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Brief Counsel

Social housing transfers – another brick in the wall

23 February 2016

​The Social Housing Reform (Transaction Mandate) Act, passed last week, is another brick in the wall of the government’s evolving state house reform programme.

It enables Ministers to sidestep the Housing New Zealand Board in order to sell or lease Housing New Zealand properties for the purpose of social housing reform – a provision which is intended to smooth the way for transaction implementation in a way that is unprecedented in New Zealand statute.

Treasury took a long hard look at whether the existing Ministerial direction provisions in the Crown Entities Act 2004 would do the job but these are confined to requiring that public sector boards implement a government policy objective – not that they perform a specific act, in this case, selling a particular property at a particular price and providing ancillary or transitional services in favour of third parties as part of a transaction brokered by Treasury.

In short, Ministers will be able to authorise and enter into social housing reform related transfer transactions in the name of Housing New Zealand (and its subsidiaries) analogous to an attorney acting under a power of attorney - in this case, a power of attorney with a very broad scope that is set independently of what the Housing New Zealand Board might think. 

The only real limit is a necessary link to the social housing reform programme objectives.  Treasury itself has acknowledged that this sort of transaction mandate is ‘an unusual legal mechanism’ but, given the legal uncertainties and challenges of the current legislative framework, the best available option for enabling the reform programme to move forward.

Labour, the Greens and New Zealand First voted against the Bill not only because of objections to the policy underpinning the direction of the reform programme but equally because of the extraordinary powers it confers on Ministers.  However, MPs did not bring much focus to this issue when Housing New Zealand appeared before the Social Services Committee earlier this month.

This suggests that the legislation may survive a change of government.

The Act also:

  • clarifies that the “offer-back” obligations in the Public Works Act do not apply, and have never applied, to land vested in Housing New Zealand
  • enables Ministers to sign up Housing New Zealand to provide transitional services to third parties as part of the transfer process, including to ensure that the needs of tenants continue to be met, and
  • requires that any use of the directive powers by Ministers must be notified, gazetted and presented to the House.

Chapman Tripp comments

Although any transactions entered must be for state housing purposes there is no requirement that the sale involve either a registered Community Housing Provider or a sitting tenant.

This is consistent with media reports that Finance Minister Bill English, when talking to a finance sector audience this month, held out the prospect of private companies providing social housing in return for guaranteed subsidies within five years.  Mr English drew a comparison with the role played by the likes of Ryman Healthcare and Summerset Group Holdings in the retirement village, aged care sector.

The market is now waiting to find out which consortia have been shortlisted to receive RFPs for the initial transfer transactions the Crown is looking to execute for stock in Invercargill and Tauranga.  Those RFPs are expected to be released to parties on the short list late next month.

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