$20 million in taxpayer money, a protected disclosure to the Ombudsman and a confidential payout. Lane Nichols investigates claims of financial mismanagement involving public funds and a plot of bare land on the North Shore.

The embattled state housing agency is under fire for spending $20 million on a piece of grassy North Shore land which six years on still sits vacant and could now be sold due to escalating costs.

Kāinga Ora paid $19.255m for the 1.5ha sloping plot at 80 Don McKinnnon Drive in Albany in 2018, with grand plans for hundreds of apartments to accommodate scores of vulnerable social housing tenants.

But today the land still sits vacant, no resource consents have been sought and no construction has begun.

Figures released to the Herald under the Official Information Act show that in addition to the hefty purchase price, taxpayers have forked out nearly $1m more on consultants, architectural services, legal advice, valuations, arborists, geotech reports and council rates.

The actual costs are likely to be considerably more, but the agency is refusing to reveal internal staff costs associated with the project, saying these weren’t recorded.

Artist's impression of a proposed Kāinga Ora "twin towers" development that has now been scrapped on Albany land the agency paid $20 million for in 2018. Image / Supplied

Kāinga Ora admits its initial plans for the site - which at one point included two huge apartment blocks dubbed “the twin towers” - have been scrapped after escalating costs rendered them no longer “financially viable”.

The agency says it is now “considering all available options for the future of the site” which could include offloading it to developers, or a reimagined housing plan with a lower yield “to make the proposition more affordable”.

The revelations follow last month’s damning report into Kāinga Ora by Sir Bill English, which found the agency was not financially viable and had exploited its easy access to government credit without giving sufficient heed to fiscal discipline.

Kāinga Ora spent $20m purchasing a vacant Albany site on Don McKinnon Drive six years ago. The land is still sitting bare. Photo / Alex Burton

The Government has also criticised Kāinga Ora’s governance and financial management, overhauling its board and laying down new expectations, including material reduction in operating losses.

Housing Minister Chris Bishop has expressed his displeasure at the situation following a Herald investigation into the Albany land deal, and has requested a briefing on the matter from Kāinga Ora.

“Stories like these are precisely the reason we commissioned an independent review into Kāinga Ora,” he said.

Housing Minister Chris Bishop during the post-Cabinet press conference in Wellington. Photo / Mark Mitchell

Nearly 23,000 New Zealanders are currently on the waiting list for a state house.

The Herald can also reveal that the 2018 sale was the subject of a protected disclosure to the Ombudsman last year.

The whistleblower alleged Kāinga Ora had paid well in excess of market value for the land and that the twin towers development envisaged for the site was never financially viable and likely to result in a ghetto.

The protected disclosure also made unsubstantiated claims that Kainga Ora staff may have personally benefited from the sale.

The claims were forwarded to the Auditor-General and Serious Fraud Office, but it’s understood no wrongdoing was identified and the complaint was eventually shelved.

The Herald can reveal that the staff member who made the protected disclosure left Kāinga Ora last year following a confidential financial settlement.

A source with knowledge of the land deal said many Kāinga Ora staff had a code of ethics and genuinely wanted to build housing for people in need.

The vacant Albany site on Don McKinnon Drive. Photo / Alex Burton

The 1.5ha plot of land at 80 Don McKinnon Drive borders the Northern Motorway and is near the North Shore District Court. Photo / Supplied

But the Albany purchase and subsequent plans had been totally unrealistic and verging on negligence, they claimed.

Kāinga Ora’s deputy chief executive for Auckland and Northland, Caroline Butterworth, defended the agency’s actions, saying it bought the property with the intention of delivering a high-density development, incorporating social, market and affordable housing.

“Over time, as we have progressed through the early design and planning stages, development costs have continued to rise, and we have subsequently determined that the original plans are no longer financially viable.

“As such, we will not be proceeding with the development as originally planned and are currently considering all available options for the future of the site.”

An artist's impression of an initial 186-unit plan proposed by Kāinga Ora for the site it bought in Albany which still sits vacant. Photo / Supplied

Butterworth said the initial plan had been for 186 units across eight apartment blocks of three to five storeys at a cost of about $104m.

Those plans later morphed to a higher density development including 19- and 23-storey towers featuring several hundred units.

“However, at the time it was found that this level of density was not suitable for the location and the other options explored were considered to either not be financially viable or would not have achieved the desired outcomes.”

Building costs had risen about 40 per cent over the last three years, “which naturally impacts our budgets”.

The agency was now exploring “further options” for the site.

Asked about the protected disclosure and allegations of financial mismanagement, Kāinga Ora Homes and Communities commercial general manager Caroline McDowall said no misconduct, failure or conflict of interest had been identified in connection with the project by Kāinga Ora or any other agency.

“We commissioned an independent valuation of the land before we purchased it, as part of our usual due diligence process. The valuation report estimated market value at $19,255,000 + GST and this was the amount we purchased the site for.

“Kāinga Ora is committed to supporting the disclosure of serious wrongdoing and to properly handling any such disclosures, including keeping all parts of the process confidential to ensure protection of the individual. Therefore, we cannot even comment on whether or not a particular protected disclosure exists.”

A Herald report from 2006 shows a developer had earlier planned a $500m high-rise apartment and shopping complex on the site which was subsequently abandoned.

Lane Nichols is Deputy Head of News and a senior journalist for the New Zealand Herald with more than 20 years’ experience in the industry.