Summary Paper: New Zealand Budget 2025 Flexible Fund & Housing Investment Plan

Written by
The Urban Advisory
 | 
Tuesday
25
November 2025

The Budget 2025 Flexible Fund represents a strategic pivot in the New Zealand Government’s housing policy. Operationalised through the newly released Housing Investment Plan, the fund consolidates previously siloed housing programmes (such as Whai Kāinga Whai Oranga and the Affordable Housing Fund) into a single contestable pool. The primary objective is to shift from broad, national-level funding to a "place-based" investment approach that rigorously targets locations with the highest statistical housing deprivation.

The Flexible Fund is the financial engine delivering on the Government Policy Statement on Housing and Urban Development 2025. It is designed to operate alongside supply-side reforms, such as the "Going for Housing Growth" programme, which aims to lower land and development costs through RMA reform.

Key policy shifts:

  • Consolidation: Replaces the "alphabet soup" of rigid funds with one flexible mechanism.
  • Targeting: Moves from a volume-based national approach to a precision-based regional approach.
  • Delivery: Prioritises community housing providers and Iwi/Māori organisations over Kāinga Ora for new delivery in this specific round.


Fund Specifications:

Financials and output:

  • Capital funding: $250 million (allocated over 10 years).
  • Operating funding: $41 million (allocated over 4 years).
  • Output targets: Estimated delivery of 650 - 900 homes (comprising both social housing and affordable rentals).
  • Start date: Funding supports delivery from 1 July 2027 onwards.

Procurement timeline:

  • Release date: The Housing Investment Plan was released on 21 November 2025.
  • Procurement process: A two-stage procurement process is scheduled to commence in late February 2026.
  • Contracting: Intended to be complete by the end of 2026, with homes tenanted by mid-to-late 2029.


Priority Locations (Place-Based Approach)

Funding is strictly ring-fenced for nine locations identified via data analysis of the Housing Register and severe housing deprivation statistics.

Tier 1: High unmet need (primary focus)

These five locations will receive the majority of the Budget 2025 allocation due to acute deprivation:

  • Far North
  • South Auckland (specifically targeting Pacific peoples and large families)
  • Eastern Bay of Plenty (Whakatāne, Kawerau, Ōpōtiki)
  • Tairāwhiti-Gisborne
  • Hastings

Tier 2: Main centres (secondary focus)

These centres are expected to receive ongoing allocations from future budgets:

  • Hamilton
  • Tauranga
  • Wellington
  • Christchurch


Eligibility and Housing Types

Eligible providers:

The fund is contestable and open to:

  • Community housing providers
  • Iwi and Māori housing providers
  • Private developers (typically in partnership with community housing providers to deliver outcomes)
  • Note: Kāinga Ora is excluded from this specific funding round but may be eligible in future years.

Investment priorities:

  1. Social housing: Traditional income-related rent subsidy places for those on the Housing Register.
  2. Affordable rentals: A "intermediate" tenure designed to bridge the gap between social housing and the private rental market.


Comparative Analysis: Previous vs. Current Approach:

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(Data compiled from New Zealand Government, 2025; Property Council New Zealand, 2025)


Structural Shifts

Beyond the official summary, there are several notable, structural shifts in this policy that will directly impact tenants, the construction sector, and specific communities.

1. The affordable rental experiment

One of the most significant but under-discussed features is the formal introduction of "Affordable Rentals" as a permanent tenure type. This is designed to solve a specific structural failure in the New Zealand welfare system.

  • The problem: Currently, a tenant in social housing pays 25% of their income in rent. If they secure higher-paying employment, they often lose eligibility and are pushed into the private rental market, where rent can jump to 100% of market rates. This creates a perverse incentive for social housing tenants to avoid increasing their income.
  • The fix: The "Affordable Rental" category creates a stepping stone. Rents are typically set at roughly 80% of market rent to bridge the gap between social housing and the private market.
  • Who this hits: This specifically targets the "missing middle" - key workers like nurses, teachers, and police officers in high-cost areas who earn too much for state housing but struggle to afford private rentals.

2. The Māori housing pivot

The shift from the dedicated Whai Kāinga Whai Oranga programme to the general Flexible Fund represents a strategic change for Māori housing investment.

  • The shift: The Whai Kāinga Whai Oranga programme, which provided ring-fenced funding for Māori-led housing, concluded in May 2025. Under the new plan, Iwi and Māori providers must compete in a general "contestable" pool alongside other community housing providers.
  • The impact: While the "place-based" focus heavily favours regions with high Māori populations - such as Tairāwhiti and the Eastern Bay of Plenty - there is a risk that without ring-fenced funding, smaller iwi projects may face increased competition from larger, commercialised providers.

3. Regional construction reality check

The plan relies on a "place-based" approach, but this faces a physical constraint: construction capacity.

  • The Gisborne/Tairāwhiti paradox: This region is a Tier 1 priority. However, workforce development reports indicate chronic labour shortages in the region, complicating the ability to deliver new builds on time.
  • The northland contrast: Conversely, Northland has recently experienced a 31% drop in residential building consents, the sharpest decline in the country. The fund could act as a vital stimulus here, preventing construction firms from collapsing due to a lack of forward work.
  • Notable risk: With delivery slated to begin in July 2027, there is a significant "air gap." Construction firms in struggling regions need immediate workflows, creating a risk that local capacity may diminish before government contracts commence.

4. Impact on private investors (the death of passive gains)

This fund reinforces a signal the government is sending to the market: the era of relying solely on capital gains is fading.

  • The signal: By subsidising new builds and affordable rentals, the government aims to increase supply at the lower end of the market.
  • For investors: Property investor associations have noted a shift away from "passive gains" towards active development. Investors holding older, lower-quality rental stock may face stiffer competition from new, government-subsidised "Affordable Rentals" that offer better quality at 80% of the market rate.

5. The Kāinga Ora sideline

It is notable that Kāinga Ora is excluded from the initial round of this fund, signalling a move away from the state-led delivery model.

  • For tenants: Future social housing tenants are more likely to have a community housing provider as their landlord rather than the state.
  • Operational focus: Kāinga Ora’s current mandate has shifted towards managing its existing asset base and "renewing" aging stock rather than leading new large-scale expansion projects.


Pros and cons of the new fund vs. previous funds:

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References

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