One thing Labour, the Greens and New Zealand First — and even the Internet Mana shack-up — can agree on is that too many can’t afford to buy a house right now. National agrees, too.
The four bigger parties also agree that a major factor is that supply is not matching demand. So why not a cross-party agreement on what to do?
Not in election year. Actually not at all. “Affordability” has two sides.
House prices are way out of whack with fundamentals (rents, incomes, long-run trends). After more than doubling from 2002 to 2007, prices by April were up another 13 per cent, driven mainly by a 29 per cent zoom in Auckland and Christchurch’s rebuild.
Logically, at some point prices will fall, suddenly in nominal terms or over time by not keeping pace with price and wage rises.
A possible sudden-fall trigger could be Labour’s capital gains tax. Westpac’s Dominick Stephens reckons that at its proposed 15 per cent plus a ban on landlords offsetting losses for income tax purposes, the value to an investor would fall 23 per cent. Even if rents rose 10 per cent, the landlord’s net present value loss would be 15 per cent.
National rejects a capital gains tax (though realpolitik suggests it would not likely repeal one once it is law). Its voters would lose most. It says it has tightened tax rules so speculators have to pay income tax on gains. And it says capital gains taxes have not stopped house price bubbles elsewhere.
National focuses on the supply side, arm-twisting local councils to free up land inside and on the edge of cities, simplify plans, ease planning rules, rein in planning staff Bill English says are too zealous and too focused on prettiness and speed up consents. New legislation limits council infrastructure charges to developers. It is working with social housing associations. Councils initially resisted and still have worries but are becoming more cooperative.
That is 1980s-2000s orthodoxy: get the rules right and the market will adjust — which has begun, English told a Local Government New Zealand seminar last Tuesday on affordable housing. He talked also of taxpayers’ big exposure through subsidising 40 per cent of all private rentals and providing social housing and the need for more “fairness” because “housing is a main driver of inequality”.
But will looser rules be enough to restore affordability as returning New Zealanders and, to a smaller extent, foreign immigrants and speculators outbid stay-at-home locals? Labour and New Zealand First talk of slowing foreigners’ immigration and restricting sales to foreigners. Critics say restrictions could be got around.
Labour goes further. It says rule changes (most of which it agrees with) are not enough. It wants the state to fund house building and onsell to less-well-off buyers: 10,000 a year for 10 years.
Housing spokesperson Phil Twyford reckons that in a small country only the government could be a big enough buyer to enable big developers and builders here to realise the potential cost savings and efficiencies in prefabricating components offsite and/or offshore, a sort of mass customisation of houses. Twyford says he has found interest among major builders and developers.
Twyford also approves the New Zealand Initiative proposal that the government give councils the equivalent of the GST on each new house to incentivise them to consent new developments which councils now often see as a cost in supplying services.
And Labour, unlike National, also focuses on the demand side, the buyers.
It says National’s labour deregulation has weakened wages. It backs a “living wage”, which echoes the 1935 Labour government’s emphasis on a good wage through compulsory unionism, after which for about 50 years most regular jobs paid for a decent living, including a house.
The left calls this “predistribution”. Instead of redistributing income through taxation so ends can be met — as in Helen Clark’s Working for Families palliative — organise the labour market so people earn enough from their work. Post-1984 deregulation scuppered that.
That “left” includes Internet party leader Laila Harre, who led the Alliance out of the Labour coalition in 2002 because it was not left enough. She has “predistribution” credentials from her union work.
So is this sort of thinking taking Labour “far left”, as John Key scoffs? Actually, it reflects centre-left thinking, as at the Amsterdam conference noted here three weeks ago. And if reaction to inequality builds to the point that it threatens political stability, as in Europe’s populist binge, it might get wider traction.
But even the “living wage” is not in house-buying territory. And one-country “predistribution” is problematic in a highly globalised economy. An alternative which attracts Labour and the Greens is to switch some of English’s rent subsidies to rent-to-buy or shared-equity schemes.
English has thought hard and deep and got real supply-side change. But is there demand-side work to do, too?