How Much Can I Borrow?

When you’re thinking about buying a home the question at the top of your mind is how much can you borrow and then how much should you borrow.

When you’re thinking about buying an investment property the only thing you’re thinking about is how much you can borrow.

The difference is because when you’re renting something out you’re earning money on the money you’ve borrowed, when you’re buying for yourself you’re just paying for what you’re living in so you want to consider the balance between lifestyle and paying down debt and growing equity.

This year I’ve spent a bit of time hanging out with the Williams Corporation team at their investment buyer evenings (I think I’ve been to three now!). One thing they point out is the value of borrowing as much money as you can because you can earn money on the banks money.

LVR rules mean you need at least 20% deposit for a new build unless you’re a first time home buyer and leveraging your Kiwisaver…. the council isn’t buying it’s first home.

The current rateable value of our social housing stock is over $325 million dollars so I’m keen to get busy and borrow some… how about $1.3 billion dollars?

On Sunday I had an interesting conversation with Anne Galloway, the city councilor for Halswell. Like many, she goes to pains to point out that we can’t fund social housing from rates. Frankly I’m at a bit of a loss why people keep prattling this comment and am feeling a bit white washed. I can’t help feeling that this whole social housing thing is a bit like an episode of “Yes Minister” and we’re all being played.

Not only should social housing not be funded from rates but it should also bring our city a large return.

I did some quick math…

I wondered how many units we could build if we borrowed everything we could and just asked Williams Corp to build for us (at their published book value). Of course we wouldn’t ask then to build at book value and we already have the free land, so we can’t factor that. So I pondered how many we could build if I took the current average unit value, but of course that number is no good either because it looks very much like most of our stock is over valued in the market given what we should be able to build for currently (though don’t tell the bank that because I want to use my existing stock to secure the loans!)

I decided that I should just factor the Williams Corp price, the current rent, cost of borrowings at councils 2.5% and as much money as I could borrow and figured out that we should earn $19.5m a year. That fixes the problem of finding funds to run the stadium!

Ok, so these are just scatter gun numbers because it leaves out so much information and makes to many assumptions, but it does make me wonder why we’re messing about and not getting busy with a massive building program to at least get us another 1,000 homes build withing the next 18 months!

https://www.ccc.govt.nz/assets/Documents/The-Council/Request-information/2017/LGOIMA-State-Housing.pdf

In the mean time my wife flicked me a pdf link that she’d found while looking for something else, which is just full of enlightening reading. At first I was wondering what the heck it was all about but then it occurred that this isn’t just economic, it’s political too!

The council has been moving housing into a trust because it wants to be able to claim government assistance for tenants while giving the tenants lower rents. But council also has the ability to raise massive amounts of capital and the tax payer is paying the bill.

I haven’t read all the detail, but clearly lawyers at The Treasury are interested.

The other numbers I also considered is how quickly the council can pay off its borrowings. Our council is already very wealthy, Raf Manji expressed recently that CCC is worth $13b dollars.

I’m sure it’s an issue for some that growing our housing stock means growing the wealth of our council and currently we have an increasingly wealthy and powerful council.

I can’t help wondering how much of this is all about improving the quality of housing in our city and country v’s more scrapping about who’s budget stuff goes on… hummm…. those who know me know just how bothered I get about that issue!

D

How Are Elected Officials Informed?

OCHT Provided More Numbers! 🙂

This afternoon I got an email back from Bob Hardie, Senior Housing Advisor, Ōtautahi Community Housing Trust and then followed up with a quick phone call.

Stephen McPaike picked up that this list has units listed that were not in the spreadsheet that came from CCC last week (that was part of an information request by a candidate during the election process).

The question all this presents is, who actually knows how much social housing Christchurch has and how do elected members become informed?

Bob commented that they don’t report back to CCC, which is quite reasonable, and it occurred to me if OCHT are this willing to provide me with information then clearly they would do the same for CCC if they asked, it’s not like a count of housing is a secret!

I like Bob, he was easy to chat to and very informative.

I also asked about closed units and how long they stay closed. Bob explained that they aim for between 11 and 15 days, which I expressed is very reasonable. When I’ve turned over rentals in the past it can take a few weeks to clean things up and get them to a level you want to present.

Bob also explained that the trust has been trying to raise the level of quality in the unit stock as they turn them over, also seems very reasonable…. actually there wasn’t anything in our brief 10 minute conversation that I didn’t find reasonable.

We also talked about how the open and closed units are quite fluid as tenants change and that drug use in the units is one of the biggest challenges. That last one I can personally relate with having done a couple of meth decontamination’s.

So, while a very helpful conversation, I’m now left with more questions than I started with and pondering how elected officials can be expected to make planning choices when no one seems to have the full picture.

However, on balance, I also think we shouldn’t get alarmed about this as we have some reasonable rough idea and everyone seems to agree that we need more social housing. The only thing we don’t seem to agree on right now is if we’re moving fast enough and how we might move faster.

All Cleaned Up – Harman Courts Front Yard

Well the good news is that the front yard clean up at Harman Courts got finished today! Yeah!

Let’s hope there aren’t to many more of these sorts of issues hiding in the wood work because they’re really expensive! They’re expensive because once they start, the rubbish just keeps pilling in as was seen at Harman Courts.

Thanks to everyone involved in following it up.

The biggest learning for CCC and OCHT from this should be that when you say you’re going to do something, give yourself enough time! If you’d said it will take 3 weeks then sure, we would have questioned why we can’t get resources sorted sooner, but saying 24 hours was likely a bit unrealistic too. 🙂

I think the biggest thought for tenants has to be that if you see someone moving out and can see they’re over whelmed with rubbish then reach out for help! The dump just isn’t that expensive, plenty of places have a free/borrow trailer and we can put the hat around for dumping fees if your stuck, we can also put the hat around for petrol money.

WHERE DOES THE OCHT BOARD STAND?

Earlier today Vicki Buck, OCHT board member, popped up on Facebook to offer assistance with the rubbish issue at Harman Courts.

I had a bunch of questions for Vicki as I simply don’t understand the view of the board towards social housing.

I wrote….

Hi Vicki,

I tagged you to start to raise awareness with others that you are one of 7 board members on the trust.

https://www.ocht.org.nz/about/ocht-board/

Frankly I see a whole pile of issues here and I don’t know what the answers are.

On one hand this rubbish has sat for months (I’m told), on the other hand has it been left their at the knowing direction of the board to send a clear public message to the rest of the tenants?

Sitting in council meetings (you were there, you saw me sitting quietly), speaking with council staff, the message comes across very clearly that there is a great amount of division around the question of a civic response to housing.

http://oursocialhousing.nz/why-do-we-need-ccc-social…/

Speaking with Martin Pearce, Tenancy Operations Manager, on Thursday, he appeared to hold the view that hosting a rubbish dump on one of the complexes in their control, wasn’t appropriate and that they should simply take ownership and clean this mess up. However I get the clear impression that his view is not representative of the board, or perhaps the CEO would have made sure that mess was going on Friday as promised.

MORE LAYERS TO THE ONION

However there appears to be many more layers to this question than first appeared.

No sooner did some action on some part of the clean up get under way, I got another ping from a resident about three more quite reasonable issues at the same complex. Needless to say I’ve now got the message that I really need to do a site visit and have a look, perhaps you’d like to join me?

GOVERNANCE

From a governance point of view, I actually don’t know what the boards view is, and I’d like to.

If you want to make phone calls and follow something up, perhaps you’d like to call me and get me on the same page as the board around expectations – my number is 0211140699

At present there is less than 70% of the housing stock open according to information provided to election candidates.

Board members tell me they’re pleased with a $700,000+ saving on maintenance, but the same time it would appear (if I’m to believe tenants) that this has come about by simply not doing maintenance.

COLD

39% percent of tenants report being cold (according to the trusts own published survey), so getting a funding allocation for heating seemed like a great idea.

However, a month after that was approved by council, I’m told by Martin that there is still no program of work and that we should expect to wait until at least Christmas to see a program. By the time we take out the holidays, that will leave just over two months to install 930 heating systems.

If it takes 4 months just to make a plan, it’s going to take longer than 12 months to install!

PRIVATE MESSAGING AND “THE FACEBOOK PUB”

Finally, while I do PM from time to time, this is an issue that needs to be in the public domain. Others may choose to moderate my views, some may choose to endorse them. We should remember that I am not a tenant.

I am simply a member of the public who sees a $273 million dollar civic asset (assuming an average value of $100,000 per unit) not making a return to the civic and providing a very poor level of service to its customers.

I see $6.6m dollars of lost revenue per year as well. At the same time civic is asking me to pay over 5% more rates this year.


How Do You Clean Up Rubbish?!

As of this afternoon there is still rubbish sitting in the front yard at 85 Poulson Street. Apparently the small stuff has gone, which is a start, but the big stuff is still there and this just isn’t good enough!

We’d be happy enough if a commitment had been made for next week, but the commitment was made for today, so we expect the work completed by today.

So much talk about mental health issues in this city. Well this is the sort of thing that just drives them. Social houses have the ‘edge case’ of society in them and they’re often most at risk of health deterioration.

Leaving this waste there is potentially expensive! On the living wage, a couple of guys to move this stuff will cost less than $200. However a doctor costs way more than that if this becomes a final straw.

It just doesn’t look like a big issue, but it’s this small stuff that makes a difference. Earlier in the year I did over 150 Snap Send Solve tickets in my immediate area and it just made a massive impact on how our part of the suburb presented. http://ccc.govt.nz/report/snap-send-solve/

LGOIMA – What’s The Heat Pump Plan?

Today was the day for ‘Information Requests’. Different agencies have different processes for asking for information.

Getting information from Christchurch City Council is called a LGOIMA Request and you can lodge one using this form, and they have 20 working days to get back to you. Last year they did less then 400 requests, so it’s not really used very often.

https://ccc.govt.nz/the-council/request-information/request-official-information-through-lgoima/#uff

I want to know what the plan is to get the heat pumps installed that Stephen secured funding for so I sent off this request…

” SOCIAL HOUSING

Hi, I’m following up the earlier council motion to spend $16m on heating and ventilation.

  • Can you please where are the 930 units to be upgraded are. I already have the CCC Social Housing information.xlsx so perhaps if you could just add another column?
  • What size heat pump is going in each unit?
  • What ventilation for each?
  • When is the program of work going to be defined in detail?
  • When will the program start?
  • How will be engaged to action the program?
  • When will the program be completed?
  • What reporting to tenants is planed and how is access to their units to complete the work going to be managed and are there currently enough staff to manage a project of this scale?
  • What order are the units going to be completed in?
  • Has the required electrical work and ‘at height’ work been identified? (ie looking at the aged and light construction of some units, with units ranging in age to 81 years, I would assume that some units may need electrical consideration, while other units are in three story apartments and external units may need to be fixed to the outside of buildings at height, requiring significantly more engineering consideration.)

I am looking to be better informed around this project and these seem like the obvious starting points. “