Homes are where the heart is
New Zealand’s housing crisis is predicted to be the key issue affecting general election votes. Who’s got the best plan to sort it out?
Restoring the ability of young New Zealanders to buy a home is being tipped as a defining issue of the upcoming general election.
Nowhere is New Zealand’s increasing inequality as manifest as in house prices which have reached ten times the median household income in Auckland, according to the latest Demographia survey.
Its author Hugh Pavletich, who damns high property prices as a gross breach of young New Zealanders’ human rights, predicted spiralling house prices could be John Key’s ‘‘Waterloo’’ at the election to be held in September.
With Key now gone, it’s Bill English who has to sell National’s housing policy to the public and combat an increasingly vocal opposition, highlighting the extraordinary rise in housing unaffordability during National’s three terms in power, peaking in 2007.
When he was bidding for power, Key told the electorate: ‘‘Housing affordability is a big deal. It used to be the Kiwi dream that every New Zealander would be able to buy the house, the quarter acre pavlova paradise and that dream is diminishing.’’
Key was ‘‘very optimistic’’ that National, if voted into power, could make a difference. Then, the median house in Auckland was selling for just over six times the median household income.
Ten years later progress has been ‘‘by and large, extremely muddled and slow’’, says Pavletich.
‘‘In many ways Labour is more advanced than the Government on these issues.’’
Not only did it take a lead by saying it would remove the Auckland urban limit, which has caused the price of land within the limit to spiral up, Pavletich says, Labour also led the way with policy on funding infrastructure with bond issues.
Keeping tabs on policies is tough. ‘‘They are shifting all the time,’’ Pavletich said.
Politicians are responding to growing unhappiness with high house prices, even among homeowners like Pavletich, who calls the price of his own home ‘‘the illusion of wealth’’.
Australian politicians are now moving to tackle its own affordability crisis, and with New Zealanders so easily able to cross the Tasman, it would be disastrous for us if they succeed in restoring affordability, and we do not.
‘‘What we are experiencing is the political process lagging, not moving fast enough on these issues,’’ he says.
Not everyone is convinced that smashing Auckland’s urban limit will free the market to deliver affordable housing.
Professor John Tookey, head of the Department of Built Environment at AUT, says the market cannot fix high house prices itself.
In a recent ‘‘briefing paper’’, he wrote: ‘‘We cannot leave matters to the free market and then continue to be stunned by the inconvenient fact that the market will act in its own best interests: land banking; rationing land release to keep prices high; and building large and expensive homes whilst ignoring demand at the bottom end of the market’’.
‘‘Developers, builders, house buyers and the public all act for their own best interests. All of these stakeholders will not act as charities pro bono publico. To think otherwise is na¨ıve in the extreme.’’
He says the solution that would bring down the price of homes is probably a hybrid one, including many elements, including making much more land available, and changing some of the tax treatments of homes, such as bringing in a capital gains tax.
But, he adds: ‘‘Doing nothing is actually a credible proposition in terms of allowing the solution to work itself out.’’
That could mean a messy bust, or slow ‘‘stagflation’’, where wages rise, and house prices creep up at a slower rate, dropping them in real terms.
‘‘The question will come down to the ballot box,’’ Tookey says.
NATIONAL
Under Key, National’s housing minister Nick Smith wanted to build more homes, but spoke about keeping price rises to single digits each year, rather than bringing them down.
One of the first acts of English as prime minister was to do away with the position of Housing Minister.
But he used his speech at the opening of Parliament to outline his housing vision. ‘‘Housing will remain a key focus for the Government this year, and work will continue to increase the supply of land for housing,’’ he said.
‘‘Legislation to reform the Resource Management Act will be progressed, to reduce costs and delays for homeowners and businesses, and the Government will also proceed with reform of the Building Act.’’
The Government would work with Auckland Council to ensure the successful implementation of the city’s unitary plan.
More special housing areas, which ACT leader David Seymour called islands of fantasy in a dysfunctional market, would be established in Auckland, and more underutilised Crown land would be made available for homes.
The Government would also build and fund additional social and emergency housing.
LABOUR
Labour sees housing as an issue of equality that can woo voters to colour their ballots red at the election. Its policy is to bankroll a ‘‘Kiwibuild’’ state house building boom like the one in the 1940s and 50s, which left solid-as bungalows dotted throughout towns and cities. Over ten years, it is pledging to build 100,000 of them. It would establish an Affordable Housing Authority, and would rapidly increase the number of apprentices to boost the building workforce. Labour says it would remove the Auckland urban growth boundary and free up density controls. New developments, both in Auckland and the rest of New Zealand, would be funded through innovative infrastructure bonds, which economists and think tanks back.
More controversially, it would ban non-resident foreign buyers from buying existing New Zealand homes, and extend the ‘‘bright line test’’ from the current two years to five years, and look at ending the ability of landlords to ‘‘negatively gear’’ properties with the help of tax breaks.
ACT
Favours an orderly creation of a free market. ‘‘Unaffordability has multiple social and economic impacts, and leads to unjust wealth transfers,’’ it says. ‘‘What is required is a relaxation of land use restriction that will return New Zealand to greater housing affordability over a period of time.’’
Its policies would reform the Resource Management and Local Government Acts, ‘‘reinstating the rights of property owners to develop their land as they see fit’’.
It says there’s no evidence capital gains taxes would fix the problem, and says subsidising first-home buyers through KiwiSaver or other schemes does nothing to solve the underlying supply problems.
GREENS
Its policies are centred around the idea that every family, no matter how poor, can afford a decent home, whether renting or owning.
It would build homes like Labour, though not as many, providing funding to third sector housing organisations for a minimum of 1000 units a year for the next three years. It would also remove legal and institutional barriers to the development of co-operative housing, eco-villages, self-built, sweat-equity housing, shared ownership, and papakainga housing Supported housing for those in need.
It would tighten tax rules to stop speculative investment in housing, and introduce a capital gains tax on all but the family home. It would also introduce a Universal Child Benefit that could be capitalised towards the child’s first home, and increase provision of low interest financing for low-income households seeking home ownership. It would also shift the standard tenancy conditions towards more secure and predictable tenure arrangements.
OPPORTUNITIES PARTY
Gareth Morgan’s party would overhaul the tax which ‘‘favours owners of capital and unjustly burdens wage earners’’, though it would not collect a single extra dollar of tax.
In effect, income taxes would fall, but all owners of homes would pay tax each year as though the properties were an investment.
Older people could borrow from the Inland Revenue to pay their tax, and repay the money when they eventually sell their home.
Over time, that would reduce house prices, and incentivise work, not asset speculation.
Morgan says: ‘‘Around 80 per cent of adults will be either unaffected or pay less tax as a result of this taxation reform. 20 per cent of adults will pay more tax.’’
NZ FIRST
The party says: ‘‘Existing National Government policy drives rental prices for low income earners up to crippling levels and do not provide for adequate, affordable accommodation in areas of low housing supply.’’
Policies include government buying land and making it available to first-time homebuyers to build smaller and more affordable houses on.
It would also ‘‘ensure that New Zealand’s housing stock is restricted to New Zealanders.
Non-residents who are not New Zealand citizens would be ineligible for home ownership except if a genuine need to do so can be demonstrated’’.