Ministry of Social Development's largesse has landlords 'printing money' - social worker

A social worker is calling for an investigation into the "blatant criminality" and "profiteering" that saw private landlords paid well above market rates for emergency housing. 

The Ministry of Social Development paid more than $37 million on emergency accommodation between 2017 and 2020 to landlords and property management companies in Auckland, according to a new report from the Auditor-General - a shift from the previous policy of only using motels and other commercial providers. 

The ministry often paid well above the market rate, with landlords taking advantage of the desperate situation, taking affordable accommodation away from would-be renters and distorting the local rental market. One place being rented at $1400 a week as public housing two weeks later cost the taxpayer $3900 as emergency housing.

Social Development Minister Carmel Sepuloni says she knew nothing of the practice until after it had already stopped. But Alastair Russell of Māngere East Family Services says not only was the spending "well-known" amongst staff, it was also widely known the housing on offer wasn't worth the exorbitant rates being charged.

"We were raising those issues with Work and Income staff," Russell told RNZ on Wednesday. 

"There's at least an assumption that these landlords, these property managers were assuring Work and Income these properties were of a suitable standard - and many of them clearly were not. The degree of profiteering that was going on is simply abhorrent…

"The ministry is putting vulnerable, desperate families into housing... The landlord is seeing the ability to print money, and is thinking of nothing else." 

He said given the amount that was spent - $37 million over three years - the Serious Fraud Office should be investigating

Sepuloni told RNZ it was an "operational decision" to expand the emergency housing programme into private rentals.

"It certainly came as a surprise. I did feel it was a surprise I should have been brought in on the loop. 

"However by the time I found out, the practice had stopped. They had realised there were unintended consequences... the intention I have to say, when they started doing it, was good - but the consequences have not been well thought-through."

National housing spokesperson Nicola Willis called it a "shocking waste of taxpayer funds", though the report notes it's the same amount that would have been spent had motels been used, rather than private accommodation. 

"The intention and how it started was not bad. It was good," said Sepuloni. "But what hadn't been thought through were the unintended consequences of doing that."

Russell said there was still little oversight of the quality of housing people leaving emergency accommodation are being steered towards. Sepuloni said when her party took power in 2017, there were no mechanisms for clients to formally express concerns about the standard of emergency housing they were in, and now there is.

National Party leader Christopher Luxon told RNZ someone has to be held accountable. 

"It is quite outrageous what's happened there... I think the Auditor-General's report was very, very clear. In any good organisation you want to be able to have really good accountability, and I'd be having a chat with somebody about what's happened there and being reassured the system has completely changed." 

He said Sepuloni's protest she wasn't told about the policy was a "cover" for not being accountable. 

"My challenge when I look at what happens in Government, I don't understand why there isn't more accountability or regular conversations on a number of issues - why a minister wouldn't be picking up the phone and finding those sorts of things out."

Luxon said he wasn't opposed to using private rentals for emergency accommodation,"but we've got a big problem when we're actually paying over and above the odds of what's the market rent".