Media release: Inquiry into the Ministry of Social Development’s funding of private rental properties for emergency housing

14 December 2021

An inquiry by the Auditor-General has found significant deficiencies in the way the Ministry of Social Development paid for private rental properties to be used as emergency housing.

From November 2017 to June 2020, the Ministry paid more than $37 million to private landlords and property management companies in Auckland.

Before this, the Emergency Housing Special Needs Grant was only paid for motels and other commercial accommodation, so funding private rental properties in this way marked a significant change in practice.

The decision to fund private rentals for emergency housing began as an innovative and pragmatic response by the Ministry’s frontline staff to a pressing need for emergency housing.

“We acknowledge the very real challenges that staff faced in helping vulnerable families find suitable accommodation at short notice in a constrained accommodation market,” says Auditor-General John Ryan.

From a small beginning in November 2017, the Ministry’s use of private rental properties as emergency housing increased significantly. But this new approach raised issues that the Ministry then did not respond to. Its planning and assessment process was limited, and it did not provide formal guidance to its staff about how to make decisions to fund private rental properties, or the price to pay.

“This may have been acceptable for a short-term response, but we expected to see a more planned and strategic response to the situation, including guidance to staff, as the practice and costs of providing emergency housing in this way increased,” Mr Ryan says.

The Ministry did not do the analysis needed to decide what a fair rental rate was, such as comparing the market rates of weekly rental options for fully furnished houses or similar. For example, the Ministry had price guidance for what a reasonable payment for commercial premises was but had no similar guidance for payments for short-term furnished private rental properties.

The Ministry also said it aimed to fund emergency housing that was warm, dry, and safe. But it had no way of checking that the private rental properties it was paying for met these expectations.

As a result, the Ministry couldn’t show the accommodation was fit for purpose or that it was getting value for money.

For its part, the Ministry told us it was not responsible for assessing the quality of the housing it provided, or that it had the regulatory authority or capacity to do so. The only mechanism the Ministry said it had for ensuring that accommodation was suitable, was by responding to complaints from the people living there.

“In my view, it is important that the Ministry is clear on the standards it expects and can verify that the accommodation it’s funding meets these standards, and the needs of those being housed. A system that relies on some of the most vulnerable in our community to make complaints is clearly inadequate,” says Mr Ryan.

Although the practice of paying for private rental properties has now ended, the Ministry continues to fund emergency housing and has said it is working on improvements to the system.

The Auditor-General remains interested in this area and how the Ministry will use the findings in this report when it is considering how best to respond to the needs of people requiring emergency housing.

Note: For further concise background about our work, please read this summary, and the Auditor-General’s overview at pages 3 to 8 of our report.

ENDS