12 Jul 2016

HNZ dividend payment unlikely - English

11:48 am on 12 July 2016

Budget forecasts released eight weeks ago showing Housing New Zealand (HNZ) would not return a surplus, and therefore dividends, in the next few years, are now out of date, says Bill English.

05072016 Photo: Rebekah Parsons-King. Caucus run. Bill English.

Bill English Photo: RNZ / Rebekah Parsons-King

HNZ has signalled to the government it will not produce a surplus this financial year, and so will not be paying a dividend. That was because of a $2 billion investment in buying and building houses over the next three years.

The agency says its work with Treasury on this has not been formalised, so an official statement saying it would not deliver a dividend, as forecast in the May Budget, has not yet been made public.

Mr English, the Minister Responsible for Housing New Zealand, said there had not been a "formal decision" about the dividend yet, but the new plans showed that as HNZ ramped up plans to build 4000 houses over the next few years, that would be unlikely.

Mr English said in the scheme of things, $50 million was "neither here nor there", but as a foregone dividend it would help pay for the house building programme.

He said the housing market was dynamic and fast rising, so the plans for the building programme had changed several times, as it had become more and more expensive to procure houses.

Labour Party finance spokesperson Grant Robertson said the government was all over the place.

"It's quite clear that [Economic Development Minister] Steven Joyce gave a panicked response to Labour's announcement and claimed that a decision had been made that there was no dividend being taken from Housing New Zealand.

"Bill English has now quite clearly said that decision actually hasn't been made yet.

"I don't think Steven Joyce is in control of the National Party's housing policy."

Mr Joyce had said HNZ would not be paying a dividend for the next two years as it ramped up house building.

John Key at a stand up with media. 8 July 2016.

John Key (file) Photo: RNZ / Cole Eastham-Farrelly

Prime Minister John Key said while the government accepted HNZ would not pay a dividend this year, it still believed taking a dividend from Crown agencies was a good way to impose financial discipline.

Speaking from London, Mr Key said the government had been willing to invest in capital for HNZ.

"As I understand it, what's the likely change in terms of the dividend, really, is just been sort of a reduction in the amount of money they were earning for a number of other reasons.

"So look, in the end from the government's point of view, the reason that we have things like a dividend structure is to try and put good commercial discipline around and organisations, it's not because we're necessarily always looking to make money off them."

"An entity like Housing New Zealand, we know we're not going to make money, but it is good to have commercial disciplines on them."

29062016 Photo RNZ / Rebekah Parsons-King. Grant Robertson

Grant Robertson Photo: RNZ / Rebekah Parsons-King

Mr Robertson said those comments were just not credible, as the government has made an active decision to take dividends over past years.

"The National Party has taken over $600m worth of dividends... while we've seen state housing lists rise, while we've seen a rise in homelessness.

He said, contrary to the Prime Minister's assertions, HNZ had been used as a cash cow.

"The problem and the need for social housing is enormous, of course money needs to go in but you can't claim not to be making use of dividends when you've been taking $600m out.

"The National Party has made an active choice to sell state houses and take dividends rather than using Housing New Zealand for its primary purpose of housing vulnerable New Zealanders."

Mr English defended taking dividends in the past, saying in those years the agency had had enough cash on its balance sheet to build, buy or lease new houses, and still pay the government a dividend.

In a statement, HNZ said the prime minister was "right in part" about reduced earnings in other areas.

HNZ said it did have less revenue because of the Tamaki stock transfer that occurred on 1 April last year.

But it reiterated the main reason it would not post a surplus was "due to the increase in activity (and costs) in building new homes and maintaining our existing homes".

HNZ said that equated to an average of $80,000 per property on maintenance and upgrades this financial year.

The May Budget showed HNZ paid a $109m dividend in 2015 with forecast payments of $38m in 2016 and $54m the year after.