The book value of Invercargill's state house portfolio is $38 million, but Invercargill Mayor Tim Shadbolt reckons the city council could end up acquiring the 348 homes for just $1 each.
Mr Shadbolt is anticipating the ‘‘collapse'' of the state house sales process, at which point the council would join with a registered community housing provider to make the low-ball offer.
‘‘We're wanting the Government initiative to collapse.
‘‘No-one seems particularly interested. They keep raising this ogre of the Australian bid, but we haven't seen any sign of it.
‘‘We're on a wait-and-see thing at the moment,'' Mr Shadbolt said.
However, Dunedin-based mental health services provider Pact is keen to acquire the houses and will take part in the process run by Treasury.
Expressions of interest close in February.
Pact corporate services director Paul Chamberlain said while he expected the homes to be sold for less than their book value, their worth was much greater than $1 each.
Their combined rental income was about $3 million per year, Mr Chamberlain said.
Acquiring the Invercargill properties would be a change in scale, but Pact was already a social housing provider.
Pact would also be interested in Otago state houses if they went on the market, he said.
Invercargill and Tauranga are test cities for the Government's controversial state house sell-off. There is speculation the sell-off could be a flop because big organisations have ruled themselves out.
IHC's housing arm, Accessible Properties, is not keen on the Invercargill portfolio, but it is interested in the Tauranga houses.
Mr Shadbolt said a street-level inspection of the houses indicated ‘‘huge maintenance'' was required.
‘‘We think the houses are substandard.''
The Government wanted to get ‘‘rid'' of state houses and not play the role of landlord, Mr Shadbolt said.
‘‘We're prepared to take that on, but only on the condition we can completely renovate the homes.
‘‘They're only worth what the market will pay for them.''
State Housing Action Network member Dr Liz Craig, a Dunedin public health physician, said she was concerned by the potential for ‘‘huge fragmentation'' in the country's social housing stock.
‘‘You end up with a lot of little organisations all having to manage multiple extra layers of paperwork and bureaucracy,'' Dr Craig said.‘‘How much extra does that take on top of managing the plumbing, the maintenance and everything else?''
Dr Craig said it was difficult to ascertain the condition of the houses, but they could need significant investment. She doubted prospective buyers had the necessary capital to spend much on them.
A Treasury spokeswoman said 342 of the 348 houses were tenanted at September 30.
‘‘We are looking for a single transaction in Invercargill and it is up to the respondents how they structure their expression of interest ... either as a single bidder or consortium that includes a community housing provider.
‘‘Tenants have been told that their rights as a tenant will continue to be protected by law, as they are now.
‘‘If a community housing provider becomes their new landlord they will be able to stay in social housing as long as they still need it and meet their obligations,'' the spokeswoman said.
Finance Minister Bill English said the Government was looking for providers that could bring ‘‘innovation'' to how tenants were supported and properties were managed.
‘‘We are also looking for providers who want to expand their operation and grow their capability in a sustainable way, while making the most of their expertise in enhancing links across community-based social services to provide better outcomes for tenants,'' Mr English said.
