It’s an inalienable human right – the right to housing. Articulated in key United Nations human rights documents, like the Universal Declaration of Human Rights, it’s also long been seen as a right that governments have a duty to ensure and provide for.

Yet in recent years in New Zealand there’s no escaping the visible rise in the number of homeless people sleeping rough. There’s no avoiding the tales of people desperately searching for safe and adequate accommodation. It’s impossible to deny the country is in the grip of a housing crisis.

The reasons for this crisis are wellrecorded but, in essence, it comes down to a shortage of affordable housing stock. Construction of houses over the last 30 years didn’t keep up with population growth, which led to a lack of supply. But that supply shortage is heightened at the lower, affordable end of the housing scale.

There are both government and private moves afoot to address this issue and, encouragingly, dwelling consents are at historically high levels and the construction industry is booming. But truly providing housing for all is more complex than that, according to the Salvation Army.

In its latest State of the Nation report it says the more accurate housing story is not so much about increasing housing supply, but more about household income levels and high housing costs.

Both buying and renting housing in New Zealand is expensive and, for many, the cost is proving too much.

As a result, demand for social housing has skyrocketed. As at December 31, 2019, there were 68,970 households in social housing and 3,043 households in transitional housing. Further, there are now 14,000 applicants on the Government’s waiting list. And remember – those are the official figures; in real terms the amount of people who need housing is much higher.

Public Private Partnerships Needed

So what does this mean for investors? Well, despite ramping up its social housing building programme, the Government simply doesn’t have enough properties to put people into. Nor do community housing providers (CHPs). More than ever before, they need to work with private landlords and developers to try and address the problem. Government agencies – including Ministry of Housing & Urban Development (HUD), Ministry of Social Developmen (MSD, Kainga Ora (formerly Housing NZ) and even Immigration NZ are now upping their efforts to reach out to private landlords. So too are CHPs.

Community Housing Aotearoa (CHA) CEO Scott Figenshow says many CHPs have been working with private landlords for some time. But the current crisis means they are keen to see more private rental properties being made available in the social housing arena.

“There is a willingness and desire to work with private landlords,” he says. “We understand that going down this path is not going to appeal everyone. It is all about helping people in need and building healthy communities. So

it’s a different mindset. We think that partnering up with a CHP in some way can be a great investment option though.” Figenshow is far from alone in this belief. It seems that, despite their oft-presented negative characterisation as “slumlords”, many private landlords agree.

Here’s some evidence: Kainga Ora is currently leasing nearly 2,400 private rental properties across New Zealand. Meanwhile, about a third of CHP Emerge Aotearoa’s properties across all their housing programmes are provided by private owners.

In the transitional (or emergency) housing space the participation of private landlords is even more pronounced. According to CHA, at the end of September 2019, there were 939 Housing First places and 3,001 transitional places, with the majority of places in these programmes leased rather than owned.

And the reason for this is that – alongside the socially responsible, feel good factor – there are some major benefits for private landlords who partner up with either government agencies or CHPs to provide social housing.

Although there can, of course, be some challenges too. So to get a real sense of what investors can expect if they go down the social housing path, we sought out some private landlords who have done just that. Here’s what they had to say about their experiences…

‘Our rentals on the private market are much more hassle. I never lie awake at night worrying about our social housing properties, but I do about our private rentals’ SUSAN HAYNES

Effective Business Model

Whanganui-based investor Susan Haynes has two of her rental properties leased, via Link People, for social housing. Initially, she was motivated to do it because, as a social worker, she was acutely aware of the lack of rental housing available for people with special needs.

“That’s what interested us in property investing in the first place: we wanted to help provide social housing. Then we moved to Whanganui and there was nothing in that space, so we had to act.

But we are business people too and, for us, social housing rentals have proved to be an effective business model.” While the rents they collect are in the lower quartile of market rents, the fact they get a guaranteed 52 weeks’ rent a year balances that out, she says. “Also, it’s a totally hands-off arrangement – which some landlords might not like as there’s a loss of control to a degree. But we like it as it means our properties are managed free for us by Link People, as opposed to having to do it ourselves or paying for a property management company.”

Link People also guarantee to deal with and repair any damage, excluding normal wear and tear. For Haynes, this is a real bonus – especially given ongoing issues around tenant liability for damage as well as looming changes to tenancy law.

“Our rentals on the private market are much more hassle. I never lie awake at night worrying about our social housing properties, but I do about our private rentals. So, taking all of this into account when doing the numbers, it works out for us, despite the slightly lower rent.”

One downside she highlights is insurance. Increased risk averseness on the part of insurers means it has become much harder, and more expensive, to secure reasonable cover for properties used in social housing. Haynes fears this could put other private landlords off social housing and this has led her to braise the issue with Associate Minister of Housing Kris Faafoi.

Helping Those In Need

Like Haynes, Christchurch investor Amanda Franklin was prompted into investing in social housing by a desire to help people in desperate situations. But she chose to go down the transitional housing route, leasing three of her rental properties to the Salvation Army, who sub-let them to their clients.

“It’s the best thing we have done because these people would otherwise be on the street or continuing to live with violent partners. We chose the Salvation Army as they work closely with their clients, supporting their journey to becoming a working part of society. It’s far better than a handout and has better results.”

She lists the security of regular rent coming in and not having to manage tenants as the big benefits. “When issues arise the Salvation Army can, and does, move on problem tenants very quickly.

All damage is repaired and, regardless of occupancy, we are paid market rent every week.”

This path does not suit everyone, she adds. “But if you are wanting to help others and have rentals, which are in a ‘buy-and-hold’ scenario, and fit the type of property social housing agencies are looking for… Then yes, it’s great.”

As focus on the housing crisis has heightened, so too has awareness of transitional housing and its different forms. One of its manifestations is the Housing First programme, which helps long term homeless people transition into permanent housing.

Auckland Property Investors’ Association president Andrew Bruce has been an active supporter of Housing First since it arrived in New Zealand. He now has several of his Auckland CBD apartments in the programme, leased through the Airedale Property Trust.

“Putting people in housing allows them to start building some structure in their lives rather than being on the streets. That, and the wraparound services, help the tenants to get into a place where they can move on to permanent housing. “As a landlord, I wouldn’t do this directly myself, but leasing to an intermediary works.”.”

It hasn’t been all plain sailing though. One of his apartments was damaged, but the damage repair clause kicked in and it was fixed. On another occasion, a meth smoking tenant set off the alarms, prompting a call out. That tenant was removed, the apartment was decontaminated and then re-tenanted, with no halt to the rent.

Those experiences haven’t deterred him. Far from it. Recently, he leased his former motel complex, now converted into 13 units, to a CHP in Hamilton for transitional housing. “A major benefit is that instead of having to deal with 13 individual tenants, plus issues around the common areas, the CHP has a lease for the whole property.”

While he’s only six months into the arrangement, he is happy with it and says the CHP is looking after the property well.

“And we are hearing some cool stories about what a difference it makes to the tenants’ lives.”

Alternative Options

For investors interested in providing or being involved in social housing, there are also other models. One alternative is modelled by Christchurch developer

‘There is a need out there for this sort of accommodation and it needs to be filled. It could be something for more investors to look at’ JASON LOPAS

Jason Lopas. He works with a charitable trust, Resicare Trust, which provides affordable hostel type accommodation for low income tenants.

His companies own the five commercial buildings, all in Christchurch, which are used for this, and the Trust conducts the day-to-day management of them. Tenants come to them through government and non-government channels and they get paid directly from Government for rent per client.

Prompted by tenant demand, Lopas is building 28 new stand-alone, one-bedroom units, which will be targeted at tenants over 55. He has plans to build another 60 later in the year. With these units, they are following a different model: they will retain half of them for rentals and sell the other half, with investors being their target market.

“The Trust-operator model has worked well for us. The units are a step away from that model, but it is still about providing social housing to people who need it. We will also continue to do this in the other buildings, which work more as short-term accommodation.”

Lopas says it was a steep learning curve and can be challenging. But they have developed a comprehensive set of good management systems and processes to ensure the model works.

“We think we do it well. We have waiting lists so that’s a sign that we are. And it feels like we are doing a good thing. There is a need out there for this sort of accommodation and it needs to be filled. It could be something for more investors to look at.”

Communication Breakdown

While there are many positives about getting into social housing, our interviewees did have some complaints. It’s worth noting what the biggest complaint from investors who have gone down the social housing route – or tried to – was.

It was not about the tenants. Nor was it about insurance, although problems in getting decent cover was mentioned several times. Rather it was about the problems, particularly around communication, encountered when dealing with various government bodies and CHPs involved with social housing.

One investor who was developing a multi-unit property gave up after encountering multiple roadblocks with the CHP he was dealing with. Another, who contacted Link People about leasing one of her rental properties, got an initial response, but then received no follow up or any further contact. She too gave up.

Another investor, who is trying to workout an arrangement with Link People, has been left outraged by communication problems, a lack of urgency, and administrative bottlenecks. He is still going through the process, but he is seriously disillusioned by the problems he has encountered.

This suggests that both governmental and non-governmental agencies need to be more proactive in engaging with private landlords, in getting out the relevant information, and ensuring that communication channels are kept open.

That’s because there is a pool of private landlords out there who are interested in social housing and, if they are properly engaged, they could play an important role in addressing the housing shortage.

How To Get Involved

There are two main avenues investors can take to get involved in social housing. One is via government agencies: The Ministry of Housing & Urban Development (HUD) works with Kainga Ora (formerly Housing NZ), community housing providers and developers to deliver social housing.

More specifically, Kainga Ora leases privately-owned properties. Kainga Ora national portfolio manager Monique Fouwler says it helps them to meet demand for suitable homes in areas where there is high demand for affordable rental housing.

“As well as providing stable homes for those in need, the lease programme provides an opportunity for private owners to lease their home in return for guaranteed monthly lease payments. We lease from a range of investors, ranging from individual residential property owners to larger developers.”

In order to be considered for lease, all properties must meet Healthy Homes regulations. Anyone interested in working with Kainga Ora should contact them on 0800 801 601 or LeaseTeam@kaingaora.govt.nz.

Immigration NZ is now looking for private properties to rent to refugee families. Rent is guaranteed as the rent payments will come from WINZ. The relationship is with the tenant, but they have a refugee support system to ensure a positive experience for both tenants and landlords.

If a family moves on, they also have a pipeline of potential replacement tenants so there is no downtime between tenancies. Rental property owners interested in doing this should email RefugeeHousing@mbie.govt.nz to find out more.

Additionally, the government has just announced new funding will go to the Ministry of Social Development (MSD) to establish housing broker roles. The housing brokers will build connections with private landlords and property managers; promote MSD clients as potential tenants, and match people with housing opportunities in the private rental market.

The other avenue into social housing for investors is via community housing providers (CHPs). Hope Simonsen, from CHP Emerge Aotearoa, says if investors have connections to a CHP in their area they should approach them. “Alternatively, they can go through HUD, which runs the Community Housing Regulatory Authority (CHRA) that registers and regulates CHPs. They need engagement from investors and from suppliers.”

Community Housing Aotearoa (CHA) also has a members’ directory on its website. The members are sorted by region. Investors can get a CHP’s details from the directory and contact the CHP directly, or they can contact CHA on 04 385 8722 or support@communityhousing.org.nz to help out.