Kāinga Ora tackles rent debt

Over the past 12 months, our frontline teams have been working with tenants to reduce their rent debt. This has resulted in total rent debt falling from $21.6 million in January 2024 to $16.1 million at the same time this year.

But we want the amount owed to fall faster and to make sure we keep rent debt down in the future. So we are making changes as part of the broader reset of Kāinga Ora to address this.

New policy

We’re going to reduce debt by taking a firmer approach with tenants who are behind on their rent. We will be fair and reasonable – but rent must be paid.

We will continue to support households who fall on hard times but are making genuine attempts to get back on track with their rent. We’re a social housing landlord so that’s the right thing to do.

But, through our new rent debt policy, we are drawing a line on how patient we can be. We don’t want to end tenancies, but we will if tenants are not meeting their obligations to reduce their rent debt, are skipping rent payments or refusing to work with us.

We're also taking action to prevent large debts in future. Our new approach seeks to ensure that tenants will not have accumulated more than 12 weeks’ worth of rent debt when their tenancy is ended. This means we will begin the process of ending a tenancy earlier than in the past. This provides clarity about what will happen, and when, to both our tenants and our frontline.

Partial debt forgiveness

A small number of Kāinga Ora tenants – less than 3% - have accumulated more than 12 weeks’ worth of rent debt. There are a range of reasons for this, including social and economic events over the past five years and the steps Kāinga Ora took to respond to government policy, particularly during the pandemic.

We’re going to help those tenants get on top of their rent debt faster by reducing the amount owed to a level that is more realistic for them to repay in full. We’ll only do this for tenants who are consistently paying their rent and making reasonable payments to reduce their debt. In return for this one-off help, tenants must continue reducing their debt.

This will provide a clear incentive to tenants who are not currently meeting their obligations to change their behaviour and speed up repaying what they owe. If they consistently do this, they will be eligible to have part of their debt forgiven. But if they do not, we will take steps to end their tenancy.

We expect to forgive up to $8.3 million of the $16.17 million we’re owed. This is already provisioned for on our balance sheets as it is regarded as doubtful debt, so there will be no impact on our financial performance.

We think this is the right thing to do. The likelihood of collecting all this debt is low, given the time it will take tenants to pay it off and the significant costs associated with chasing it. We’re also conscious that during the pandemic the steps we took to respond to government policy meant we didn’t chase debt in the way we normally would, so we carry a measure of responsibility.

We’re being pragmatic. We think we’re better off focusing on recovering the remaining debt faster and ensuring current tenants do not get into too much debt.

All tenants whose debt is reduced will still have a significant amount to repay. And they’ll have a strong incentive to do this under our new policy, which it makes it clear we will end tenancies if tenants do not meet their rent obligations.

Looking ahead

It’s important we strike the right balance between supporting households in difficult circumstances and ensuring that our tenants meet their obligations. We will be closely monitoring the impact of both the new rent debt policy and partial rent debt forgiveness to ensure we have the right balance. If necessary, we will make further adjustments.