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Maintenance of State Housing Offi Ce of the Auditor-General PO Box 3928, Wellington 6140

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Maintenance of State Housing Offi Ce of the Auditor-General PO Box 3928, Wellington 6140 Performance audit report Housing New Zealand Corporation: Maintenance of state housing Offi ce of the Auditor-General PO Box 3928, Wellington 6140 Telephone: (04) 917 1500 Facsimile: (04) 917 1549 Email: [email protected] www.oag.govt.nz Housing New Zealand Corporation: Maintenance of state housing This is an independent assurance report about a performance audit carried out under section 16 of the Public Audit Act 2001 December 2008 ISBN 978-0-478-32620-8 2 Contents Auditor-General’s overview 3 Our recommendations 4 Part 1 – Introduction 5 Part 2 – Planning for maintenance 7 Information about the state housing asset 7 Assessing the condition of state housing properties 8 Strategic position of long-term planning for maintenance 9 Planning and programming 10 Part 3 – Managing maintenance work 13 The system for carrying out maintenance 13 Setting priorities for maintenance work 15 Involving tenants and contractors in addressing maintenance issues 17 Staffi ng for maintenance functions 18 Part 4 – Monitoring and evaluating maintenance work 21 Monitoring maintenance work 21 Comparisons with the private sector 22 Improving maintenance performance and processes 23 Figures 1 Average response times for urgent health and safety and general responsive maintenance 22 Auditor-General’s overview 3 State housing is the largest publicly owned property portfolio in the country, with an estimated value in 2008 of $15.2 billion. Ensuring that the state housing stock is well-maintained is important for tenants and for protecting the value of these properties. Housing New Zealand Corporation (the Corporation) is the agency responsible for maintaining state housing. My staff carried out a performance audit to provide Parliament with assurance about the eff ectiveness of the systems and processes the Corporation uses to maintain state housing. Overall, the systems for maintaining state housing properties are comprehensive and eff ective – apart from the system to assess the condition of the Corporation’s properties, and the system it uses to measure its performance. Almost all properties are inspected at least twice a year. Tenants can raise maintenance issues directly with the Corporation through a network of neighbourhood offi ces and a National Contact Centre. The Corporation has set clear standards for the quality of its responses to tenants and for the quality of its maintenance work. It monitors the performance of its contractors thoroughly. It also monitors how the standard of its properties compares with properties in the private sector rental market. However, the inability of the Corporation’s existing systems to provide detailed information about the condition of state housing properties has limited the eff ectiveness of its planning for maintenance. This means that it has lacked a reliable basis for measuring and managing its overall maintenance workload. This would be a signifi cant concern if the Corporation had not already identifi ed and put in place a process to address the problem, and to renew its systems. It is working to complete a new Asset Management Framework by 2010. My staff will follow up the Corporation’s progress with this in 2010/11. I thank the staff of the Corporation and its maintenance contractors for providing my Offi ce with a high level of help and co-operation during this audit. K B Brady Controller and Auditor-General 3 December 2008 4 Our recommendations 1. We recommend that Housing New Zealand Corporation’s new Asset Management Framework record detailed and specifi c information about the condition of state housing properties, and that the Corporation use this information to plan its maintenance work. 2. We recommend that Housing New Zealand Corporation’s new Asset Management Framework include tools for accurately measuring and costing the overall maintenance workload. 3. We recommend that Housing New Zealand Corporation’s new Asset Management Framework include systems to plan for eff ectively managing the overall maintenance workload. Part 1 Introduction 5 1.1 State housing is the largest publicly owned property portfolio in the country, with an estimated value in 2008 of $15.2 billion. Ensuring that the state housing stock is well-maintained is important for tenants and for protecting the value of these properties. 1.2 Housing New Zealand Corporation (the Corporation) is the agency responsible for maintaining state housing. Maintaining 68,000 state houses is a substantial task. The Corporation carried out more than 1.7 million maintenance jobs in 2007/08. 1.3 We carried out a performance audit to provide Parliament with assurance about the eff ectiveness of the systems and processes the Corporation uses to maintain state housing. 1.4 The audit focused on the systems and processes the Corporation uses to: • plan for maintenance in the long term; • manage day-to-day maintenance work; and • monitor and evaluate that maintenance work. 1.5 The audit did not directly assess the current condition of state housing or look at other non-maintenance activities the Corporation carries out, including modernisations, capital improvements, energy effi ciency retrofi ts, or the Healthy Housing, Community Renewal, and Rural Housing Projects. Part 2 Planning for maintenance 7 2.1 In this Part, we set out our findings about the Corporation’s: • systems and processes for gathering information about state housing properties; • systems and processes for assessing the condition of state housing properties; • strategic positioning of long-term planning for state housing maintenance; and • systems and processes for planning and programming maintenance work. 2.2 This Part contains two recommendations. Our main concern with the Corporation’s systems and processes for planning maintenance work is discussed in paragraph 2.8. Information about the state housing asset The Corporation has systems and processes that provide reliable information on the size, form, and value of the state housing asset. 2.3 The Corporation’s main information management system, Rentel, stores data about state housing properties, tenants, applicants, contractors, and payments. The system produces a basic description of every property and lists maintenance and other changes. The Corporation lists the properties by type, age, and location. It also records other information, including numbers of bedrooms, average fl oor areas, total fl oor areas, and valuation data. 2.4 The Corporation has about 68,000 state housing properties, with 96% owned by the Crown and 4% leased from private owners. More than half the state housing properties were built in the 1940s, 1950s, and 1960s. About 44% of all state housing properties are located in and around Auckland. 2.5 The Corporation’s freehold land and rental properties were revalued at 30 June 2008 for fi nancial reporting purposes. The total gross amount of the revaluation, excluding properties intended for sale and selling and other costs, was $15.2 billion. Part 2 Planning for maintenance 8 Assessing the condition of state housing properties The Corporation does not have enough detailed and specifi c information about the condition of state housing properties. 2.6 The Corporation’s Property Maintenance Assessment Policy is to inspect each of its state housing properties at least once in a 12-month period.1 This is done mainly through the annual Property Management Assessment System (PMAS) inspections. The Corporation introduced PMAS inspections in 1997 to monitor the condition of its properties against minimum standards set out in the Corporation’s Maintenance Standards Manual. Since 2002, an external contractor (currently PQS Limited) has carried out these inspections for the Corporation. 2.7 The main purpose of these inspections is to identify for each property any components that do not meet the Corporation’s standards, and to identify and address any health and safety issues. 2.8 The PMAS does not produce an itemised assessment of the condition of each property. Accordingly, the PMAS does not provide a basis for estimating the cost of repairs and maintenance required to bring each property up to standard, or for developing a strategy for managing the overall maintenance workload. The PMAS inspector notes defects against the Corporation’s Maintenance Standards Manual, but these are not weighted by scale, criticality, or cost. For example, a broken bedroom wardrobe latch counts as “a defect” equally with a bathroom damaged by leaking plumbing. If the total number of defects, regardless of scale, is nine or fewer, the property is deemed to meet the standard. If the total is 10 or more, again regardless of scale, the property fails to meet the standard. 2.9 Inspection results are aggregated to regional and national levels to measure overall maintenance performance against the Corporation’s Property Condition Benchmark. The Property Condition Benchmark is that at least 85% of the state housing properties have fewer than 10 defects. The Corporation rated its national performance at 88.59% in 2007/08. This included ratings as low as 66.74% and 68.99% in South Auckland, and as high as 99.68% in Christchurch. In our view, this is not a satisfactory performance measure of the Corporation’s eff ectiveness in maintaining its housing stock. 2.10 The PMAS generates a high-level or “broad brush” measure of the condition of the state housing properties. The Corporation cannot use the PMAS for accurately measuring, costing, and scheduling its maintenance workload. It does not have any other tools capable of providing detailed and reliable analysis of the condition of the properties. The Corporation’s Board is aware of this defi ciency and is developing a successor to the PMAS as part of an Asset Management Framework project. 1 The Corporation’s tenancy managers also carry out at least one inspection every 12 months under its Tenancy Management Policy. Part 2 Planning for maintenance 9 2.11 The Corporation is preparing the new Asset Management Framework now, with detailed design and implementation to follow in 2009 and 2010.
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