The Dim-Post

June 15, 2015

Just lookit all that prudent sensible economic credibility

Filed under: Uncategorized — danylmc @ 1:20 pm

Via a Matt Nippert story (based on OIAs from Phil Twyford), which got a bit overlooked when it came out a week ago:

Housing New Zealand paid an investment banker $1.6 million to help it sell state houses, official documents show.

Low-profile Auckland banker Andrew Body gave advice to the Minister of Housing and secured lucrative contracts to implement the policy while also advising potential buyers of state housing stock – a dual role attacked by the Labour Party as a conflict of interest.

Housing New Zealand (HNZ) and Mr Body say correct procedures were followed, and conflicts were declared where required.

Mr Body was appointed in 2010 by then-Minister of Housing Phil Heatley to the housing shareholders advisory group, then later to an advisory panel to help form government policy on social housing.

And today we’ve learned:

Figures compiled by Labour showed that 443 state houses were sold in 2014, at an average of 13.3 per cent below the Government Valuation.

Labour claims Housing NZ has “lost” at least $13 million on the sales, with the total proceeds from sales where valuations were available raising $71.8m, compared to the $84.9m the houses were valued at.

Five state houses sold in 2014 raised more than $1m, including a $1.36m sale of a property in Devonport, about 5 per cent less than the property’s GV.

So Housing New Zealand is paying consultants millions of dollars to help it sell houses for less than the government valuation in the middle of a property boom to buyers advised by the same consultants. Meanwhile the quality of the homes still under care by the state are so poor their occupants are literally dying. This is just about the worst thing I’ve ever heard.

29 Comments »

  1. We’re not actually in the middle of a property boom, are we, Danyl? We’re in the middle of a housing crisis and the Government needs to sell houses in order to free up some cash for their plans to build a lot more houses in order to dampen down demand. Work & Income are paying out record amounts of accommodation supplements because of high rents, so surely part of the solution is to make sure that low income families are able to buy their first home with the help of Government incentives. I also think that we can’t rule out the possibility of implementing rent controls. So, currently when you rent a house, the landlord can legally only put the rent up by a certain percentage each year. Yet if you move out and a new tenant comes in, the rent can go up exponentially. This means that a small wooden house in Christchurch can be rented out for $360 per week by a couple that have been there for ten years and when their renewal comes around in November their rent will be increased to $380 per week; their friends who have just moved in to an identical property across the road are paying $480 per week and when they have their renewal in one years’ time their rent will be going up to $505 per week. This is a loophole in the system that needs to change. People say that Warrant of Fitness checks on all rental properties wouldn’t work because rents would go up but the fact of the matter is that rents are already capped in New Zealand for existing tenants and the other loophole that could see rents rise, new tenants, simply needs to be closed with the use of a National register of investment properties. This register would also ensure that foreigners couldn’t buy an unlimited amount of investment properties as they can now. Nick Smith was right to assert that, while foreign ownership only makes up around eight percent of the properties in Auckland, in an overheated market this is very detrimental to that market.

    Comment by Daniel Lang — June 15, 2015 @ 1:36 pm

  2. Gross incompetence, or corruption?

    Either way, a Minister should lose their job.

    Comment by Fraud — June 15, 2015 @ 1:38 pm

  3. And now we get the joy of watching labour fucking up what should be a slam dunk of incompetence and corruption.

    Comment by idiotsavant23 — June 15, 2015 @ 1:38 pm

  4. sell houses for less than the government valuation and the quality of the homes still under care by the state are so poor their occupants are literally dying

    There’s your answer.

    Comment by Phil — June 15, 2015 @ 1:56 pm

  5. “And now we get the joy of watching labour fucking up what should be a slam dunk of incompetence and corruption.”

    Perhaps just a tiny little bit of credit might be due to Labour’s spokesman Phil Twyford for, y’know, breaking breaking both of of these stories?

    Comment by russell brown — June 15, 2015 @ 2:05 pm

  6. Alternative explanations that do not involve exploding heads or hyperbolic outrage might include the possibility that the Devonport House was bought solely for its land value and the house is to be demolished and others were sold for less than the GV because they were in poor condition and required major work or because they were sold for use as rentals and the price reflected the risk associated with low income tenants for private landlords.

    Comment by Tinakori — June 15, 2015 @ 2:13 pm

  7. Fraud #2: Or both.

    Comment by Kumara Republic (@kumararepublic) — June 15, 2015 @ 2:16 pm

  8. @Tinakori – your assessment may well be correct but it still doesn’t avoid the conflict of interest.

    Comment by Gregor W — June 15, 2015 @ 2:21 pm

  9. But if the $1.6 mill is INSTEAD of agents fees..?
    Yeah right.

    When I last sold a house, I too used a banker. But only to receive the funds.

    Corporate welfare gone mad?
    Still, not a biggie compared with this guy:
    http://www.latimes.com/local/la-fi-hy-musk-subsidies-box-20150530-story.html

    Comment by Clunking Fist — June 15, 2015 @ 2:27 pm

  10. Gregor, there is no conflict of interest if both sides in a transaction want you to do the work and are aware of what you are doing. Have done so as a consultant myself – at the request of both sides. Alternatively, he did not act for both sides in specific transactions but worked for one or the other and both sides were aware of his background of working for both at different stages in a process. Also, no conflict.

    Comment by Tinakori — June 15, 2015 @ 2:37 pm

  11. Meanwhile the quality of the homes still under care by the state are so poor their occupants are literally dying.

    I’m tired of the incompetence. I want my right-wing parties to be competently evil. Instead I get idiots who allow poor people to literally die because of poor housing while also giving them an extra $25 to live a bit longer.

    This is just about the worst thing I’ve ever heard.

    Or seen “…with huge liquid eyes ..”.

    Apparently it’s getting easier to not write satire.

    Comment by tom hunter — June 15, 2015 @ 2:41 pm

  12. Gregor, there is no conflict of interest if both sides in a transaction want you to do the work and are aware of what you are doing

    Sure, presuming both sides are commercial entities and all cards are on the table, presumably including any pecuniary benefits the intermediary receives and under what conditions pertinent to the deal being struck.
    However, when one of those sides is non-commercial and ostensibly represents the NZ taxpayer and the other is a private, profit making enterprise then that’s a bit of a hard sell.

    Also while I agree that there is no specific conflict if the same professional is working on different elements of a deal for counterparties – say, developing an ROI for one and due diligence for the other – certainly most consultants of my acquaintance are shy of this purely because of the perception of conflict. Mostly, they will shift the work onto other consultants operating under the same banner to keep the Chinese Wall in place.

    If as in a recent property transaction where I was one party and a family trust was another, my solicitor felt it was a conflict of interest for her to act for both parties as her professional standards precluded it even though efficiencies would be gained, then this deal should prompt some questions.

    Comment by Gregor W — June 15, 2015 @ 3:09 pm

  13. “Gregor, there is no conflict of interest if both sides in a transaction want you to do the work and are aware of what you are doing. ”

    except for when one party is the state who has a written rule that even the perception of conflict is enough to rule it out

    Comment by framu — June 15, 2015 @ 3:50 pm

  14. So the $1.6 million (Mr Body was paid) divided by 500($ per hour) = 3200 hours which then divided by 40 hours (per week) = 80 weeks.
    So what took 80 weeks or was he paid an excessively high rate ? And the Herald article referred to says Housing NZ paid several consultants more !
    It would seem that the current government has poor business skills as they paid a high fee for a poor result.

    Comment by Ric Stacey — June 15, 2015 @ 5:15 pm

  15. “So, currently when you rent a house, the landlord can legally only put the rent up by a certain percentage each year. Yet if you move out and a new tenant comes in, the rent can go up exponentially.”

    Recently I read of a case (random Stuff comment thread so not verifiable) of someone whose low income status was used by their landlord to claim on one of the government insulation subsidy programmes — probably either this one, or whatever came before it. Immediately after it was installed, the landlord decided the property was worth more, increased rent accordingly and kicked out the current tenant who wasn’t able to pay.

    Is this something that’s happening in any widespread way? I’d have thought that claims for the insulation programmes would have placed at least some constraints on landlords to keep their properties affordable for the existing tenants who’d been used to justify the grant in the first place. When I tried to search for the actual rules, I wasn’t able to find anything beyond sign-up forms.

    Comment by izogi — June 15, 2015 @ 5:56 pm

  16. News from the provinces: a bunch of state houses are for sale here (in Whanganui) at ~$60K which is the very very very low end of the market. Scuttlebut from the real estate agents is that it has completely killed sales of small units, etc, because you could buy an entire state house instead.

    Comment by deadlyllama — June 15, 2015 @ 7:46 pm

  17. I’m not surprised houses in Gisborne sell for less than the GV. The place is depopulating.

    What ever the valuation it’s only the sale price that indicates what a place is worth to some one who wants to buy.

    That will be greeted with cries of evil neoliberalism but if you’re going to base your argument on worth then it’s hard not see how that is about market forces ultimately.

    Valuations are generally a bargaining device.

    I don’t know the details of the Devonport house that sold for over a mil but it doesn’t make any sense for the govt to not use that capital elsewhere.

    Comment by NeilM — June 15, 2015 @ 8:47 pm

  18. @idiotsavant: I’m sure the Greens will show us how it’s done, as per usual

    Comment by kalvarnsen — June 16, 2015 @ 2:05 am

  19. Reblogged this on Talking Southern Auckland and commented:
    Selling below valuation in Auckland? Okay rather suspicious but then again I have seen properties sell in Papakura either AT valuation level or well above it. It depends on the circumstances the new owner might have.

    Also going to put the comment made over at DimPost that caught my attention as well:

    We’re not actually in the middle of a property boom, are we, Danyl? We’re in the middle of a housing crisis and the Government needs to sell houses in order to free up some cash for their plans to build a lot more houses in order to dampen down demand. Work & Income are paying out record amounts of accommodation supplements because of high rents, so surely part of the solution is to make sure that low income families are able to buy their first home with the help of Government incentives. I also think that we can’t rule out the possibility of implementing rent controls. So, currently when you rent a house, the landlord can legally only put the rent up by a certain percentage each year. Yet if you move out and a new tenant comes in, the rent can go up exponentially. This means that a small wooden house in Christchurch can be rented out for $360 per week by a couple that have been there for ten years and when their renewal comes around in November their rent will be increased to $380 per week; their friends who have just moved in to an identical property across the road are paying $480 per week and when they have their renewal in one years’ time their rent will be going up to $505 per week. This is a loophole in the system that needs to change. People say that Warrant of Fitness checks on all rental properties wouldn’t work because rents would go up but the fact of the matter is that rents are already capped in New Zealand for existing tenants and the other loophole that could see rents rise, new tenants, simply needs to be closed with the use of a National register of investment properties. This register would also ensure that foreigners couldn’t buy an unlimited amount of investment properties as they can now. Nick Smith was right to assert that, while foreign ownership only makes up around eight percent of the properties in Auckland, in an overheated market this is very detrimental to that market.

    Comment by Daniel Lang — June 15, 2015 @ 1:36 pm

    Comment by Ben Ross - Talking Auckland — June 16, 2015 @ 9:25 am

  20. “News from the provinces:…….”

    $60,000 seems about right for a state house in a city like Whanganui where a significant proportion of your tenants might have gang links. There will be a risk premium factored in to cover your limited ability to realise bad debts. Not too many years ago you could buy units in Cannons Creek for similar prices and, if your tenants paid regularly, the rates of return on your investment were very high.

    Comment by Tinakori — June 16, 2015 @ 10:16 am

  21. 60K in wangas? – about right trade me

    Comment by framu — June 16, 2015 @ 11:29 am

  22. ahh damn – no html –
    was just linking to houses in wanagnui and had set it to show lowest price first – link was verrrrrry long – but yes – 60k for some parts isnt out of bounds by any stretch

    Comment by framu — June 16, 2015 @ 11:30 am

  23. I don’t know the finer details but I suspect this is a beat up.

    There is no such thing as Government Valuation but there are rating valuations which can fairly quickly become out of date. More importantly, RVs have no relationship with a property’s market value, for various reasons. One only has to look at the massive difference between property prices and their respective RVs in Auckland to realise this.

    Ironically you remark that state houses are being run down appallingly and, yet, in the same breath you are suggesting they should be fetching top dollar! You need a proof-reader.

    Comment by Ross — June 17, 2015 @ 2:11 pm

  24. https://www.qv.co.nz/valuations/rating-valuation

    Many RVs in Wellington were last done in Sept 2013 so are nearly two years out of date. Also, RVs typically do not take into account improvements to a property, and chattels are not included.

    Comment by Ross — June 17, 2015 @ 2:17 pm

  25. This is just about the worst thing I’ve ever heard.

    There’s some tough competition these days.

    Comment by herr doktor bimler — June 17, 2015 @ 2:27 pm

  26. And all the while this is going on Labour is counting hair straighteners at government departments.

    Comment by Michael — June 18, 2015 @ 6:40 pm

  27. And all the while this is going on Labour is counting hair straighteners at government departments.

    As they’re proving, they can do more than one thing at once. It’s important that they focus on the things that the gallery really care about.

    Comment by Fraud — June 19, 2015 @ 9:21 am

  28. “Labour is counting hair straighteners”

    is that really where the story came from? link

    Comment by Sacha — June 19, 2015 @ 9:27 pm

  29. “Also, RVs typically do not take into account improvements to a property”
    As someone who has put an extension on their property, I can assure you they come round out of cycle, to revalue once the cert of code compliance is issued.

    Comment by Clunking Fist — June 23, 2015 @ 7:12 pm


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