Corporation heading for huge debt?

Press, 9 October 1987, Page 1

Corporation heading for huge debt?

PA Wellington A confidential report suggests that the Housing Corporation is heading for a $3 billion debt within three years unless it is radically restructured. The report, leaked to Television New Zealand, pointed to a drastic range of options that could force the corporation out of mortgage lending. The report on its financial structure and . strategies was commissioned by the corporation’s board. But the Minister of Housing, Ms Clark, said last evening there was nothing in the report that “implies any threat to the Housing Corporation.” “I am firmly committed to the State playing an active role in the housing market, both in terms of the provision of rental accommodation and in the provision of assistance to low income earners to enable them .to afford home ownership,-” she said. . , The report said the corporation had been trapped into issuing'more and more mortgagesjrfdubious value ahd.it blamed the : Government’s policy ot giving subsidised mortgages to low Income earners for pushing, up house prices. ’ ' The report warned that within three years '■ the corporation could be $3 billion in debt It said the corporation could

not keep lending at Its present rate. There was not enough money in New Zealand to do It and financial markets abroad held little hope of raising the billions needed. The report said even if the corporation came up with foreign cash, the Government and other State-owned enterprises would then find It hard to .raise their own loans overseas. One of the options the corporation now faced was getting out of mortgage lending entirely and restricting its operations to State house rentals only, the report said. It suggested that if the Government was determined to continue subsidising mortgages for low income families, then it could give direct subsidies to the private sector. That way banks, finance houses, insurance companies and building societies could fund low income earners. Mortgages-or the subsidies could go direct to the home buyer, in the form of tax breaks and grants. *:-, ■. . Ms Clark agrped.the report suggested that funding difficulties could arise for the corporation in the if its borrowing programme continued to. expand at the present rate, and in its present form. “I am expecting a report from the board on the Issues raised by the? report in thte near future,” she said..