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Income-related rent subsidy

The Income-Related Rent Subsidy (IRRS) is paid by HUD to Kāinga Ora – Homes and Communities and registered Community Housing Providers (CHPs), to cover the difference between rent paid by their public housing tenants and the market rent for the property.

The amount of rent public housing tenants pay is generally set at 25 percent of their income, which is called Income-Related Rent (IRR).

Recent changes to IRRS for CHPs

The amount of income-related rent subsidy provided to CHPs has been determined within rent maxima, set out in the Public Housing Plan 2018-2022.

In July 2021, rent maxima were replaced with a principles-based approach to assessing market rent, which will cover new developments by CHPS, and rent reviews for current public housing places.

This will enable better alignment to private market rents and improve the feasibility of potential CHP development opportunities. Projects will still be subject to HUD’s evaluation process and Value for Money framework. 

We will use the revised rent setting for new proposals HUD receives from now that will deliver new public housing from 1 July 2022 onwards.

How market rent assessments will be carried out

To support an application for funding, CHPs will supply a current market rent assessment. HUD has recently developed guidance notes to ensure the right level of detail is provided within an assessment. This includes consideration of aspects including the volume of places to be delivered, key contract terms and design standards. Future rent reviews will occur in line with the negotiated contract.

Key principles applied when assessing the market rent and determining the agreed rent include:

  • Ensuring the market rent represents a fair reflection of the property, location, and contract terms.
  • Enabling development in key locations and for bespoke housing solutions
  • Ensuring agreed rents reflect the design standards and housing outcomes sought, and
  • Enabling market rent to be set at a value reflective of the new build nature of properties, to reduce initial rent reviews being markedly different.

Guidance for market rent assessments

Key aspects of the process to be applied to market rent assessments include:

  • The assessment is undertaken by a registered valuer with the report provided to HUD at the time of application for funding of the development opportunity.
  • The valuer report provides consistent information for the assessment:
    • details of the development opportunity and supporting plans
    • underlying assumptions related to the rent assessment
    • reference to national and international valuation standards, and
    • documented analysis of market evidence.
  • The assessment takes into consideration the location of the development and proposed design.

Rent reviews for existing public housing places

The removal of the rent maxima will apply from 1 July 2022 for existing public housing places and will consider provider contract terms, which outline the approach to rent reviews. This date aligns with when Budget 2020 funding becomes available for further public housing delivery. HUD is undertaking further work on how these changes will be implemented. Details of this will be provided to CHPs when available.

Contact us

If you are a registered Community Housing Provider, please contact your Business Development Manager or your Relationship Manager if you have any questions.

For other new build opportunities, please contact public_housing_panel procurement@hud.govt.nz

Published: August 17, 2021

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