Housing

‘Garage’ rooms went for motel rates

People hired to fit out emergency housing in South Auckland say it became a major moneymaker for property investors in the area, alleging conditions in those houses were worse than first thought

Not satisfied with charging motel room rates for 'uninhabitable' rental properties, some landlords, property managers and investors started dividing up garages with gib board so they could squeeze even more money out of the scheme. 

The allegation has been made by people hired to fit out these emergency houses who have also made further accusations against real estate firm Harcourts Ōtāhuhu. 

"I've seen an entrance to a three-bedroom house where they just gibbed up the middle of this living room. Called that two bedrooms. Gibbed off the entrance to the house - which would be 2x3 square metres - and called that another bedroom."

Two people hired to fit out those houses (who have requested anonymity) claimed money earned from the scheme was not capped at $3000 as earlier reported and rooms would be "gibbed" to generate extra profit from it.

"I'd see houses that would have garages be gibbed and then called a two-bedroom unit," one worker said.

"I've seen an entrance to a three-bedroom house where they just gibbed up the middle of this living room. Called that two bedrooms. Gibbed off the entrance to the house - which would be 2 x 3 square metres - and called that another bedroom.

"And all of a sudden you're dealing with a six-bedroom house and they're getting $3500 and $4000 a week because they're charging a motel rate per night, per room, over the week."

With accusations and revelations piling up, the National Party has expressed concern that emergency housing appears to be becoming an entrenched part of our housing system.

National Party spokesman for Social Housing Simon O'Connor said regardless of who was elected in October, both major parties needed to get more social housing built through government agencies or community housing providers.

Associate Housing Minister Kris Faafoi said the Government had no plans to expand Kāinga Ora's state housing build beyond a target to construct 14,400 new houses by 2024.

By the end of June the waiting list for social housing sat at 18,520.

O'Connor has also called for the Auditor-General to investigate emergency housing grants and the types of checks and balances the Ministry of Social Development had around them.

Associate Housing Minister Kris Faafoi says the Government has no plans to build more social housing beyond its current targets. Photo: Lynn Grieveson

Last week Newsroom revealed the existence of a now-shuttered MSD initiative to secure emergency housing by paying motel room rates for three and four-bedroom houses.

Some landlords earned up to $3000 per week at these rates causing them to take properties off the rental market so their properties could be funnelled into the much more lucrative emergency housing one.

"We saw several 'garage do-up' sort of things that I'd be amazed if the council ever knew existed."

Emergency Housing Special Needs Grants (EHSNGs) were issued for seven nights at a time. 

Initially centred on motel and hotel accommodation, the grants were expanded out to include private rental homes in 2018. MSD put a stop to it in the middle of this year creating "chaos" in South Auckland as families scrambled to find new accommodation.

'Garage do-ups'

Mangere East Family Services social worker Alastair Russell - who visited a lot of these houses at the time - has backed up some of the claims of those who fitted the houses out. 

"We saw several 'garage do-up' sort of things that I'd be amazed if the council ever knew existed.

"They were just ... 'throw a bit of gib board down the middle of the garage and call it a two-bedroom unit'."

One of the workers alleged many of these places would be used to house up to 10 children, along with other family members. 

"They were basically getting air mattresses. A jug. A toaster. And a few of the most basic things you've ever seen that you can get from the Warehouse."

Another person involved in the fitting out of these homes claimed MSD negotiated a set of essentials to go into the houses like beds and sheets, but the actual fit-outs fell short of this:

"They were basically getting air mattresses. A jug. A toaster. And a few of the most basic things you've ever seen that you can get from the Warehouse."

Worse, no one checked to see if these items were still there when the next family moved in. 

"I insisted that the 'bedware' [bedding] had to be changed basically ... no one checks these places out."

Close ties between emergency housing and agents alleged

The two workers involved in fit-outs have also made further allegations against Harcourts Ōtāhuhu.

They acknowledged Harcourts Ōtāhuhu wasn't the only real estate firm tied up with the grants, but said the organisation had two very strong links to it. 

First, a set of properties handled by former property manager Sid Sharma were put into the scheme.

This hasn't been denied by Harcourts Ōtāhuhu boss Mushtaq Sheikh, but he has disputed claims these houses were also sublet into emergency housing without the consent of the landlords involved.

Second, Harcourts Ōtāhuhu real estate agent Rosemeen Mohammed's brother Pravez Mohammed (sometimes also referred to as Parvez Mohammed) owned Caretaker Property Management Ltd - an emergency housing provider. 

The company had taken in $725,065 to house 91 "clients" (nearly $8000 per client) with 279 EHSNGs ($2598 per grant) by 30 June 2019 (one year before the whole scheme was shut down by MSD).

According to MSD, EHSNGs were granted on a week-by-week basis.

'I can't get houses from agents'

People involved in the fit-out were allegedly urged not to reveal the link between Rosemeen and Caretaker Property Management to MSD.

They said Pravez told them MSD had strict rules against emergency housing providers being linked to any property management firm or real estate agent.

"I was not interested in rental I was interested in selling houses."

Through Caretaker Property landlords would allegedly be paid double the usual market rent (normally about $1000) and Pravez's company would pocket the rest minus expenses.

The workers said a fit-out of these houses could involve a one-off cost of up to $1000 which would be made back within the first week. Damage to the property was covered by a bond of up to $3000 paid by MSD.

Rosemeen acknowledged her brother owned an emergency housing provider, but said she had no involvement in it beyond giving advice to her brother - if he asked for it.

"I was not interested in rental I was interested in selling houses."

National's social housing spokesman says the next government will need to build more social housing regardless of who it turns out to be. Photo: Lynn Grieveson

Pravez denied any connection between his company and Harcourts Ōtāhuhu too. 

"I've actually just been talking to the Ministry about it. So I can't really say anything right now. Because we've been above board and everything we do has gone through the Ministry.

"I can't get houses from agents. That's the bottom line. If it's on the book with any company we can't touch it."

Harcourts NZ managing director Bryan Thompson said the organisation doesn't normally comment on matters involving employees. 

"I can, however, confirm that Rosemeen Mohammed is a sales consultant and plays no role within the property management function of the Ōtāhuhu office."

Thompson said "those involved" with the Harcourts Ōtāhuhu's property management function 12 months ago "are no longer with that business".

Former property manager questions referrals

However, former Harcourts Ōtāhuhu property manager Vanessa Parker alleged people bought their houses through Rosemeen then moved them into emergency housing at her brother's company.

Two people who claimed they were hired to fit out Caretaker Property houses have backed her claim and said Pravez told them the houses were being procured by Rosemeen. 

"Rosemeen was the person to find houses for emergency housing. That was her job."

Parker said she became suspicious Rosemeen was involved in her brother's business because the property management division of Harcourts Ōtāhuhu - where she worked - received almost no property management referrals from Rosemeen.

Such a situation would normally only occur if all buyers were owner-occupiers or first-home buyers.

"If I sell a house the first thing I will offer them - are you guys looking for rental? Okay we've got a Harcourt division. That's my loyalty."

Parker said this was unlikely because many of those buying in the area were property investors who would need somebody to manage their properties.

They were ideal customers for a potential referral to the property management wing of the business. Unless other arrangements had been made for somebody to manage those properties through something like an emergency housing provider. 

Rosemeen flatly denied she ever referred any of her properties to Pravez's business, but did acknowledge some people who bought properties did so with the intention of putting them into emergency housing.

"If I sell a house the first thing I will offer them - are you guys looking for rental? Okay we've got a Harcourt division. That's my loyalty.

"If they say 'Oh Rose have you heard of anyone [doing emergency housing]? Yeah there are suppliers, but you need to get in touch with them because their rules - their tenancy agreements - are totally different."

However, MSD rules might not have been broken even if properties had made their way from Harcourts to Caretaker Property Management as alleged.

MSD housing general manager Karen Hocking said a company that registered with them for emergency accommodation was not asked to declare any connection to other businesses.

"We rely on suppliers to provide us with correct information and update us with any change or variation to the original registration."

MSD under 'incredible pressure'

Social Development Minister Carmel Sepuloni said MSD had seen demand for accommodation rise 223 percent since 2018 (when rental houses were used for emergency accommodation). 

She also refused to class the $2000-$3000 a week payments as "rent payments". They were "costs met by MSD to accommodate clients in properties".

"Note that over this temporary period MSD helped a total of 11,025 Auckland-based clients with EHSNGs [Emergency Housing Special Needs Grants] and of these only 13 percent, mostly larger families, were accommodated in private rental properties.

"This was considered a cost-effective and whānau-friendly solution including for a number of larger families/whānau that would have otherwise been accommodated across multiple units - exacerbating an already difficult situation for the family.

"Using properties that could instead be private rentals as an option for emergency housing was not pre-planned or sought out, and was only used temporarily in response to the need of vulnerable New Zealanders."

However, those involved in the fit-outs have also backed up what MSD itself eventually found: properties were taken out of the rental market. 

"And in fact, what you've exposed is almost an entrenching - you could argue - of this dynamic. Just an acceptance of motels and 'Oh well we'll accept also substandard rooms and houses'."

Worse, some poorer families were getting kicked out of their homes so these could then be fed into the emergency housing system - further fuelling a housing shortage.

"They [MSD] were under incredible pressure and mostly those people were outside looking for homes because all of a sudden they've got no homes because they've been taken out of the market," one person involved in the fit-outs said.

"No one ever looked at the emergency housing side of things. A case manager would sign you up and then ask 'How much do you want to be paid for those?'."

Emergency accommodation - an entrenched part of our housing system?

Rosemeen, too, acknowledged emergency grants had a dramatic impact on rental listings in the area where she worked:

"We couldn't get normal rentals for people because everybody wants to give it to emergency.

"We used to have 10 listings in the office and then you have two listings. So normal Kiwis are complaining that they can't find accommodation."

Social Development Minister Carmel Sepuloni says the payments were "costs met by MSD", not rent payments. Photo: Lynn Grieveson

O'Connor said the Auditor-General needed to launch an investigation into how the emergency housing grant money had been spent and the internal controls MSD had around it.

"To the point that we have to keep leveraging motels in the short-term it's a necessary thing that has to happen, but it's certainly not the ideal.

"And in fact, what you've exposed is almost an entrenching - you could argue - of this dynamic. Just an acceptance of motels and 'Oh well we'll accept also substandard rooms and houses'."

O'Connor said a balance had to be struck between meeting short-term needs and also investing in future housing supply.

"The more that we pump into this emergency housing scheme, all it's doing is sustaining the emergency. It's not actually moving us toward a sustainable solution."

While it was essential to house everybody now there needed to be an acknowledgment that the tens of millions being ploughed into emergency housing would be better spent building houses through the community housing sector and government.

"The more that we pump into this emergency housing scheme, all it's doing is sustaining the emergency. It's not actually moving us toward a sustainable solution," O'Connor said. 

"Fundamentally it's about building as many more houses as the Crown can ... realistically trying to get 18,000 families into social housing tomorrow is almost impossible, but we can certainly work as fast as we can.

"It's a dual thing: make sure the Crown or the government - red or blue - is building as many as they can. Get the community housing sector to do the same."

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