Developers have begun placing covenants on land titles to keep state housing tenants out of newly established neighbourhoods.
The trend has disturbed Housing Minister Chris Carter, who warns that the Government could consider a legal challenge if it continues.
Mr Carter said he was worried that the properties affected were not just at the top end of the market, but also those in the middle to lower price ranges.
He has highlighted a case where land being developed at Flat Bush, Manukau City, carries a covenant that it cannot be sold or leased to Housing NZ and other Government agencies or local authorities which select their own tenants.
The land is next to 1700ha of farmland bought by the Manukau City Council to be developed into a new town for 40,000 people over the next 15 years.
Mr Carter said two land blocks had excluded social housing through covenants registered against the titles.
Such covenants were not an isolated event in New Zealand, especially in areas where developers were attempting to achieve high values.
Their impact could become pronounced if used at the more modest end of the housing market where Housing NZ operated.
'It could have serious implications for our desire to pepper-pot social housing around ... we want to remove the image of state housing in big concentrations.'
Mr Carter said there was a significant waiting list for state housing and an acute shortage of land for new houses.
Any expansion of restrictions on social housing would constrain the ability of Housing NZ to keep up with rising demand, and inadequate state housing had wide-reaching consequences such as crime, a higher risk of disease and family violence.
Mr Carter was not ruling out a legal challenge to such covenants and he had been advised that it could be successful.
He said legislative change would be too complicated, and it was better to try to sort out the problem with councils and developers through incentives.
Housing NZ spokesman Tom Bridgman said the extent of such covenants could not be determined without doing property title searches throughout the country, but there was concern a pattern was emerging.
He said Housing NZ had not legally challenged any covenants to date because none of the properties brought to its attention were in sufficient demand to justify the cost of court action.
The situation raised the issue of property-owner rights versus public good rights.
Mr Bridgman said HNZ had been working with councils to offer development guidelines and had recently signed memorandums of understanding with the Manukau and Papakura councils to recognise the need for social housing.
Auckland City Council group manager Ian Maxwell said people could put whatever restrictions they liked on their properties but must not contravene the Bill of Rights.
The council did not deal with covenants, but had heard of cases where owners were using them to specifically stop Housing NZ from leasing or buying their properties, he said.
They included mid-range developments, which was a concern.
Mr Maxwell said not much could be done unless Housing NZ successfully challenged such a case in the courts or the Government legislated to prevent it.
'But that's really difficult because it impacts on basic property rights. It's a touchy issue.'
Need help or
support?
