Wellington council’s affordable housing proposal is flawed

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Wellington’s CBD Photo: 123rf

Developers and social housing providers approve of Wellington City Council’s new proposal to recycle under-utilised buildings in the inner city into “affordable apartments.”  The council proposes providing the owner/developers with long lease agreements to provide ” affordable housing.”

The idea shows out of the box thinking but there are a number of issues that concern me about the initiative. The most obvious one is the cost of bringing old buildings up to scratch to meet earthquake standards.

…Mr Lester said the plan benefited everyone in the housing market.

“We don’t have to borrow. The building owners, the private housing provider would do that.

“They’d refurbish the spaces, they’d take on that risk of the construction but we’d provide them with a long-term lease and we can provide also access to subsidised rentals through the income-related rents by working with community housing providers.”

My first concern about this proposal is that providing affordable housing (which means charging below market rent) won’t stack up financially for building owners compared to what they get leasing their buildings out as office space. Assuming that after the expensive outlay of refurbishment that they will make more money turning their properties into apartments how is the council going to prevent them from charging market rents? How is the council going to prevent them from selling off the individual apartments once they are given permission to change the buildings use?

Scott Figenshow, who heads Community Housing Aotearoa, said the plan was a fantastic step forward in remedying the lack of affordable homes in the capital.

“The role the council can play in both backing some building conversions – there may also need to be seismic upgrades.

“Allowing community housing providers to do tenancy management and actually operate the housing … wrap all that up [and it] makes a really bankable proposition,” Mr Figenshow said.

Really? I have been a landlord and I was never interested in one of those deals where you can buy a newly built home at a good price as long as you are locked into ten years providing your property for ” community housing.” Community housing means dodgy tenants who will damage the home, and who will use drugs and scare the neighbours. In exchange for a rental guarantee from the government (that they will pay you whether the place is occupied or not) you are locked into a deal where you get below market rent and ongoing damage to your property that you can’t get out of. The damage is such a common occurrence that the agreement even stipulates that the government at the end of each tenancy will repair the damage.

And he said a mixed tenure model for the new developments should prevent them becoming ghettos.

“Maybe [some people are] paying a market rent. Others might have purchased their unit, others might [be] under a shared ownership programme [and] own 60 percent of their unit.

“Someone else might be a social rental tenant assisted with income-related rent subsidy or accommodation supplement, so providing all that mix … is what good neighbourhoods are about.”

Nope wrong again. People who own their own apartment do not want riff raff as their neighbours. The community housing providers might not be fussy about who they put in an apartment but homeowners are fussy and do not want beneficiaries as their neighbours. Ironically the socially aware, upwardly mobile Wellingtonians who will be championing this scheme, will not want live next door to an “affordable” apartment.

Wellington developer Alex Cassels said the inclusion of a 15-year lease to the council would encourage developers to get involved in the project.

…Deputy mayor Paul Eagle, who leads the council’s housing portfolio, said the plan was expected to pay for itself over the lifetime of the project.

And he said the new initiative should not increase the burden on ratepayers in the long-term.

“Costs will be dependent on the number of housing units we can get developed under the initiative. But it is expected that the housing provided will be cost neutral for ratepayers in the long-term, as building owners will pay for the refurbishment and tenants will pay for rents.”



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