Homeless accommodation has been a lifeline for private tourist motels during the pandemic, but the massive infusion of public funding is also beginning to distort the market.
National MP Chris Bishop lambasted the government for spending more than $1 million a day on emergency housing and criticized the scheme as a “get-rich-quick scheme” for motel owners.
But moteliers at the cutting edge of accommodation for the needy say that for most operators it’s far from a gold mine.
Instead of providing hospitality to tourists, they became social workers and substitute counselors for the dispossessed, drug addicts and mentally ill.
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Sue Gill-Devereux and her husband spent just over a year running a motel apartment complex in Auckland that housed around 50 people, many of whom had serious criminal records and some were house-bound.
“It was more like a mental health service in prison. I had a woman who told me about 10 times a day that she was going to kill herself.
After being assaulted by a visitor, Gill-Devereux has been relieved to take over running a tourist motel on the Coromandel, and she is adamant they will never return to the emergency housing work that has seen them do days from 8 p.m.
At the end of June, 8,802 people, just under half of whom were children, were in short-term emergency accommodation, usually motels.
In addition to this, the Department of Housing and Urban Development is also contracting over 100 hotels and motels nationwide to provide transitional housing, and as of the end of May, just under 900 beds out of 5,427 were in motels.
Figures released last week under the Official Information Act by the Department of Social Development show that from March 2020 to July, more than 200 out of 1,540 commercial accommodation providers earned more than $1 million each to house the homeless, and the top 10 won over $8 million.
Gill-Devereux says some of the big operators with multiple properties might “skim it,” but that’s not the case for the smaller motels where managers work extremely hard in tough conditions, dealing with “wild” customers. who frequently damage units and steal property. .
MSD Group housing general manager Karen Hocking says the cost of emergency housing is set by the accommodation provider, based on the market rate for immediately available motel rooms.
Nelson’s Balmoral Motel is among those providing accommodation for the homeless as part of the Housing First initiative. Video first published in July 2020.
“This is influenced by a range of factors including supply and demand, the size of the household in need and the area where emergency accommodation is needed.”
Hocking says most guests are respectful renters, and Special Needs Emergency Housing Grant recipients staying in motels are responsible for the cost of any damage caused by them or anyone else staying with them.
A security deposit to help cover damage costs is capped at the equivalent of seven nights accommodation and is refunded to MSD at an agreed rate.
Gill-Devereux says they struggled to get their money back, and in one case they only received $1,500 when the repair bill was over $10,000.
An industry source with experience refurbishing emergency housing units says getting them back to acceptable condition may involve replacing everything from beds, curtains, carpets and fabrics to furnishings to kitchen appliances and bathroom accessories.
The cost can be as high as $250,000 for a complete renovation of a badly damaged two-bedroom motel apartment.
Belinda Mellor and her husband Peter are grateful to have had this guaranteed income from a two and a half year contract from the Department of Housing and Urban Development to provide accommodation in their 13 unit motel in Nelson.
She agrees it is hard work and says the money paid is not exaggerated.
“We get an average mid-season room rate, so a little more than we would get in the middle of winter and less than we would get in summer, but if we get an empty room we still get paid. .
‘They gave us some really nice people overall…we really love our guests’, but she sometimes admits it’s been a pain and is happy to have had Salvation Army support for the residents more difficult with alcohol and mental health problems.
“There was a lot of social work.
One room needed carpeting after some flooding caused by an oblivious tenant who left the tap running, and one room occupied by a hoarder needed a complete renovation.
The motel’s contract with the department ends in November, and Mellor worries about potentially emptied tenants in a very tight rental housing market before Christmas.
“Everyone continues to assure me that no one will be homeless and that they will all be accommodated, so hopefully so.”
Dion Cooper is helping his partner run three Taupō motels, one of which provides emergency accommodation and had received $1.8 million in government funding by the end of June.
He rejects any suggestion that the scheme is a ‘cash cow’ because, he says, having emergency housing clients stay longer increases electricity and gas costs, as they get exactly the same services as regular customers.
He says their executive motel charges MSD customers $165 a night, while the average rate in Taupō is currently $185 to $255, and the people they house are certainly not “hopeless.”
“A large majority actually go to work every day, they’re good Kiwis, but there’s just no home for them.”
Cooper says they plan to stick with MSD’s work until international tourists return in droves, but he says there’s no guarantee the government’s work will continue, so they’re keeping well maintained property.
“We’re taking care of it the way we do so we could turn it into a normal motel tomorrow if we wanted to.”
Rotorua has drawn considerable negative publicity over the proliferation of motels housing the homeless along what was once its tourist ‘golden mile’ due to increased violence, vandalism and anti-social behaviour.
Things was told of an incident where a family arriving at a motel accommodating both tourists and welfare clients were greeted by a woman who shouted “what are you looking at?” before exposing her breasts.
Rotorua Association of Motels, chairman Nick Fitzgerald, estimates that of the 66 registered motels in the city, more than half provide emergency or transitional accommodation.
“Maybe a third of these emergency housing providers mix [tenants with guests]and those are the ones that really hurt us as a destination.
On the positive side, the number of motel beds taken up by homeless people has boosted business for companies that have avoided the emergency housing market in favor of corporate clients and domestic vacationers.
Fitzgerald says that’s helped push hotel room rates to $182 a night from a pre-Covid average of $130, and that’s trickling down to other accommodation providers. “They almost set a benchmark.”
The Department of Housing and Urban Development has contracted a dozen motels in Rotorua to provide emergency accommodation for around 200 whānau with children, and it has applied to Rotorua District Council for five-year resource permits allowing 1008 people to stay on these 12 sites. .
The consents have been publicly notified and the number of submissions received will be published this week, with a hearing panel of commissioners due to consider the application at a date yet to be set.
Fitzgerald says five years is “an incredibly long time” to have so many properties tied up in emergency housing, and pouring government money into the area is affecting the value of motel leases.
Under normal circumstances, dilapidated motels would be sold off and renovated, “but those opportunities are no longer there for people because they have to pay a premium to get a substandard motel.”
“It’s unfortunate, but there are instances where really lower quality emergency accommodation motels are more expensive than tourist motels because they have a very strong business case and bottom line.”
The government’s guaranteed income had prompted some motel owners to raise their rents, and in many cases, Fitzgerald says there’s no reduction mechanism if there’s a big drop in income when the tap is on. emergency housing income is closed.
“It can cause people to walk away from businesses.”
Tourism real estate broker Kelvyn Coffey says motel valuation is tricky if income has been inflated by emergency housing income, as it is not sustainable if the government pulls out of business when housing stocks slump improve.
Some older motels have been converted to permanent rentals and Coffey says it is surprising that Kāinga Ora has not bought more freehold motels for social housing, as it has with the Boulevard Motel in Rotorua, instead of investing money in paid operators.
“[The Government] would have an exit strategy, and from the taxpayers’ perspective, that makes so much sense, but they’re just flushing money down the toilet.