A new Kāinga Ora complex has opened in Auckland at a cost of $1.2 million per apartment as one of New Zealand’s leading developers calls the public agency’s record of running up billions in debt a national scandal and embarrassment.

The Government says it now expects the state-run agency to achieve “better value for money” on future builds, while the Opposition accuses the Government of ignoring its success in building 14,000 homes in six years so it can slash future home building for the needy.

The agency yesterday allowed the public to view the newly built Meadowbank complex, saying it spent $11m on the three three-bedroom and six two-bedroom apartments.

That equates to $1.2m per apartment and rises to $1.7m if the about $4m value of the land already owned by Kāinga Ora is added.

One neighbour said it feels like the new public housing tenants will be living in greater luxury than some private homeowners on the same street.

Mark Todd, co-founder of developer Ockham Residential, believed the project’s cost-per-apartment highlighted the agency’s “incompetence and lack of expertise” and called reports it racked up $12 billion in debt in five years a scandal.

“Kāinga Ora’s billions of dollars of expenditure in its five-year existence is a national embarrassment with what it costs to deliver each home,” he said.

He believed the agency should have delivered two to three times as many homes for the amount of money it has spent.

Tenants are expected to move into the Meadowbank apartments within weeks. Photo / Sylvie Whinray

Injected with billions of dollars by the previous Government, Kāinga Ora built record numbers of new houses each year, Labour says.

However, the new National-led Government immediately put its performance under the microscope.

Former prime minister Sir Bill English led a review that said the agency’s debt had jumped from $2.7b in 2018 to $12.3b by June 2023, and was set to to increase to $23b by 2028.

The agency also racked up a $520m deficit in 2022-23, which was forecast to grow to $700m by 2026-27, the review said.

Housing Minister Chris Bishop consequently sacked the agency’s eight-person board.

“Kāinga Ora has a new board whose first job is to deliver a turnaround plan to ministers before the end of the year,” Bishop said in response to questions about costs at the Meadowbank project.

“As part of that plan I expect to see consideration given to achieving better value for money in its build programme.”

Act Party building and construction spokesman Cameron Luxton said the Meadowbank apartments made it clear “Kāinga Ora needs to stop forking out for six-star apartments on prime real estate”.

Ockham Residential’s Todd believed Kāinga Ora’s extravagance was highlighted by how it hired more than 1000 extra staff between 2017 and 2021.

By contrast, it took him 15 years to build Ockham Residential up to its peak last year when its 95 skilled staff delivered $440m-worth of apartments, he said.

The apartment kitchens are presented simply with stainless steel benchtops. Photo / Supplied

His company is selling two- and three-bedroom apartments in Ockham’s Toi complex in Mt Albert for around $900,000. A two-bedroom apartment in its The Greenhouse Grey Lynn complex is selling for about $1.6m.

However, Labour’s acting housing spokesperson Willie Jackson defended Kāinga Ora, saying the Government was throwing away the hard-won experience that went into getting the agency up and running and addressing the shortfall in homes for the needy.

The Government now plans to use community housing providers to build the 1500 public homes currently planned.

Yet Jackson claimed community housing providers had on average built homes costing 10% more per square metre than Kāinga Ora homes.

Philippa Howden-Chapman, a public health professor and previous Kāinga Ora board member, also believed the Government was turning its back on the state-run group so it could cut the number of homes built in the future.

Kāinga Ora said its Meadowbank project met all its financial metrics at the time of approval.

The ground-floor apartments have accessible bathrooms. Photo / Sylvie Whinray

It’s $11m price tag included engineer, architect and council fees as well as infrastructure and construction costs among other expenses.

The two-bedroom apartment open for the public to view yesterday included a small lounge and dining room and kitchen with basic stainless steel bench tops and oven.

It had wheelchair access and the Sky Tower could be seen from its front window. The apartments were right by the train station and popular cycle and walking paths.

One neighbour who sparked questions into the cost of the apartments said they were in one of Auckland’s “primo” locations, but another said he was “very sympathetic to the need for more state homes” and that if the Government already owned the land it “made sense” to build them there.

David Findlay, an owner of the Harcourts JK Realty Group, said prices typically vary widely for smaller three-storey complexes – often preferred by Kāinga Ora because they are not required to have elevators: from $4500-$9500sq m.

The Skytower and city skyline can be seen from the apartment dining rooms. Photo / Sylvie Whinray

He said Kāinga Ora would likely come under more scrutiny for building poor quality homes and so had, in his opinion, often erred on the side of higher quality builds, paying more for reputable builders and guarantees of quality.

Tom Rawson, co-owner of Ray White Manukau, questioned why Kāinga Ora didn’t sell its land in places like Meadowbank and instead build more in outer suburbs where more people could be housed for less, saying the $1.2m price tag for the new apartments could buy a five-bedroom home in South Auckland.

Ockham Residential’s Todd said he wanted to be clear he supported public housing.

“I’m all for New Zealand spending billions of dollars on state housing ... the state should be massively involved in affordable and social housing,” he said.

He believed community housing providers should be favoured instead because they rarely wasted money given how hard they worked to secure it, he said.

He also called on greater involvement and use of expertise from the country’s biggest builders when it came to building large, five-storey or greater public housing blocks.