2020 Retirement Housing Review - Section 17a
In late 2020, Council completed a review of its Retirement Housing Portfolio. The review was the first major review of the portfolio completed in over ten years, to assess the future maintenance and financial requirements of the flats to ensure they were sustainable for the future.
Supported by Council’s Housing Strategic Framework developed in 2019, a key priority from the review was understanding how the portfolio could best support retirement housing and to understand what opportunities there were for expansion of the portfolio.
The review identified that if Council did nothing (the status quo) without increasing rental fees, within two years Council would need ratepayer funds to offset the costs of the retirement housing activity. Council also would not have sufficient funds to plan for upgrades or renewal of aspects of the existing flats over their life. In this status quo scenario, Council was essentially providing at least a $200,000 subsidy each year in rental income.
In being socially responsible and financially prudent landlords and owners of Social Housing, Council explored all of the options available when completing the review, to assess how best to serve the existing tenants, ratepayers and the wider community, now and into the future. The review explored a multitude of options, including the transfer of the portfolio to a Community Housing Provider, investing in new units, and selling the units and investing in new housing in the District. In total over 10 different long-list options were considered.
Council settled on the option that sought to ensure the long-term sustainable viability of the existing flats, without adding additional burden to ratepayers and attempting to balance as best as possible the affordability challenges and disruption for residents. This was in the context that over the life of the Long Term Plan 2021 – 2031, the community were already facing a significant burden of rates increases from deferred investment in infrastructure. This option also provided for limited upgrade and renewal funding over the longer term (for things such as replacement carpet and upgrading kitchens). While it was recognised that there will unfortunately be affordability challenges for some tenants, those most in need of Councils housing (those without cash or assets) could access the accommodation supplement to offset the increase by up to 70% in some cases.
Council recognises that any increases in rental charges is difficult and has not considered any increase in rental charges without careful consideration and a comprehensive consideration of the options available to it. The full Section 17a Review is available here.
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For clarity, Council manages all of the costs and expenses for its retirement housing in a single account or envelope – this means that all of the costs relating to running the housing and the income are retained in one account, and aren’t used to pay for other council services. Likewise rates do not subsidise the housing portfolio.
As part of the review Council sought feedback from the community in July 2020 on this topic. While some communities choose to subsidise rental costs with ratepayer funds, there was clear community feedback that was not a role of ratepayers at this time.
There are small pieces of work that have been done to date, however the increase is also required for future work, like replacement kitchens and bathrooms in some units that aren’t required now, however will be in 5-10 years’ time.
On average is costs Council just under $7,000 each year to operate and maintain 48 flats. This includes the cost of staff to manage tenants, receive income, insurance, rates, lawns and gardens and basic maintenance on each flat. On top of this, Council has to plan for and fund renewals costs for things like replacement bathrooms, carpet and kitchens.
Some tenants who do not have cash or assets, can access the full accommodation supplement. Councils also cannot access any of the subsidies that would make retirement housing more affordable, such as the Income Rent Related Subsidy provided by Government despite providing social housing, due to rules set out by Government.
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