Home truths
Before the election, the three coalition parties made a raft of promises on housing. How are they measuring up? Henry Cooke reports.
Housing was a defining issue in the 2017 election – and all three parties in Government campaigned heavily on it. They made a raft of promises to make life better for renters, the homeless and first-home buyers. Now the Government is almost halfway into its term, and some of those promises are well under way. But the biggest one – KiwiBuild – is stumbling.
Labour has held firm on its promise to deliver changes to rentals and property speculation law, while the promises made by the Greens and NZ First have mostly been diluted or abandoned.
LABOUR’S KIWIBUILD: ALTERED AND STUMBLING
KiwiBuild was Labour’s flagship promise on housing at the 2017 election (and the one before it!) The idea was simple: build 100,000 affordable new homes – half in Auckland – over the next 10 years. The homes would cost under $600,000 in Auckland and even less elsewhere. Then-leader Andrew Little said about 15,000 of these would be built in the first three years. After coming to Government this number was expanded to 16,000 – with 1000 in the first year, 5000 in the next, and 10,000 the year after.
The 10-year promise remains, but much of the policy has changed and is in the process of being ‘‘recalibrated’’.
First off: the price cap in Auckland has been boosted to $650,000 for standalone homes. The interim target of 16,000 in the first three years has been scrapped – in fact Housing Minister Phil Twyford believes the Government will only build 300 in the first full year of the programme. So far only 62 have been built, with another 279 under construction and 10,355 more contracted.
Even worse: there are signs demand for KiwiBuild is not adequate. Only 54 people own KiwiBuild homes so far and only 313 people have gone through the rigour of pre-qualifying – although almost 50,000 have ‘‘registered interest’’.
In fairness to KiwiBuild, the largest stream of houses planned has still not been set up. The Urban Development Agency (UDA) is a planned Government mega-developer that would build whole new brownfield suburbs featuring KiwiBuild homes and transport links. The UDA will be able to cut through planning laws when necessary in order to build houses fast. Twyford believes he can have it set up before the 2020 election.
LABOUR’S CRACKDOWN ON SPECULATION: MOSTLY ACHIEVED
One of Labour’s main promises before the election concerned property speculation. It promised to ban foreign buyers from buying existing homes, extend the ‘‘bright line test’’ for tax on property sales from two to five years, and change tax law so property investors could no longer use losses on rental properties to offset tax on other income.
The Government moved quickly on banning foreign buyers and extending the bright line test – both were wrapped up 2018. Australians and Singaporeans are exempt from the foreign buyers ban thanks to existing trade agreements but there is a clause to take another look at this with Singapore if a serious amount of property purchases from that country is seen. Another exemption allows foreigners to buy new apartments ‘‘off the plans’’ in large developments.
A bill to ring-fence rental property losses from being used to offset tax on other income is currently in select committee and will likely pass this year.
There is a long and ongoing debate over whether these moves have a serious effect on house prices.
Nevertheless, property price inflation – particularly in Auckland, has slowed considerably in recent years. The median sale price in Auckland at the end of 2018 was down 0.8 per cent on the year prior. Whether this is thanks to the Government is almost impossible to prove – indeed you could argue the stabilising trend began prior to the last election.
LABOUR’S RENTING CHANGES: IN PROGRESS
Labour promised a suite of changes for renters. Some are in place while others are in progress – one is seemingly dropped.
A ban on letting fees, and a ban on ‘‘no-cause’’ termination of tenancies, were promised, along with an increase to the notice period for ending a tenancy to 90 days, rent increases being limited to once a year, and a requirement for all tenancy agreements to have an agreed-upon formula for rent hikes. It also promised to pass the Healthy Homes bill to make sure rentals were all warm, dry and healthy – with a $2000 grant thrown in there for landlords to do so.
Most items on this list are part of a planned reform to the Residential Tenancies Act currently being consulted on, with a bill expected before the end of the year. The letting fees ban is enacted and the Healthy Homes bill has been passed, although it will be 2021 before the heating, ventilation, and insulation standards start to kick in, and 2024 before all rental homes must comply.
The subsidy for landlords to insulate rentals – which existed under the last Government through the Warm Up New Zealand scheme – has ended and shows no signs of revival. Landlords had not taken up the subsidy in great numbers when it was available. There is a subsidy for poorer homeowners to insulate their homes however.
Meanwhile, rents have continued to increase, particularly in Wellington. Average rents have gone up $32 in the last year, and $43 the year before. There is a debate – again long-running – about how much the Government’s changes are to blame for rent hikes, particularly as many see the fundamental supply problem in housing as far more of a factor. Government officials have warned Twyford that the cumulative effect of his reforms could well see some landlords perceive the job as ‘‘too hard’’ and sell up to owner-occupiers. Given they generally have fewer people in a home than renters, this could make rentals even scarcer and drive up prices even further.
LABOUR’S STATE HOUSING PROMISES: KIND OF ACHIEVED AND ABANDONED
Labour promised to ‘‘stop National’s state house sell-off’’, increase the number of state homes, and make Housing New Zealand a public service department rather than a corporatised Crown entity. Soon after coming to power, the Government did stop state homes from being sold – though it is worth mentioning that most were being sold to community providers of social housing. However, Twyford almost immediately abandoned the idea of turning Housing NZ into a public service department.
As for increasing the number of state homes, the Government does have a build programme for ‘‘public houses’’ (state and social) – promising 6400 over four years. Last year there was a net increase of 1018, including 789 new state homes. A further 3800 are either under construction or being procured, compared to just 500 in a similar state in the middle of 2016. But by the time the last Government left office it had also promised thousands of new public houses.
The waitlist for public houses has dramatically expanded under this Government, although Twyford argues this is partially due to more people feeling like they can ask for help. It topped 10,000 at the end of last year, 73 per cent more than the year prior.
NZ FIRST’S HOUSING PROMISES: DILUTED OR ABANDONED
In the now-deleted policy on its website ahead of the election, NZ First promised to slash net migration to reduce pressure on housing, initiate a ‘‘New Zealand Housing Plan’’ to revamp the market, ban foreigners from buying freehold land, establish a new state agency to acquire and develop land, provide subsidies to insulate 53,000 homes a year, and require compulsory insurance cover for all building owners.
Most of this is not happening in full. There is no ‘‘plan’’ and building insurance laws have not changed. Net migration has eased and some changes to poststudy work rights for migrants have been enacted but it has not been ‘‘slashed’’ by Government
action. Freehold land over a certain size or with existing housing stock on it is now considered ‘‘sensitive’’ and much harder for foreigners to obtain but there is not a full-on ban. The Government is helping low-income homeowners insulate with a subsidy – but just 3200 families have used the scheme so far.
The UDA being set up to build new suburbs does mostly fit the bill for NZ First’s state development agency. And no small party ever gets every one of their promises enacted because every policy prescription must be negotiated with a larger party.
GREENS’ HOUSING PROMISES: DILUTED
The Green Party has a suite of housing promises mostly not fully enacted. It promised to build or acquire 4000 state or social homes a year, introduce a capital gains tax excluding the family home, create a legally binding duty on the public sector to provide housing, tighten the rules around tax write-offs for property speculation, and ensure housing developments minimise car use.
The Government has promised to build 1600 state or social homes a year – well below what the Greens wanted. A capital gains tax excluding the family home was the recommendation of the Tax Working Group but the Government is yet to actually endorse that. There has been no change to the legal obligations of the public sector to provide housing. There is a change in the pipeline to tax write-offs around property speculation – a promise also made by Labour. While some of the housing developments the Government has begun are well linked to public transport, others are in areas where a car is the only practicable solution – and no changes to national planning laws have been enacted.
As the largest of the parties in Government, it makes sense that Labour’s housing promises are the ones that are mostly being enacted. Indeed, all three parties have a mostly similar direction of travel on housing policies, so NZ First and the Greens can argue that something is ‘‘being done’’ on housing, even if it is not exactly that party’s policy.
But while Labour’s promises are further along, its biggest goal – KiwiBuild – is in serious trouble.