Wellington Social Housing Agency Te Toi Mahana Hikes Rents Double Initial Ministry Agreement, Citing Financial Strain

Te Toi Mahana Faces Scrutiny Over Rent Hikes Exceeding Ministry's Initial Agreement

A significant controversy has emerged in Wellington's social housing sector as Te Toi Mahana (TTM), a prominent housing agency, has implemented rent increases for its tenants that are double the rate initially sanctioned by the Ministry of Housing and Urban Development (HUD). This move has sparked considerable debate and tenant outrage, highlighting a complex interplay between financial pressures, regulatory oversight, and tenant affordability.

The Disputed Increase: 2.2% vs. 1.1%

At the heart of the matter is TTM's decision to raise rents by an average of 2.2 percent. This figure sharply contrasts with the 1.1 percent increase that HUD had initially approved for the Wellington region. Email exchanges, obtained under the Official Information Act, reveal the nuanced negotiations that led to this outcome.

Initially, TTM sought a 2.7 percent increase, justifying it as a “CPI indexed adjustment.” However, HUD rejected this, clarifying that the 2.7 percent reflected general New Zealand inflation, not the specific rental CPI for Wellington, which stood at 1.1 percent. HUD firmly instructed TTM to recalculate its proposed increases based on the regional rental CPI.

Financial Strain Trumps Regional CPI

Although TTM complied and received approval for the 1.1 percent hike, the agency swiftly sought reconsideration. Daniel Tai, TTM's tenancy general manager, articulated the agency's predicament:

“While we understand that the proposed increase is consistent with rental CPI movement for the Wellington region, it does not adequately reflect the financial pressures Te Toi Mahana is currently facing.”

Tai cited a fixed 2 percent annual increase in lease payments to Wellington City Council and a 2.2 percent overall increase in costs, encompassing both lease payments and operating expenses. He argued that a 2.2 percent increase would “strike a fair balance between affordability for tenants and the financial sustainability of our services.” HUD subsequently approved this revised figure, albeit with a clear directive for future increases to adhere to the actual rentals CPI for Wellington.

Tenant Outcry and Claims of Misleading Information

The decision has ignited fury among tenants. One unnamed tenant expressed deep anger, accusing TTM of directly passing on its lease costs, a practice she believes contradicts the intent of the CPI system, which should reflect market movements, not a landlord's internal cost structure. She lamented the lack of emphasis on tenant affordability in the email communications, pointing out that some tenants rely on food banks while a substantial support fund remains untouched.

The tenant also labeled TTM's earlier public statements about a 2.7 percent CPI increase as “deeply misleading,” asserting that the agency was aware it was referencing the wrong benchmark when communicating with the media and public.

Te Toi Mahana's Defense

In response, Te Toi Mahana defended its position, stating that while it could manage a lower increase, such an adjustment would not accurately reflect its escalating costs, potentially leading to revenue reduction and greater pressure for future rent hikes. The agency clarified that the 2 percent increase in lease payments to Wellington City Council is a “standard practice” in commercial property leases. It also noted that residential rents tend to track overall inflation in the long term, acknowledging that this relationship is imperfect due to broader factors like housing supply and population growth.

TTM confirmed its commitment to collaborating with HUD to determine appropriate rent adjustments for the future. The Wellington City Council clarified that TTM's 2 percent lease payment increase is fixed for two more years before becoming CPI-indexed.

Tenant Support Systems

Te Toi Mahana highlighted that approximately a quarter of its tenants receive the government's Income Related Rent Subsidy (IRRS), ensuring they pay no more than a quarter of their monthly income. For those not eligible for IRRS, subsidies vary, with tenants on average paying less than 70 percent of market rent. Despite these provisions, the current rent hike underscores ongoing tensions between social housing providers' financial viability and the imperative of tenant affordability.