van Velden Brooke; Woods MeganBROOKE VAN VELDEN (Deputy Leader—ACT): Thank you Madam Chair. I wish to raise an issue about the Government's debt and Government loans. In the Estimates it suggests that this year the Government will give over $5 billion in loans to Kāinga Ora which is money to build. I want to turn to an article that came out a year ago and it said that this Minister under the Government was warned not to grant any future Budget bids to … Kāinga Ora for a time after fears of unsustainable debt levels. A leaked document from the Ministry of Housing and Urban Development showed spiralling construction costs cause a debt blowout at Kāinga Ora with fears that"—Chris Bishop: It's public—it's not leaked. It's been public for a year.BROOKE VAN VELDEN: —"the Government will be unable to completely repay the increase in debt over the next 60 years." Is it acceptable Minister that this Government with a warning about increasing debt levels has signed off on $5 billion of loans to Kāinga Ora when we know that it's unsustainable?Hon Dr MEGAN WOODS (Minister of Housing): Look I'm happy to take a short call on that. I do actually agree with the Opposition member Chris Bishop that it's very hard to call a document that's sitting on the department's website "leaked". I don't think there's anything particularly furtive about that document and that is somewhat of a misrepresentation of that document as well.But I do just want to address this issue of the lending for Kāinga Ora because it did change and it was discussed at this Estimates hearing that of course the debt was transferred back into the net core Crown debt. The reason for that is actually the ability to get a better interest rate so that we can save money for the Crown by bringing in and structuring the debt in the way.I just want to put some perspective into the comments that the ACT spokesperson for housing has just brought in about that Kāinga Ora's borrowing of $5.2 billion added to what it is already—in terms of its existing debt it will be around $9 billion. Now this is obviously a large debt but I want to put this into the perspective of what the balance sheet of Kāinga Ora is. This is an organisation that owns an awfully large amount of property and an awfully large amount of houses and it has $260 billion in total assets. So if we have a look at the debt-to-equity ratio of the organisation we can see that actually it is in a very good health at 3.5 percent. If you stacked Kāinga Ora up against the similar agencies globally that you'd put it against in terms of debt-to-equity ratio looks like you'd actually see that Kāinga Ora still has a lot of headroom if you put it next to its comparator agencies. In terms of the document that the member is talking about she's actually talking about a very long-term piece of planning that I kicked off as Minister by saying: what does the financial future of Kāinga Ora look like in 50 or 60 years? How do we manage the long-term financial sustainability of an organisation that for too many years has been a political football in terms of its funding? We haven't seen the adding of public housing we haven't seen the maintenance of the existing asset base and one of the things that I know is that our operational costs at the moment within Kāinga Ora are higher than they would have been if the previous decade had actually had a maintenance programme on its homes. The cost of maintaining an unrenovated retrofitted house is far higher than maintaining one that has been retrofitted or indeed that has been redeveloped and is a new build. You carry a far greater operating burden on your balance sheet as an owner of property in those circumstances. Also one of the things that I wanted to address in looking at that financial sustainability piece is the way that Kāinga Ora or Housing New Zealand was treated as a cash-flow machine. There was over half a billion dollars' worth of dividends that were extracted from the organisation between 2008 and 2017 so not only was there nil investment; there actually was an extraction of half a billion dollars' worth of money that could have been reinvested back into redeveloping or maintaining or building new houses. But it wasn't; it was put in to pay for other things in the consolidated account. That's why as a responsible Minister of Housing I was keen to look at what the financial sustainability of that organisation looks like over that 60-year time horizon. But I do acknowledge that this set of accounts that we're seeing in this Budget is the first time that we've seen the transfer of that debt back into net core Crown debt so it looks a little bit different."