New Zealand united as a team of 5 million to beat Covid – so how come it seems only the 1% are getting rich off it, while more and more Kiwis are finding homeownership out of reach?
The combination of lower interest rates, relaxed lending rules to investors, and our successful response to the Covid crisis has seen house prices boom. If you own luxury property or a slew of rentals, you’re sitting pretty as the market buoys your property values.
Indeed, 2020 has proved “spectacular” for real estate agents, the Herald reports today, who began the year fearing an economic downturn and ended it by posting record sales. Even in the midst of the recession, the housing market proved unsinkable.
But if you don’t already own your own home, your chances have just gone further underwater. If we don’t fix this, the legacy of our unity in the face of Covid will be an even greater divide between rich and poor.
Everyone should have a warm, healthy, safe and affordable place to call home. Instead, houses are being snatched up by investors – too many of whom charge too much for homes that aren’t fit to live in.
The housing crisis is destroying the Kiwi dream. Jacinda Ardern’s government will be punished by the new generation of voters if she doesn’t act to address it.
The good news is, it is possible.
With common purpose and strong leadership from the government, we have beaten Covid. We can use that same spirit to beat the housing crisis.
New house building is now matching population growth, but the 70,000 house shortage left by the previous government needs to be filled.
Building consents and construction are at record levels with tens of thousands of state houses, KiwiBuild homes, and market homes built or on the way through Kāinga Ora – but many more are needed. Government debt is now set to be $25bn less than expected at the election. It should use some of that to build more homes, quicker.
Councils need to embrace the government’s urban development strategy to enable densification, and Resource Management Act reforms need to be completed.
Speculators who leave residential land vacant and homes empty should be charged penalty rates so landbanking doesn’t pay. Rates should be charged on land value only, not the value of buildings, to encourage densification.
The government shouldn’t be afraid to use its new compulsory acquisition powers to take property off landbankers who are sitting on it.
Remove investors’ tax advantage
An investor can claim the mortgage interest they pay as a tax deduction; a homebuyer can’t. This allows them to bid up house prices over what homebuyers can pay. All up, investors get a billion dollars a year in this subsidy.
We can create a level playing field by capping that deduction at $1,000 per household and giving it to all homeowners. It’s a small hand up for first homebuyers and would put large-scale speculators out of business.
Being a landlord should be a business, not a hobby. Landlords should need licences (that can be revoked if they break the law). Rental standards should be strengthened with a second round of healthy homes standards and further tenancy law upgrades.
This is all doable – but it will take leadership.
The government was caught out by the sudden surge in house prices: in May, Treasury was telling them prices would fall. But it has also given them an opportunity to adopt new, bold policies.
Jacinda Ardern is at her best in a crisis. Her willingness to take big decisions and her skill at communicating the values that underlie them to unite the public is unparalleled. We need her to use those abilities to make 2021 the year we beat the housing crisis as we did Covid-19.