Kāinga Ora makes a splash with Wellbeing Bonds
Kāinga Ora – Homes and Communities (Kāinga Ora) brings together multiple agencies. Sam Direen, Wellington-based treasurer, tells KangaNews about operational changes, sustainability debt and investor engagement.
What operational changes has the creation of the agency brought and has the funding approach changed at all?
We talk about funding being allocations for our income-related rent subsidy, which represents the bulk of our revenue, and financing being debt we raise in capital markets.
Financing has always been dedicated to public housing, which was the key focus of the former Housing New Zealand, so there has been no change in approach as a result of this merger.
A key piece of legislation for Kāinga Ora now in the House of Representatives is the Urban Development Bill. It covers some financing and planning powers of Kāinga Ora that allow us to build communities. This may have implications for our funding and financing down the line but it is too soon to know.
In January this year, the agency announced an increase in its borrowing protocol limit to NZ$7.1 billion (US$4.6 billion) from NZ$3.1 billion, including a Wellbeing-Bond programme of NZ$2.5 billion for the calendar year. Does New Zealand have the capacity to meet this increase in supply?
Around the time of the establishment of Kāinga Ora, the debt programme was incorporated under a framework for Wellbeing Bonds. For the benefit of international readers in particular, can you give some colour on what the New Zealand government’s Wellbeing budget means? What are the advantages of aligning the funding programme with it?
The living-standards framework has been in development for 10 years and has formed the basis of Treasury’s advice. It has been a natural framework to align Kāinga Ora as a government agency.
The government has directed the public sector to embed a wellbeing approach into operations. This is us signalling such, which we hope will lead to better wellbeing for our tenants.
Kāinga Ora released its sustainability financing impact report, covering the 2018/19 financial year, in November 2019. What were its key findings?
US-China trade tensions and slowing global industrial demand will put pressure on exporters of base metals, although China’s efforts to stimulate infrastructure development will continue to support demand for materials such as iron ore and aluminium. Services exports are expected to continue to grow steadily. Overseas student enrolments are underpinning this, as is the lower Australian dollar over the last year.
Agricultural exports, on the other hand, will weaken as the ongoing drought hits crop and livestock production. Manufacturing exports are expected to continue to increase steadily, especially exports of medicinal and pharmaceutical goods and professional and scientific instruments.
Longer-term demand for these products will probably be driven by an ageing population in Asia and Australia’s reputation as a high-quality producer.
Engaging with offshore investors has been an ongoing project since the agency re-entered public debt markets in 2018. Last year was tough for global demand for New Zealand dollars. Can you give an end-of-year report on global investor engagement?
We are increasing the frequency and quality of our communication and look forward to our primary dealers relaying this story to their networks.
Something new we are introducing this year is an investor day KangaNews is helping us host, which will be taking place in August. We plan to provide investors an opportunity to hear from our chief executive and key senior management, as well as to visit construction sites and finished properties in thriving communities.
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