MBIE unit to develop the policy
framework for this.
See Appendix One for a description of government agencies and their role in the SHRP.
Impact on Local authorities
The Regulations specifically exclude local authorities and subsidiary organisations such as
Council Controlled Organisations from being eligible to access IRRS. Combined with the
unavailability of other funding for local authorities, central government has provided a clear
indication that there is no expectation for local authorities to remain in social housing. As a
result, many local authorities are now considering the divestment of their housing portfolios.
Recent examples include:
 Hamilton City Council – resolved to sell its 17 pensioner housing complexes (344
remaining units), offering them first to social housing providers.
 Christchurch – is setting up a new community housing provider and will sell its 2,000
units to the entity. Through its Housing Accord, government has agreed all existing
tenants can apply for IRR.
The next section of this report looks at what is required to become a registered CHP.
6.4 Community Housing Regulation and Accreditation
The Community Housing Regulatory Authority (CHRA) was established under the Housing
Restructuring and Tenancy Matters (Community Provider) Regulations (2014) and operates as a
business unit within MBIE to assess applications, and to register and monitor CHPs. CHRA
began assessing applications for Class I Social Landlord Status in April 2014.

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Applicants are assessed against five performance areas:
1. Governance – the organisation must have a group of suitably skilled people responsible
for governance and must have documented policies, processes and accountability
controls. Documentation provided to assess this includes the organisation’s
empowering document (e.g. Trust Deed), governance documents, biographies of
governing members, annual reports, code of conduct and delegations’ policies.
2. Management – the organisation must have appropriate policies and processes to
ensure its business needs are met. It must be able to demonstrate that that it can manage
in a safe and effective manner, including monitoring outcomes for tenants and
demonstrating appropriate use of funding for tenancy services. CHPs are assessed
based on their policies, procedures, risk management documentation, audit reports,
annual and business plans.
3. Financial Viability – the organisation must be financially viable and solvent, have
systems and processes in place to ensure financial performance and that risk is managed.
The CHRA assesses financial accounts for the previous three years, including profit and
loss, cash flow and balance sheet.
4. Tenancy Management – the organisation must comply with the Residential Tenancies
Act (1986) and all other relevant legislation. Assessment is based on the organisation’s
tenancy management policies and procedures, including rent setting, managing arrears
and dealing with complaints.
5. Property and Asset Management –the organisation must manage its properties well,
including meeting property standard conditions, plans for maintenance, acquisitions and
disposals and compliance with all relevant legislation such as the Building Act 2004.
Assessment is based on documents such as the organisation’s asset management policies
and processes, maintenance schedules and property inspection plans.
Class I Social Landlord Status enables CHPs to contract with MSD to provide housing for
people who are eligible for Income Related Rent and to receive an Income Related Rent Subsidy.
The current policy states the subsidy is available for new tenants, not existing tenants, who are
referred through MSD to the CHP. Eligibility is currently limited to those who are recognised as
in high housing need and not those who are adequately housed.
In addition to assessing organisations and approving registration, the CHRA is responsible for
annual monitoring of organisations to ensure they are meeting performance standards.
Those providers who were assessed under the previous Social Housing Unit process have been
deemed eligible as Class I Social Landlords until March 2015, when they must reapply with
CHRA. At present, there are 34 organisations registered as Class I Social Landlords with CHRA.
Class II regulations are currently being developed by MBIE, aimed at those organisations who
wish to receive capital funding and asset transfers. In addition, MBIE is exploring the
development of minimum quality standards for rental housing and trialling a Rental Warrant of
Fitness scheme with Housing New Zealand. It is likely this scheme will be mandatory for
registered CHPs.

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In addition to meeting regulatory requirements, CHPs can attain accreditation status. CHA has
developed best practice guidelines and assessment tools. Organisations undergo an audit process
with Global Mark (an Australian based company that audits community housing organisations in
Australia) to become Accredited Providers.

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7. COMMUNITY HOUSING PROVIDERS – ASSESSMENT OF

INTEREST
This section includes information from interviews with a range of existing CHPs including those
which are registered CHPs and those which had previously expressed interest in Council’s
housing portfolio. It also includes organisations that are not registered CHPs, but have a high
profile in the community and/or an association with Council’s pensioner housing.
Interview questions focused on the key priority areas identified by the Social Housing
Committee. In total, interviews were carried out with seven organisations. Of these, five are
existing housing providers and two are registered CHPs.
7.1 Summary of Interviews with Community Housing Providers
7.1.1 Accessible Properties

Organisation Profile
Established as a subsidiary company of IHC in 2005, Accessible Properties Ltd manages 1,100
properties across New Zealand. Of these, 900 are managed on behalf of IHC with the
remaining 200 owned and managed by Accessible Properties. Housing is predominantly
provided at an affordable level for people with intellectual and physical disabilities, with some for
more independent living. New houses are accessible, built to Lifemark Standard. The company
is looking to expand and grow nationally and has expressed interest to the government to be
considered for stock transfers. While they are a social landlord, Accessible Properties does not
provide intensive tenancy management. Support services are generally provided to tenants
through contracted health providers.
Community Housing Provider Status
Accessible Properties is a registered CHP and has achieved accredited provider status through
Global Mark.
Commitment to Existing Tenants
Accessible Properties has indicated they would provide security for existing tenants and would
look to retain the same number of units for pensioner housing, provided there was ongoing
demand. They would also look to provide housing for IRR tenants.
Local Connections
While Accessible Properties does not currently have a direct connection in Whakatane, the
service arm of the shared parent organisation, Idea Services, is an existing local provider with
good local connections. Accessible Properties would look to partner with local providers to
ensure the support needs of tenants were met.
Interest in the Portfolio
Accessible Properties interest is in the purchase of the portfolio. The purchase would require
borrowing and would need to be based on a viable proposition. Accessible Properties would be
open to discussing key criteria, arrangements and outcomes with Council.
Key considerations for Accessible Properties include:
 The age and design of the units limits use by people with disabilities.
 There is limited redevelopment potential on most sites.

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 The financial viability of the project would need to be carefully assessed.

 Resource in the form of tenancy management would need to be included and/or
expanded from Tauranga.
 Tenants currently receive quite a high level of support from Council which Accessible
Properties is not resourced to provide.
 Impending opportunities for stock transfers from other local authorities and Housing
New Zealand may now limit the availability of resource to invest in Whakatane.
 Unsure whether Murupara units would work for them from a resourcing perspective.
7.1.2 Tauranga Community Housing Trust (“TCHT”)

TCHT was established in 2003 to provide housing for people with physical disabilities and their
families. TCHT evolved from the CCS BOP Housing Project, responding to a growing concern
about the lack of affordable and appropriate housing for people with disabilities in Tauranga.
They also provide medium term transitional housing for people in need. TCHT manages
between 60 and 80 houses in Tauranga, with five of these owned, and another 14 undergoing
development. The remainder are leased through private landlords and Housing New Zealand.
Their strategic plan includes growing to become a regional housing provider and TCHT is
acutely aware of the huge and growing need for housing for older people in the region. A focus
for TCHT is providing quality housing solutions for people in housing need, prioritising people
with disabilities and their families. The Trust provides intensive tenancy management,
connecting tenants with appropriate services. Rents are charged at 85% of market rates.
TCHT is a registered CHP and is considering undertaking the accreditation process.
Minimising the impact of change for tenants would be critical for TCHT, including wherever
possible retaining current terms and conditions for tenants and the relationships they have with
local providers. TCHT would work to develop partnership relationships with local providers.
Local Connections
TCHT is contracted to provide a Friendly Landlord service for consumers of mental health
services across the wider Bay of Plenty region. It is also currently in negotiations with the BOP
District Health Board to deliver the Healthy Homes contract alongside Sustainable Solutions
across the region. For the management of social housing, TCHT would look to partner with
local organisations to ensure the support needs of tenants were met.
A key goal for TCHT is to become a regional housing provider for the Bay of Plenty and as
such, is interested in purchasing the portfolio, or would consider leasing if that was a more viable
option. The purchase would be funded through raising debt and would need to be based on a
feasible model. This may include some staged options such as leasing for a period of time until
confidence grows in TCHT, followed by purchasing and redeveloping where viable.

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Key considerations for TCHT include:
 Minimising the impact of change on existing tenants is critical.

 The financial viability of the project would need to be carefully assessed and
support/subsidy by Council to make it work will be required.
 A partnering model is likely to work best, linking into other service providers such as
Ngāti Awa Social and Health Services for the provision of support services.
 Resource in the form of tenancy management would need to be included and/or
expanded from Tauranga.
 Current contracts include Murupara, so would look at this as part of the package.
7.1.3. Recovery Solutions Property Trust

Recovery Solutions Property Trust was established in 2005 to own and manage the assets of
Recovery Solutions Group. The Trust owns 30 social housing properties in Auckland and
provides affordable housing set at 85% of the market rent to people experiencing mental health
issues. The Trust also manages a further 50-60 properties across Auckland, Tauranga, Gisborne,
Opotiki, Rotorua and Whangarei used by Recovery Solutions Services Trust to deliver mental
health services to people through contracts with district health boards. The Trust has a strong
governance board and a clear vision of growing to over 2,000 properties, providing for a wide
range of people in housing need. The Bay of Plenty is a key growth area for Recovery Solutions.
While Recovery Solutions is a social landlord, they do not provide intensive tenancy
management. Tenants access support through their contracted mental health service provider.
Rents are charged at 85% of market rates.
Recovery Solutions is in the process of applying to CHRA for registration as a Class I Social
Landlord.
Recovery Solutions would keep the existing tenants in place and would ensure housing remained
affordable. The primary focus of Recovery Solutions is housing for people with mental health
issues, and as units became available may look to include suitable people with mental health
issues as well as older people.
Local Connections
While Recovery Solutions does not provide housing in Whakatane at present, the services side of
the organisation has a team of four mental health support workers that operate out of the area
and runs a day programme in Opotiki. The Trust has plans for growth of services and housing
in the Bay of Plenty region.
Recovery Solutions is interested in purchasing the portfolio, but only if it was a viable
proposition. A possible option is the development of a consortium model based on a leasing
model, bringing together an organisation to manage the tenancies, an organisation to manage
property maintenance and an organisation to provide support services.

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Key considerations for Recovery Solutions include:
 The lack of overall population growth of the Whakatane region and low capital gain
presents a real risk for providers.
 The financial viability of the project would need to be carefully assessed.
 It would require local management with minimal compliance costs.
 Tenants currently receive a high level of support from Council which would be difficult
and expensive to resource.
 Other upcoming opportunities for stock transfers may provide more viable options for
Recovery Solutions.
 Unlikely to consider the Murupara units.
7.1.4. Rangimarie Trust

Rangimarie Charitable Trust was established in 1979 by local retired farmers, the Jackman family
to provide housing for those unable to obtain or pay for accommodation for themselves or their
families. The Trust now provides 12 units on one site in Opotiki as affordable housing for older
people and those with disabilities who can live independently. The Trust has also recently
acquired another site to build four units. The units are all freehold and the Trust has a long
serving board of five trustees, one of which also fills the role of Operations Manager,
undertaking all tenancy and property management functions.
The Trust is not currently a registered CHP but had previously submitted an application to the
Social Housing Unit.
The profile of the existing tenants matches the target group of the Trust and tenant and
conditions would be protected. The Trust’s rental policy is set at 80% of market.
Connection to Whakatane
The Trust operates from nearby Opotiki and does not currently provide housing or services in
Whakatane. However the Trust would be open to working in partnership with local
organisations to manage housing and to support tenants.
Rangimarie Trust registered their interest in purchasing the portfolio in 2009 when Council first
considered selling and remains interested. The purchase would likely be funded through raising
debt.
Key considerations:
 The purchase price would need to take into account any deferred maintenance or
maintenance required to bring the properties up to a good standard.
 The commercial aspects of a purchase would need to stack up – that is, the income
derived would need to ensure the portfolio was sustainable.
 Management of the portfolio would need to be considered – most likely would require
partnering with a local organisation to manage the tenancies.
 Open to discussions with Council about how it might work best.

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7.1.5. Ngati Awa Social and Health Services (“NASH”)

Established in 1989, NASH provides a wide range of social and health services including
emergency housing support and kaumatua day programme and home visiting services. NASH’s
Assessment and Coordination team facilitate the coordination of information across agencies
and ensure clients are receiving the right support and monitor their progress.
NASH, alongside Te Runanga o Ngati Awa (“TRONA”), has investigated stock transfers
through Housing New Zealand in the past. NASH recognises the importance of affordable and
social housing to the well-being of people in the region and is well placed to develop as a
provider. TRONA and NASH propose the establishment of a new joint venture entity to
become the social housing provider for Whakatane. NASH has the infrastructure to support a
tenancy management function and has the existing services to provide support.
NASH is not a registered CHP but may consider applying.
The security of tenure and current conditions for tenants would be retained
Local Connections
NASH is strongly connected to the Whakatane and Murupara communities. They provide a
wide range of social and health services, have strong connections with government agencies
including MSD, and manage care and protection and emergency housing in the township.
NASH is interested in the portfolio and supported by TRONA, would look to establish a new
entity to purchase the housing portfolio. The entity would own and manage the properties, with
housing assessment and support services contracted to NASH. Governance could include
interim representation by Council to ensure adherence to terms, conditions and covenants
included in the transaction.
Key considerations for NASH include:
 Ensuring due diligence was completed, including an analysis of the value and return of
the housing, redevelopment and upgrade potential, the viability, cost and time required
to set up a new entity.
 The purchase would need to be compared to undertaking a similar exercise on a green
fields site.
 NASH is open to working with other interested providers.
7.2 Summary of Interviews with Interested Community

Organisations
There are two other local organisations that do not provide housing but have expressed interest
in being involved in the support of tenants and the selected housing provider. A summary of
interviews with these groups is below.

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7.2.1 Disability Resource Centre Trust
The Disability Resource Centre Trust (DRCT) provides health care and support services for
people with disabilities across the Bay of Plenty area. The Trust operates on the site of one of
Council’s complexes and purchased three units from Council to accommodate their expanding
services. While not in the business of residential housing, DRCT is interesting in developing a
good working relationship with the new owner of the pensioner housing and would be open to
discussing how they might assist with support services.
7.2.2 Whakatane Baptist Community Trust
The Trust provides support services for two residential homes for women and self-esteem
programmes in schools. The Trust has expressed interest in being contracted to provide support
services for the tenants of the pensioner housing portfolio.
7.3 Other Community Housing Providers
Contact was made with three other housing providers; The Salvation Army, Habitat for
Humanity Tauranga, and VisionWest Community Trust who currently provide social housing in
West Auckland. The Salvation Army indicated they were not currently in a position to express
interest in the Council portfolio, as they were working with central government on stock transfer
models. Habitat for Humanity Tauranga may be interested, but needed to canvas the idea with
their Board first. VisionWest indicated they may support local interest from the Baptist Church.

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COUNCIL - AGENDA
Table 7: Assessment of CHPs against Criteria and Priorities
of community
Retain no. for
pensioner use
Locally based
/connections
demographic
Can provide
governance
Purchase /
Registered
improving
affordable
Organisation Comment
Plans for
Plans for
Existing
retained
services
support
tenants
Social/
growth
Reflect
Local
stock
CHP
rents
lease
PRIORITIES
CRITERIA
1 2 3 4 5 6
Accessible Yes Yes Yes Yes and Yes Some Limit Yes as Yes No Purchase High interest, good fit.
Properties mix with ed required Would partner to
disability and for provide support
use disability
access
Tauranga Yes Yes Yes Yes and Yes Some Some Yes as Yes No Purchase Very high interest, good
Community mix with required or lease fit. Would partner to
Housing Trust disability and for to buy provide support
use disability
access
Recovery No – in Yes Yes Yes and Yes Limited Some Unsure Yes No Lease or Moderately interested.
Solutions progress mix with purchase Would partner to
mental if viable manage /provide
health use support
where
appropriate
Rangimarie No Yes Yes Yes Yes Limited No Unsure Yes No Purchase High interest but doesn’t
Trust meet criteria. Only aged
housing provider. Very
small portfolio currently.
Low resource
Ngati Awa No Yes Yes Yes Yes Yes Yes Unsure Unsu Yes Unsure High interest, but
Social & Health re doesn’t meet criteria.
Services Only local organisation

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COUNCIL - AGENDA
8. SUMMARY OF FINDINGS
8.1 What is happening in the local market?
As indicated by Council, despite predictions of low overall population growth for Whakatane,
the need for affordable and suitable housing for older people is growing as the current
population ages.
However, due to a lack of waiting list data, there is little information available around the current
unmet demand for affordable pensioner housing in Whakatane. CHPs which provide for other
target groups, such as those with disabilities and low level mental health issues may look for
flexibility around the use of the units.
The housing market in Whakatane is relatively flat, with the market value of the portfolio at a
lower level than assessed in 2010. The market in Murupara is depressed.
8.2 What does the Portfolio Assessment Tell Us?
The portfolio assessment shows:
1. The social value of the portfolio positions it well below the market level, with market
value (at full market rent) assessed at $4,550,000 for the Whakatane units and the social
value (at 80% of market rent) at $2,975,000 for the Whakatane units.
2. Returns based on affordable and market rents are reasonably healthy at 8.8%, but do
not take into account debt servicing or provision for housing support services – both of
which will reduce margins for CHPs. Once the provision of support costs is included,
the capitalisation of the yield rates could bring the social value of the Whakatane
portfolio down to between $1,500,000 and $2,000,000, depending on allowances for
salaries and overheads.
3. Most CHPs will be looking to provide housing for the long term, which means a
reasonable yield may be an attractive prospect.
4. Capital gains for the portfolio are limited, reducing the ability for CHPs to leverage
equity for further growth.
5. The Alice Stone Flats provide the only possible opportunity for further development.
6. Murupara needs to be considered separately. While some CHPs do provide services
and have connections across Murupara, financially the purchase of these units is not
likely to ‘stack up’ for a CHP.
7. The condition of the units is good and does not require significant capital investment in
the short term.

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COUNCIL - AGENDA
8.3 Are there any Suitable Community Housing Providers that

are interested?
Five CHPs indicated they were interested in Council’s housing portfolio. Of these, two were
registered CHPs and met all other criteria. Another was going through the process of
registration.
There were interested CHPs that meet some but not all Council’s criteria/priorities. The
organisations that were locally based were not registered as CHPs and were small providers with
limited capacity. Larger, regional/national providers had weak community connections
8.4 What are their Key Considerations?
Most CHPs indicated a preference to purchase the housing, however any purchase would need
to be financially viable. Purchasing would generally require debt funding. All CHPs would
protect the position of existing tenants and would retain rents at an affordable rate.
CHPs commented that Council’s tenants currently received high levels of support and this
expectation may be difficult for some to sustain, let alone enhance.
Most indicated a willingness to partner with local providers to manage tenancies and/or provide
support services. All providers were open to discussing with Council how a transfer may work
best. This included how the needs of current tenants would best be met and their interests
protected.
8.5 What are the Key Considerations for Council?
The following provide some considerations for Council:

1. Council is unlikely to achieve full market value through sale to a CHP and any sale value
may be reduced further through restrictive terms and conditions that limit the income
and target market for the CHP.
2. An REOI process may draw out the need for additional support by Council, such as
guaranteeing debt, rent to buy, low cost leasing arrangements or deferred settlement
arrangements.
3. Council may wish to consider the inclusion of controls in the sale process to address the
following:
a. Land status – while we have received advice that as Council is looking to sell the
housing to a charitable organisation to be used for a similar purpose, Council may
wish to protect this into the future by including an offer back mechanism. The
advantage of this is there is no recourse on Council if the provider on sells for any
reason, however the disadvantage is that it remains as a liability on Council’s
books.
b. Protecting future use – including retention for older people and/or for social
housing purposes.
4. Interest by CHPs may be diluted due to opportunities on the horizon from other
local authorities and central government for stock transfers.

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COUNCIL - AGENDA
8.6 Will the Transfer of the Portfolio to a CHP Improve the

Delivery of Affordable Housing for Older People in
Whakatane?
The general consensus is that Council does a good job now as a social landlord. Tenants are well
looked after with low occupancy turnover, rental rates are set at a level that is affordable and
properties are maintained to a good standard.
However, the Social Housing Review carried out by Council highlighted six key issues that
influence the provision of housing in the future. These issues included:
1. The demand for affordable housing is set to increase
2. The Whakatane population is ageing and there is a lack of appropriate and
affordable housing
3. Central government reforms exclude local authorities accessing social
housing funding
4. Council does not have a clearly defined objective for owning pensioner
housing against which to measure performance
5. The greatest gap in social housing market is for providers that meet more
than just tenants’ needs
6. The Council’s current pensioner housing stock is ageing
An analysis of options by Council showed that the option of transferring the portfolio to a CHP
would best respond to these issues. The findings of this report support this analysis to a large
degree. There is interest from registered CHPs, which have a clear mandate to provide social
housing now and into the future. They have existing housing portfolios and all providers intend
to grow, including in the Whakatane area. Three of those interviewed have the current capacity
and capability to become large providers. Only one provider currently specialises in housing for
older people, but two others indicated the provision of housing for older people is part of their
plan for growth.
Registered CHPs are able to access government funding in the form of the IRRS subsidy and
possibly future state stock transfers or capital funds. While this is not available for existing
tenants, it will provide additional support for new tenants coming into these homes.
CHPs also provide housing support services that go beyond tenancy management for their
current housing customers. However, some did express concerns that they may not be able to
resource the support needs of these tenants within their existing infrastructure, and would have
to consider providing resource support through directly employing a support person, building
referral relationships and/or partnering with local service providers.
It is also unlikely in the short term that a CHP would undertake significant modernisation works
to the units. The quality of the units is currently good and would be likely to meet an acceptable
letting standard for a CHP for the current client group in the short term. Cash flow analysis
would also show that heavy capital investment is more likely to be a medium to long term goal
for most providers. However, the units do not meet standards for those CHPs who provide
housing for people with disabilities and in the short to medium term these providers would
possibly look to upgrade and/or redevelop to enable housing for their target group.

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COUNCIL - AGENDA
9. CONCLUSIONS AND NEXT STEPS
9.1 Support for the Decision to Transfer the Portfolio
Based on the information we have gathered for this report, we can conclude that a decision to
transfer Council’s pensioner housing portfolio to a registered CHP is reasonable and it supports
Council’s long term view of the best provision of social housing for older people. There are a
number of CHPs that are interested and would be likely to respond to a REOI process.
Transferring the portfolio to a registered CHP provides Council with a degree of comfort that
the organisation has been assessed against government-approved standards, has effective
governance and management practices, is financially sound, and has the appropriate tenancy and
asset management policies, procedures and systems to own and manage social housing.
Registered CHPs undergo an annual monitoring process and as charitable organisations,
surpluses are redirected to the ongoing operation and growth activities of the organisation.
9.2 Key Considerations for a Transfer
The transfer will need to include a number of key considerations for CHPs and Council. These
considerations include that the purchase of the portfolio is likely to be at a social value. The
degree of difference between a market and social value will be dependent on aspects such as:
1. The impact of any terms and conditions imposed on the purchaser (i.e. restricting use
for pensioners only, restricting rents to below market).
2. The need for the CHP to fund support services from the rental income.
3. The need for the CHP to service debt from the rental income.
4. The requirement by the CHP to carry out any capital work to ensure the properties are
fit for purpose for the CHPs target group (i.e. creating accessible units).
A well designed REOI process would draw out detailed information from potential partners with
regard to their short, medium and long terms plans for the ownership and management of the
portfolio and how these align with Council’s expectations.
9.3 Timing of an REOI Process
The development of an REOI process should be undertaken as soon as possible. This will
enable the Council to continue with the momentum of this review and this report confirms there
are CHPs currently interested in participating in this process. However, it should be noted it is
possible that the full range of potential providers may not come forward until the future of other
local authority and state housing transfers are announced. This may impact on the quality and
quantity of responses received.
Indications are there will be further clarification around the scope and process of transfers of
state stock early in 2015, however, detailed information may not be known for some time.

Page 57
COUNCIL - AGENDA
9.4 Next Step - Clarify the Transfer Process and Council’s

Expectations
Should the transfer of the portfolio be confirmed through the LTP process, Council should
proceed to the development of a plan for the transfer process. This plan should include:
1. Developing the terms and conditions of the transfer including preferred options and
controls.
2. Designing the REOI process.
3. Designing the post-REOI negotiation process.
4. Developing a tenant communications and management plan.
5. Developing a risk management plan.

Page 58
COUNCIL - AGENDA
APPENDICES
Appendix One
Government agencies and their roles in the implementation

of SHRP
Page 59
COUNCIL - AGENDA
APPENDIX ONE
Government agencies and their roles in the implementation of SHRP
 Ministry of Business Innovation and Employment (MBIE) – responsible for

housing policy, capital funding, regulatory functions.
 Social Housing Unit (SHU) – reports to MBIE and the Minister of Housing
directly. Has $30m remaining in capital funding to distribute from 1 July 2015. It
is likely this agency will be merged either into the ITU, into MBIE or will be
disbanded.
 Community Housing Regulatory Authority (CHRA) – set up to establish
performance standards, to process applications for registration, and to monitor
CHPS. Class 1 social landlord status is the first stage (tier) in this regulatory
framework. The Social Housing Reform (Housing Restructuring and Tenancy
Matters) Act 2013 includes reference to Class II status, likely to be introduced
alongside the framework for asset transfers.
 Establishment Unit (EU) – MBIE and Treasury joint unit, set up as the lead
agency to develop the policy and framework for the transfer of housing stock.
This is expected to take 6 months – to December 2014.
 Independent Transfer Unit (ITU) – this unit will be set up post-establishment
unit and will be responsible for the transaction of assets.
Whakatane District Council: Assessment of

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SOCIAL HOUSING SUB-COMMITTEE

Meeting to be held in the Committee Room 2,

Civic Centre, Commerce Street, Whakatane

Lunch will be available in the room from 11.45 am

3 Confirmation of Minutes ........................................................................... 5

Deputy Mayor Judy Turner

Councillor Scott Jarrett

Councillor Alison Silcock

Details of SOCIAL HOUSING SUB-COMMITTEE MEETING HELD IN

Present: Councillors S Jarrett, A R Silcock and J A Turner, E

In Attendance: J Reweti (General Manager Community and Economic

Visitors: H Simonsen and B Doherty – The Property Group

Apologies His Worship the Mayor A A Bonne

1. CONFIRMATION OF MINUTES: 8 SEPTEMBER 2014

Refer to pages 5-8 of the agenda.

2. COMMUNITY HOUSING PROVISION

Key points noted were:

Developers and providers had a different focus

No capital funding or access to IRSS is available to local authorities

Other points included:

4. ASSESSING THE IMPACT OF TRANSFER

Supply and demand of rental housing in Whakatane

THE MEETING FINISHED AT 1.55 PM

Confirmed this day of

4.1 WDC Community Housing Provider Report (Cont.)

HOUSING AND COMMUNITY

THE PROPERTY GROUP LIMITED’S REPORT FOR

Assessment of the Transfer of Whakatane District Council’s

4.1 WDC Community Housing Provider Report (Cont.)

1. Executive Summary............................................................................................................................ 4

Whakatane District Council: Assessment of 2

4.1 WDC Community Housing Provider Report (Cont.)

A p p e n d i x o n e – Government Agencies and their Roles in the Implementation of SHRP

Whakatane District Council: Assessment of 3

4.1 WDC Community Housing Provider Report (Cont.)

1.1 Community Housing Provision

1.2 Assessment of Portfolio

Whakatane District Council: Assessment of 4

4.1 WDC Community Housing Provider Report (Cont.)

1.3 Key findings

1.4 Conclusions and Next Steps

1.4.1 Support for the Decision to Transfer the Portfolio

Whakatane District Council: Assessment of 5

4.1 WDC Community Housing Provider Report (Cont.)

1.4.2 Key Considerations for a Transfer

1.4.3 Timing of an REOI Process

While it is recommended that an REOI process is developed as soon as possible, it should be

Whakatane District Council: Assessment of 6

4.1 WDC Community Housing Provider Report (Cont.)

2.1 The Brief

2.2 The Approach

Whakatane District Council: Assessment of 7

4.1 WDC Community Housing Provider Report (Cont.)

2.3 Overview of Report

The report is divided into eight sections:

1. Introduction to the report.

Whakatane District Council: Assessment of 8

4.1 WDC Community Housing Provider Report (Cont.)

3.1 Social Housing in New Zealand

3.2 Social Housing Reform

Whakatane District Council: Assessment of 9

4.1 WDC Community Housing Provider Report (Cont.)