Concerns about the sale of social housing dismissed

Horowhenua District Council confirms the sale of its pensioner housing portfolio to Compassion Housing for $5.25 million, the transfer of a $5 million loan to Compassion Housing and that it has secured an improved ongoing provision of pensioner housing in Horowhenua.

Since the sale, the Office of the Auditor-General has, following complaints from members of the public, considered the process and found that the claims are unfounded.

Horowhenua District Council Chief Executive Mr Clapperton said he welcomes the letter from the Office of the Auditor-General and wants to acknowledge his team for their perseverance.

“Our team has continued to carry out the good work of Council day-in and day-out in a professional and caring manner. Often they have had to do this in the face of rumours such as those that have been dismissed outright by the Office of the Auditor General.”

Because of the sale, Council has repaid a $5.2 million outstanding loan associated with the housing portfolio. This, combined with the transfer of the Suspensory Loan, has led to a significant reduction in debt servicing and there has been a reduction in Council’s operational costs.

“The Office of the Auditor-General has confirmed what we already knew,” Community Wellbeing Committee Chair Barry Judd said. “We as a Council know we followed the correct process, have achieved the right outcome for our ratepayers and have actually improved the level of support for our former tenants of the pensioner housing. It’s time to move on.”

“As well as that, Council’s debt has been reduced, Council no longer has operational costs to run and manage the units, and ratepayers have avoided a future cost of $4.3 million to replace old housing stock.”

“My colleagues and I were determined to get a fair price for our community, while also ensuring an improved level of service for tenants,” Cr Judd said. “I believe we have achieved this.”

Before the sale, an independent market valuation placed a $3.8 million valuation on Council’s ‘social housing portfolio’.

Mr Clapperton said a fair price was achieved, costs had been reduced, loans removed from Council’s books, future costs had been avoided and Council’s former tenants now receive a greater level of care.

“The independent market valuation was based on the fact that the stock was being sold as social housing, which has a much lower rental yield compared to normal private residential rentals.”

The pensioner housing portfolio included 115 units at eight complexes in Levin, Foxton and Shannon, and 1.1 hectares of land in Waimarie Park in Levin.

The average age of the portfolio was 39.7 years, and the pending renewals consideration was that 50-60% would require replacement in the next 20-25 years at an approximate cost of $4.3 million to the ratepayer.

Last year, the impending sale was mentioned in Council’s 2016-17 Annual Report, as per good accountancy practice, and was reported in Council’s Treasury Report to the Finance, Audit & Risk Subcommittee meeting in February. In that report, Audit New Zealand staff reported the sale meant a loss for Council – that is a loss based on the market book value of the stock.

“The market book value of $7.191 million, while correct, is only of use if Council had sold the portfolio with no conditions,” Mr Clapperton said. “Council resolved to allow the sale of the portfolio subject to it being sold as social housing, so the provision of affordable pensioner housing would continue.”

The sale, debt repayments and debt transfers will be included in Council’s 2017-18 Annual Report, which will be published later this year.

ENDS

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