NZ Labour releases comprehensive housing policy

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By Leith van Onselen

NZ Labour has upped the ante on housing affordability.

Over the weekend, Labour leader Andrew Little delivered a rousing speech on housing policy, which shamed the National Government’s inaction and provided a comprehensive road map of its own, encompassing both demand-side and supply-side measures.

Below are the key extracts from the transcript:

Housing is at the core of a good life.

It provides security and stability.

It helps families put down roots in their communities and save for retirement

It is one of the most common sources of capital for people setting up their own small business.

The ambition of widespread homeownership sits at the heart of our social contract. It is at the heart of the Kiwi Dream.

The promise that if you work hard and do the right thing, you can earn a place of your own.

But under this government, all of that is slipping away.

We all know New Zealand has a housing crisis.

I know it, you know it, the Reserve Bank knows it.

Everyone in Auckland knows it.

The rest of New Zealand knows it.

The only people who don’t think New Zealand has a housing crisis all just happen to work in the Beehive.

Under National, home ownership is at its lowest level in 65 years.

Since 2008, when this government came to office, the average house price in Auckland has nearly doubled.

But over the same period, incomes have increased by only 24%.

In the last year, house prices in Auckland have increased by $2600 a week.

Twenty six hundred dollars a week.

It’s crazy. How on earth do you save enough to keep up with that?.

And look, behind all of these figures are real people who are missing out…

They’re young, they’re hard working, they’re ambitious.

They’re exactly the type of people this government should be standing up for, instead of shutting them out.

But instead the government is siding with the speculators, the people trying to make big money out of our housing market at the expense of families looking for homes.

The proportion of Auckland houses being bought by investors has now reached 46% – around twice the level of first home buyers.

But it isn’t just first home buyers that are hurt by this crisis…

When did this become the New Zealand we lived in?

When did we decide we wanted to make buying your first home so difficult, or living with a mortgage so tough?…

The truth is, this Government is nowhere when it comes to housing.

They don’t have the political will to look at real solutions, so instead we’ve seen them flail from gimmick to gimmick…

This government has completely failed on housing…

Today, I want to lay out Labour’s comprehensive plan to fix the housing crisis.

It’s the plan we will be taking into the next election…

We will attack the housing crisis from every angle, starting with the devastating lack of supply.

We’ll start by urgently building enough emergency housing to support those in need…

This week, I announced that Labour will urgently address the shortage of emergency housing – with $60 million to provide 1400 new beds in emergency accommodation – enough for 5100 extra people a year…

There aren’t enough affordable homes, so we’re going to build more.

Now, the Government’s been really struggling with this concept, so let me say it again:

When there’s a housing crisis, you need to build more bloody homes.

That is what Labour is going to do.

That’s how we’re going to fix this crisis.

The next Labour Government will build 100,000 new affordable homes to be on sold to first home buyers.

Working with the private sector and experts in fields like prefabrication, we can build standalone homes for $500,000-$600,000 in Auckland, with apartments and town houses for less than $500,000…

To get these houses built, we’re also going to do more to free up land for new greenfields developments.

That’s why Labour will abolish the Auckland urban growth boundary that has been driving up the price of land.

We’ll replace it with a smarter way to manage urban growth that will shut down the land bankers and speculators by cutting off their profits.

And to make sure there we can deliver these homes, we need to be growing the construction workforce…

Labour in government will set up an Affordable Housing Authority to deliver ambitious new urban development projects, at scale and at pace.

We are going to change the face of our towns and cities, and fix this housing crisis.

Our Affordable Housing Authority will roll up its sleeves and build like we haven’t seen in this country for a long time…

The Authority will look after the Government’s urban land holdings, and will make sure there is a pipeline of land for future needs – for housing, business, schools, parks and hospitals…

But we can’t just fix the supply issues, we have to fix the problems with demand as well.

We urgently need to clamp down on the speculators who are driving up the prices.

I have no sympathy for speculators and land bankers who are just in the market to make a quick buck. Not when families are missing out.

So we’ll start by cracking down on the offshore speculators – the people who don’t live here, don’t want to live here, whose only interest in New Zealand is to extract profits.

We’ll ban offshore buyers from the market unless they are willing to build a new home and add to the stock.

It’s a common sense idea, supported by a big majority of New Zealanders, and it’s been staring the government in the face for years.

But there’s more we need to do.

Right now, there’s no doubt that the way our tax system is designed gives speculators enormous incentives to wreak havoc in our housing market, allowing them to reap super profits practically tax free…

What’s more, our rules around negative gearing encourage speculation as well.

The way this works is investors are able to write off any losses they make in property investment against the rest of their income for tax purposes.

That means other taxpayers pick up the tab – its effectively a taxpayer subsidy for speculation.

If homeowners cannot claim their mortgage payments against their taxes why should speculators?

Taken together, these rules give a boost to the speculators, and gives them an unfair advantage over first home buyers.

That’s not right, and it can’t continue.

In government, Labour will hold a comprehensive review of our tax system, to restore fairness and balance between the productive and speculative parts of our economy.

But it has become clear to me that we can’t wait.

The crisis is urgent.

That’s why today I am announcing that the Government I lead will extend the bright line test so that if you sell an investment property within five years, you’ll pay the full tax on it.

That means the short term speculators won’t be able to get away tax free anymore. It means ending the tax incentives to speculate in short term property gains at the expense of families trying to get into a home.

But we won’t stop there.

I am announcing today that Labour will begin consulting on how to end the loop hole of negative gearing.

We’ll do this in a way that’s targeted at speculators, not investors looking for a stable, long term return.

Under Labour, the market won’t be stacked in favour of speculators anymore – we’ll back families and first home buyers. We’ll back the Kiwi Dream.

These announcements make it very clear: Labour is the party of home ownership in New Zealand today…

The full Labour housing policy can be downloaded here.

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To summarise, Labour has proposed the following supply-side reforms:

  • Creating an Affordable Housing Authority to fast-track development in NZ cities;
  • Building of 100,000 affordable homes across the country;
  • Removal of barriers stopping Auckland from growing up and out; and
  • Growing the construction workforce.

On the demand-side, Labour has proposed:

  • Banning foreigners from purchasing established homes;
  • Taxing speculators that flip homes within five years (versus two years currently);
  • Closing the negative gearing loophole following consultation with stakeholders.

Labour has also proposed greater help for those on the fringe of the housing system, namely:

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  • Increasing the number of state houses;
  • Helping 5,100 more Kiwis into emergency housing every year; and
  • Improve standards pertaining to rental accommodation.

Overall, it’s a comprehensive plan, even though it is a little light on detail at the moment and does not include curbing immigration. Still, it should force the National Government to respond with a plan of its own, or risk pain at the ballot box.

Yet again, the robust debate taking place in New Zealand is in stark contrast to Australia, where the issue of housing affordability received only minor acknowledgement by Labor during the Federal Election campaign, and zero acknowledgement by the Coalition.

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Unlike Australia, all sides of politics in New Zealand have explicitly acknowledged the housing affordability problem, which is the first step in developing solutions.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.