How to make housing affordable? Political parties draw battlelines
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 house prices during National's three terms in power.
* Auckland fourth least affordable housing market in nine countries
* Finance Minister warns home buyers to think ahead, with houses "fully priced"
* Housing campaigner predicts spiralling house prices will be Key's 'Waterloo'
* Nick Smith is 'Million-dollar Minister' as average Auckland house passes $1m mark
Speaking in 2007 Key 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 price in Auckland was 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.
"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 would free the market to deliver affordable housing.
Professor John Tookey, head of the Department of Built Environment at AUT, said 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 naïve 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 tax laws.
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.
Under John 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 Bill 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, though it didn't rate a mention until page four. English outlined a continuation of the Government's current policy direction.
"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, 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, he said.
Its policy is to bankroll a "Kiwibuild" house-building boom with some echoes of the one in the 1940s and 50s, which left solid-as bungalows dotted throughout towns and cities. Kiwibuild is about building affordable homes for sale to first home buyers. It is pledging to build 100,000 of them, over ten years. Labour would also build more state houses too, increasing the stock by a 1000 per year until demand is met.
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. "This will give Auckland more options to grow, as well as stopping landbankers profiteering and holding up development."
New developments would be funded through innovative infrastructure bonds, which economists and think tanks back.
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.
Favours an orderly creation of a free market. "Unaffordability has multiple social and economic impacts, and leads to unjust wealth transfers," it says. "Any sudden reform risks a socially disruptive transfer away from those who have invested in the current market. 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.
It's policies are are centred around the idea that every family should be able to 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 3 years. It would also remove legal and institutional barriers to the development of co-operative housing, eco-villages, self-built, and sweat-equity housing.
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.
THE 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.
"Our proposal is to deem a minimum rate of return on all productive assets, including housing and land," the party says. In effect, people's income taxes would fall, but all owners of homes would pay tax each year as though they were an investment.
Over time, that would reduce house prices, an incentivise work, not asset speculation.
"Plugging the hole in our tax regime will be done gradually to ensure house prices remain stable while incomes grow," the party says.
Morgan says: "Around 80 per cent of adults will be either unaffected or pay less tax as a result of this taxation reform."
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."
- Sunday Star Times