Is this really the solution to our housing problem?
Our housing problem is getting worse with each passing year and each successive government.
In 1991, 73.8% of households in New Zealand lived in their own home. By 1996, this figure had dropped to 70.7%.
By 2001 home-ownership rate was 67.8%, and by 2006, this had dropped below the half-way mark to 44%
As with so many other indicators, the “free market” reforms of the late 1980s and 1990s were creating a flow-on effect that very few had foreseen.
The drop in home ownership was perhaps worsened after the 1987 share-market crash when investors – many of them ordinary folk – were burned and lost theire lidfe savings, and often their homes.
Part of the problem is that the housing stock is insufficient to meet demand of New Zealanders wanting to buy their own home. Far from being a Local body council or RMA problem, this blogger sheets home responsibility on successive governments who have failed to,
- Introduce a comprehensive capital gains tax to stifle speculation,
- Speculation drove up property prices as investors played an out-bidding war against each other,
- Uncontrolled capital flowing into the country allowed prices to rise as vendor’s expectations grew for higher and higher sale prices (much like in the 1970s and ’80s when wage spirals led to price-rise spirals)
During the 2011 Election, Labour campaigned to introduce a Capital Gains Tax (CGT). A CGT, Labour (and others) maintained, would put a dampener on housing speculation by removing it’s near total tax-free status. As well as driving up house prices, speculation of this sort took investment away from more productive industry.
Speculation also relies on using overseas borrowings, pushing up the amount we owe to offshore lenders,
Predictably, the “genuises” at National – and especially John Key – trashed the idea immediatly,
Key’s criticism ranged from “complexity” (it is not more complex than other tax laws) to “when you put more taxes on the economy you slow things down” (the economy can’t be any slower than it is now).
A few days later, Key went one step further,
According to Dear Dear, in one of his LSD-inspired moments of alternate-reality,
“Labour are trying to put up, as a stalking horse if you like, a problem that existed when they were in government but doesn’t exist now.”
That was Key being his usual mendacious self, of course. Despite his assertion that National had “solved the problem”, our housing crisis was worsening.
In fact, less than two years later, the headlines were screaming the problem from Bluff to Kaitaia,
As per usual, National Ministers were pointing the finger at everyone except themselves (see: Dear Leader Key blames everyone else for Solid Energy’s financial crisis) and English was quick to point the finger at the RMA ands local body councils.
Of course, the last time National interfered with home-building processes, they de-regulated the building industry; loosened the Building Act 1991; and gave New Zealand a legacy of thousands of rotting houses.
National’s most recent pronouncements are vapid and will do nothing except put superficial band-aids over a deep cancer in our society and economy,
“Restrict high-loan-to-value ration lending in the housing sector“ translates to requiring first home owners – usually young couples – to have to save tens of thousands of dollars, whilst at the same time paying high rents and other out-goings.
Let’s be crystal clear what National is advocating here;
1. Without a capital gains tax, National is allowing the older generation (sometimes referred to as “Baby Boomers”) to;
- keep their rental investments,
- use the equity in their currents investments to buy more properties,
- eventually ‘flick off’ their investmental properties for a tax-free profit
2. New home owners will have to;
- build up a large savings deposit (returning us to a 1970s-style era),
- create a demand for more expensive, second mortgages,
- push up rents as more and more young people are forced to rent for longer,
- compete with property investors who will continue to drive up prices, to buy a home
In effect, young New Zealanders will find it harder and harder to get into their own home whilst Baby Boomers will continue to make the most from increasing rents and a tax-free regime for property (house) investments.
It will be young New Zealanders being penalised for high house prices – a situation not of their making.
And worse still – and this is truly salt in the wound for young New Zealanders – the money they will be forced, by National’s decree, to save, will be used by Banks to on-lend to housing speculators to buy more investment properties.
The sheer obscene unfairness of this scenario cannot be under-stated.
By what logic, or concept of justice, is it fair to make it harder for young New Zealanders to buy a home whilst older generations continue to enjoy their tax-free investments – which contributed to driving up house prices and our overseas borrowings in the first place???
If this country wants to send another 500,000 New Zealanders to Australia, I can think of no better policy with which to achieve this enforced emigration. National is practically screaming at our kids to “bugger off !”.
Good on you, John Key, Bill English, Steven Joyce, et al. Another dumb idea.
Previous related blogposts
A Capital Gains Tax? (3 Aug 2011)
Blood from a stone? (27 Jan 2012)
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