Masterton social housing provider Trust house is facing financial headwinds as it embarks on an ambitious $50 million upgrade programme aimed at housing some of the region’s most vulnerable.
The organisation’s now-former chief executive, Charles Kaka, said that currently degraded and older housing stock needs refurbishment. High demand for social housing means new homes are being built as fast as possible. However, the organisation has high debt levels and faces rising interest rates and building supply costs, as well as ongoing upgrade and general maintenance expenses. And the current cost of each refurbishment is high if done to an acceptable standard.
Kaka took the Times-Age to view an example of a recently upgraded home in Kaka St, in central Masterton. The result is impressive. The three-bedroomed home has environmentally compliant water heating and a facility that can be modified to charge an EV. The warm, dry, rewired, reroofed, recarpeted, recently painted and insulated home is probably representative of state-of-art social housing. However, such improvements – whether visible or invisible – come at a price.
“Each renovated property at this stage is $100,000. We think that number will go up to $150,000,” Kaka said.
He said funds for the renovation came from a variety of sources, including debt.
“We have done about 10 of these; we committed to them late last year. This is part of our home improvement plan. These are old assets that have had a major renovation. On average, our assets are 55 years old – some will be older than 55, some will be younger.
“We think we can do 31 or 34 of these sorts of renovations in the next financial year, funding dependent.”
Kaka said funding needs to be raised and acknowledged the increased rents are not expected to cover the costs fully.
“We’ve got to raise it. It comes from rents, it comes from debt, and it comes from philanthropic donations,” he said.
“We’ve got about $23 million worth of debt.”
Kaka acknowledged the pressures, including rising interest costs and the impact of covid.
“The options are you get income from the rents, and you can get it by borrowing – and borrowing at today’s interest rates is not particularly kind,” he said.
“Our biggest cost this year will be that we’ve got debt coming off fixed term and going onto a variable rate. We’ve got a tranche coming off in May and another tranche coming off in November. That will be significant.
“We are also the biggest ratepayer in Masterton. Rates are going up.”
He said central government help is available for increasing the housing supply, and new developments are part of the Trust House programme. No government funding is available for renovations.
Down the road in Kuripuni, an extensive new build programme for infill housing is expected to substantially increase the number of available homes on the large section. However, this project is presently self-funded by Trust House.
There, one existing older standalone home has been demolished to make way for a number of homes, meaning three available bedrooms increasing to nine. Kaka estimated the current housing shortfall in Masterton is about 200 dwellings.
A spokesperson for the Ministry of Housing and Urban Development [HUD] acknowledged Trust House’s approximately 280 public housing tenancies and 189 private tenancies but said central funding options for upgrades are limited.
“HUD does not have any suitable funding options to be able to assist Trust House with its programme to upgrade its existing housing stock,” they said.
The spokesperson referenced HUD’s Operating Supplement – a subsidy that’s paid, in addition to the Income-Related Rent Subsidy, for eligible new public houses to help enable new build supply.
Corin Haines, Masterton District Council manager of community facilities and activities, was supportive in principle.
“Social housing is an important service provided to our community. We are happy to support providers where we can,” he said.
Another instalment of the Times-Age’s series on social housing will run in next Saturday’s paper.
