The Auditor General has released a scathing report into the government's use of private rentals as emergency accommodation.
The Ministry for Social Development (MSD) paid more than $37 million to private landlords and property managers in Auckland alone (file image). Photo: 123rf.com
Between November 2017 and the end of June 2020, the Ministry for Social Development (MSD) paid more than $37 million to private landlords and property managers in Auckland alone.
Many clients complained of houses being unliveable - despite rents costing MSD thousands of dollars a week.
In a report out today the auditor general's office said MSD could not show it received value for money, nor did it monitor the quality of accommodation.
Desperate to find people accommodation, the report stated MSD generally paid $2000 to $3000 a week for furnished properties - the median rent for Manukau at the time was between $450 and $560.
Some properties were even sub-leased, with property managers claiming thousands more than landlords ever received.
National's Housing spokesperson Nicola Willis said it showed the government's use of taxpayer funds to procure private rentals was wasteful and distorted the rental market.
"It' shows that there was really sloppy management of how emergency accommodation was being procured. It proves there wasn't value for money and it likely distorted the rental market. This is really concerning," she said.
"The government is spending around $1 million a day on emergency housing and taxpayers need assurance that they are getting value for that money. The Minister has to front up. What's changed, how can we be confident this sort of money won't be wasted again?"
Private rentals are no longer used as emergency accommodation, with MSD now opting for motels instead.
Minister of Social Development Carmel Sepuloni said she found out the government had been paying private landlords for emergency accommodation after the practice ended.
Carmel Sepuloni Photo: RNZ / Samuel Rillstone
"I think the findings are fair and reasonable, I'm glad that MSD stopped the practice and it certainly gives them something to reflect on," she said.
"Even prior to this report coming out, MSD had learnt the hard way and I have confidence that they won't repeat that mistake."
The auditor general's report stated MSD needed to consider a more strategic approach to meeting people's needs for emergency housing.
Auditor General John Ryan said the decision to fund private rentals for emergency housing began as an innovative and pragmatic response by MSD'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," he said.
The use of private rental properties as emergency housing increased significantly after 2017 but the inquiry found MSD's 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," Ryan said.
Auditor General John Ryan. Photo: Controller and Auditor General
MSD had a 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.
It aimed to fund emergency housing that was warm, dry, and safe but the inquiry found it had no way of checking that the private rental properties it was paying for met these expectations.
Ryan said as a result, MSD could not show the accommodation was fit for purpose or that it was getting value for money.
Further, MSD told the auditor general's office the only mechanism MSD 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," Ryan said.
Mangere East Family Services practice leader Alastair Russell was among those who sounded the alarm at the time and said the findings by the auditor general came as no surprise.
"MSD simply had no idea of the quality - or the lack of quality - of the housing that people were going into."
Given the amount of money that was spent, the Serious Fraud Office should be involved, he said.
"There is no one facing any criminal charges for this, even though they were clearly stealing from the public purse.
"Again, it is something that no one actually wants to take further."
There had been no consequences and did not appear to have been any learning for MSD, he said.
"There are housing brokers in Work and Income offices up and down the country who have no idea as to the quality of housing they are recommending that people should go and pick up the tenancy."
