Photo: RNZ / Nate McKinnon
Finance Minister Nicola Willis says Kāinga Ora has been building houses at a cost of 12 percent above the private market rate.
Willis disclosed the figure from a new report at the Finance Select Committee hearing on Tuesday morning as part of scrutiny week.
She said a series of reviews ordered by the agency's new board as part of its "turnaround plan" to make the department financially sustainable had uncovered some alarming statistics.
"One of the data points that just struck me as phenomenal is that despite all of that cheap Crown capital, despite all of that scale, they've been building houses at a far greater cost than the private sector does," she told reporters afterwards.
"I may have stolen some of Chris Bishop's thunder there ... I am of course the joint shareholding minister for Kāinga Ora so we share these responsibilities."
Finance Minister Nicola Willis. Photo: RNZ / Samuel Rillstone
Willis would not disclose when Kāinga Ora was building houses at a higher cost to the private market rate - saying the government would share more in the new year.
At the Social Services Committee hearing taking place at the same time during scrutiny week, Kāinga Ora board chairperson Simon Moutter said the agency was putting a "huge focus" on trying to get back to market build costs.
He said part of the extra cost was providing accessible homes that were built to last - with appropriate fittings that would not deteriorate.
"We're not building to sell, so we'll be maintaining these houses over an extended multi-decade period. So we want to make sure that we're putting in the right fittings etcetera that will, at the right cost, be better.
"The other thing that is quite a big factor for us is the land that we hold isn't always optimally configured and property developers can pick and choose what land is going to be the lowest cost to build on - which is partly topology, but partly sort of form factor, etcetera, which leads to greater efficiencies - and we don't always have those degrees of freedom."
Moutter said they did however, believe Kainga Ora could cut down on some inefficiencies and had brought in a target this year to reduce unit build costs by 10 percent.
They had already achieved reductions of 14 percent, and were aiming to cut it further to 20 percent by the end of the 2026 financial year, he said.
The Housing and Urban Development Ministry, appearing afterwards, said they had been working with Kāinga Ora on bringing down costs since May or June of 2023.
"Both in terms of let's be clear the actual build costs but also the other costs that go into whatever they book for a public house - so what I mean by that is some of the overhead costs, some of the planning, consenting, that sort of work.
"They were both slightly higher in terms of the apples to apples on the build costs, but what really lifted it up quite a bit higher was the other costs that went into play as well ... that's what they're working with and looking to adjust."
MPs at the committee also questioned both Kāinga Ora and HUD about a projected 283 reduction in the number of social houses available in Auckland next financial year.
The agencies said it would be a "rebalancing" after more houses than expected had been built this financial year - a 770 net increase - and building rates would increase again the following year as houses were retrofitted, or demolished and rebuilt.
Kāinga Ora also confirmed staff cuts were continuing, a 538-FTE reduction aiming for the end-of-year budget number of 2990 full-time equivalent employees.
Contractor spending had also reduced from $65 million in FY22/23 to $47m in FY23/24, and "every month we are managing that down".
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