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Letter Written to Ombudsman Over Chch Rents

Office of the Ombudsman
PO Box 13 482

The Coalition for Fair Rents
C/- Council of Social Services
Community House
141 Hereford Street

Sharon Torstonson
Ph: 03 366 2050 / 027 224 0108



We are writing regarding the advice given to the Christchurch City Council to inform its decision to increase the rents for its social housing by 24% on 27 March 2008.

We believe that the council advice did not follow the decision-making requirements in Part 6 of the Local Government Act 2002 [the Act].

The advice provided to the Council
- was inadequate and flawed;
- did not consider all options;
- did not adequately assess the costs and benefits associated with each option;
- did not adequately consider the views of those affected or with an interest in the matter at each stage of decision-making;
- did not address the inconsistency with existing policies and plans.

In particular we note:

Flawed Information

1. The report to Council (27th March 2008) claimed that nearly all of the council’s tenants would meet the Ministry of Social Development’s housing affordability guidelines which identify that housing is affordable if its cost does not exceed 30% of gross income. The report had not applied the MSD formula correctly so this statement was not correct (see Appendix 1).

2. The Councillors were informed by officers that an approach had been made to central government for financial support. In fact at that point no formal approach had been made by Council to central government.

3. Councillors were informed by officers that "almost all" of the tenants would be eligible for the Accommodation Supplement, which would cover 70% of the increase. Officers would have had no reliable data on which to substantiate this as eligibility varies according to individual circumstance.

4. Over the period since the 27th March meeting, a variety of different reasons have been offered by the Mayor and Council staff for the large increase, including the need to raise a fund by 2015, the need to raise money for capital development, the need to ensure improved maintenance now and the need to ‘keep up’ with market rental prices in the city. The lack of clear reasoning appears to be an outcome of the flawed and poor quality information on which officers made the recommendation to Council.

Lack of Consultation and / or Consideration of Views

5. Section 78 of the Act requires that the Council gives consideration to the views and preferences of persons likely to be affected by or to have an interest in, the matter at each stage of decision-making. There is no evidence that the views and preferences of persons likely to be affected by or to have an interest in, the matter had been considered at each stage during this process.

6. Section 97 of the Act provides that the Special Consultative Procedure must be undertaken where the Council is making a decision which is inconsistent with the LTCCP. This decision seems inconsistent with the levels of service and financial statements specified in the LTCCP. The officers did not suggest a Special Consultative Procedure on this matter, nor did they table a recommended statement of proposal of consultation.

7. Section 79 of the Act allows councils to use their discretion regarding the extent or degree to which the decision-making processes (section 77 and 78) are applied. However, it requires that councils must, in making this judgement, have regard to the significance of the matter and the principles set out in Section 14 of the Act. When asked whether the Council needed to seek community views, the CEO informed the Council the Act gave them discretion to the degree to which it satisfied the decision-making process. However, he did not provide advice on the basis on which that judgement should be made, nor did he advise them that their own decision-making guide would suggest that more extensive consideration of community views was required.

8. The Council was not reminded that its own decision-making guide suggests it should " Err on the side of Caution” with regards to the level of efforts put into the process and considering community views (i.e. it suggests that is preferable to do a thorough process than use section 79 as a justification for a hasty process).

9. The Council was not informed that this matter could potentially trigger the significance threshold, based on the Council's own Policy on Significance .
Departure from Existing Policy

10. Section 80 of the Act provides that where a significant departure from a plan is proposed the Council must when making the decision clearly identify the inconsistency, the reasons for the inconsistency, and any intention of the local authority to amend the policy or plan to accommodate the decision. The recommendation to Council was inconsistent with the Council's Social Housing Policy , Housing Strategy , the Annual Plan and the LTCCP . The Council was not advised of these inconsistencies, the reasons for them or how these inconsistencies should be addressed.
Options not considered

11. The Council's decision-making guide clearly identifies that options should not be narrowly defined around variations of the favoured proposal. It states the officers should "represent a range of possible courses of action". The officers only presented three options: the preferred option, do nothing and an option which they argued would not address the issue (i.e. an inadequate option). It did not suggest other options, such as alternative funding (i.e. government funding, trust funding etc), partnerships with other providers, staggered increases or alternative asset management and development processes.
Inadequate Assessment of Benefits and Costs

12. Section 77 of the Act states that Council must assess the benefits and costs of each option in terms of its social, economic, environmental and cultural wellbeing. We believe that the officers did not adequately assess the costs and benefits associated with each option, particularly the health and social impact on housing tenants (despite the Council having endorsed the Health Impact Assessment of the Greater Christchurch Urban Development Strategy, which included a commitment to "ensure affordable housing options for all") .

13. The report to Council (27th March 2008) contained inadequate financial information and therefore did not sufficiently assess the costs and benefits. The need to spend $50m in about 2015 was used as a justification for a recommended rent increase of 24%. No evidence was provided that in seven years there would be a need to spend $50,000 each on 1000 units. No evidence was provided as to why the current annual surplus of about $4m per year could not adequately fund refurbishment.

14. The report stated that the average rent is an average of 58% of market rent. No advice was given as to how Council would go about assessing market rents given its current market share. The Social Housing Strategy identifies that “ninety per cent of the housing stock comprises bed-sits, studios and one-bedroom units. This represents 63% of the market for one-bedroom rental units in Christchurch”. This share of the market means that Council would have a significant influence on provision and rents in the market and market rents would not be an appropriate bench mark. No advice was given as to how Council would overcome this dilemma or how it could develop a more appropriate rent setting process.

We have attempted to resolve this matter by
- Writing to the Council requesting that it reconsider its decision.
- Providing additional information regarding the impact of the decision.
- Discussions with Councillors and council staff
- Offering to work with the Council on this matter.

Our efforts were sufficient to bring the matter back to the Council table in an extraordinary meeting on 28 April. At that meeting no further reference was made to the affordability criterion of 30% of gross income. The alternative measure of 80% of market rents was instead relied on. None of the other matters detailed above were addressed.

We would like the Council to
a). Halt the 24% increase
b). Seek and consider the views and preferences of persons likely to be affected by or to have an interest in, the matter, and to obtain community views, including undertaking a Special Consultative Procedure on this matter
c). Consider other options for addressing the perceived problem
d). Commission an independent health impact assessment regarding this matter, prior to making this decision

Sharon Torstonson
The Coalition for Fair Rents


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