NZ Labour throws down the gauntlet on housing

By Leith van Onselen

With the New Zealand General Election scheduled for 23 September 2017, the Labour Party opposition has upped the ante on housing policy. From Stuff.co.nz:

[Labour’s] policy is to bankroll a “Kiwibuild” state house building boom like the one in the 1940s and 50s, which left solid-as bungalows dotted throughout towns and cities.  It is pledging to build 100,000 of them, over ten years.

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.

Labour’s housing policy is certainly far more comprehensive than the incumbent National Government’s, whose primary focus has been on expanding the supply of land for housing, in part by reforming the Resource Management Act.

Specifically, Labour’s policy would address both demand and supply-side impediments to affordability, namely:

Demand:

  • Banning foreign buyers from purchasing established homes; and
  • Reducing speculative demand in housing via tax reforms.

Supply:

  • Building 100,000 public homes over 10-years;
  • Boosting the construction workforce;
  • Removing Auckland’s growth boundary (thereby boosting potential urban land supply); and
  • Boosting housing-related infrastructure via bond financing.

Labour should be on a winner here. It’s fair to say that the National Government is failing on housing. While it has had some moderate success in boosting dwelling supply, it has failed to keep up with the Government’s mass immigration program (see below table).

ScreenHunter_17404 Feb. 13 12.08

Indeed, the New Zealand Herald yesterday released findings from Treasury, which estimated that New Zealand’s housing shortage has worsened under the migrant flood:

New Zealand is up to 60,000 houses short, with Auckland needing as many as 35,000 homes, estimates in a Treasury document suggest.

The figures are part of housing supply and demand forecast produced in September of 2016 and released in January as part of an Official Information Act request.

Using their own metrics, Treasury estimate that the “cumulative shortfall” houses in Auckland was at between 30,000 and 35,000 in June of 2016.

That figure is estimated to get slightly worse in 2018, as the population continues to increase, before improving.

It indicates that between June 2015 and June 2016, just under 9000 homes were added to the market in Auckland – but 16,748 buyers started looking for homes…

If population growth follows a “high projection” produced by Statistics NZ, the shortfall could grow by 30,000 homes by 2030.

Meanwhile, in the same article, ANZ projected the housing shortfall is growing by some 4,000 homes per quarter.

National’s focus on the supply-side of the housing market, while simultaneously juicing demand via immigration, was always going to lead to policy failure.

Policy action is required on multiple fronts. And in this regard, Labour clearly has the more credible housing policy.

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Comments

  1. What will happen if these macropru/tightening/pro-affordability policies start to bite and house prices start to fall?

    Economic collapse.

    So… there’ll be a scramble to reverse them.

    • EVERYBODY in New Zealand knows what’s going on in the housing market – everybody. We are a small country after all. And as you suggest EVERYBODY knows that nothing tangible will or can be done ( economic collapse etc).
      Andrew Little stands a good chance of getting Labour across the line and into a coalition of the disparate, but that’s more likely because Bill English is a poor alternative, not because of whatever platform Labour runs on.
      So if ” house prices start to fall? .. there’ll be a scramble to reverse them.” how right you are!

      • But labor won’t address the immigration issue, NZ first is much better on that front. Even if they increase housing there is a critical infrastructure problem, especially in Auckland. There is also a services problem as more people have to buy in the smaller towns such as lack of doctors. Immigrants are actually a threat to quality of life for many in New Zealand. Many locals don’t have the wealth to compete with foreign immigrants. NZ First I think is the best party for people born in nz

      • Gareth Morgan is a shocking public speaker, and it’s going to take a lot for even me to vote TOP, but…..

        Immigration should not be driven by student visas, nor reciprocal visitor working visas it should only be about whether the immigrant benefits us. Of course migrants accepted for humanitarian reasons are a separate issue…..This will require changes to our visa regime, and international brand….There’s a big downside from too many migrants, particularly if they are working in low-skilled jobs. Establishment parties have wrecked New Zealand’s immigration policy by making it a tool of what they believed was a lucrative foreign education industry. But we’ve ended up selling low quality education packages to desperate economic refugees…. It’s a policy rife with rorts, there’s a steady stream of them being reported or investigated… the regime is rotten.

        http://www.top.org.nz/top2

    • What will happen if these macropru/tightening/pro-affordability policies start to bite and house prices start to fall?
      Economic collapse.

      There will be a collapse of the quakonomy and boom in the economy.
      It will be like when a doctor prescribes the right medicine and the cancer collapses and is replaced with healthy tissue.

      • That would mean workers getting ahead of rentiers and a return to a meritocracy. Our aristocratic landlords will not allow that in Oz. Melbourne Taxi drivers are but a small group but the same noise magnified x1,000 or more from speculators will be deafening. If a correction does happen I suggest that all tenants should go into hiding for having caused the crash… By not buying.

    • First comment …

      Hugh Pavletich

      From the NZ Herald article …

      ‘However, Key has since said part of the reason was he did not want to be unpopular.’

      A very big part indeed I would suggest !

      And where were things heading following the Newshub / Reid Research poll 25 May 2016 poll ? Watch and draw your own conclusions …

      http://www.newshub.co.nz/home/politics/2016/05/opinion-john-keys-govt-has-failed-new-zealand-on-housing.html

      Then there was the NZ Herald ‘Mood of the Boardroom’ results September. Business was getting fed up with John Keys can kicking … and even more so his Housing Minister Nick Smith.

      And for very good reason. Here is John Key on housing reform in 2007 …

      https://www.youtube.com/watch?v=cWPgoAI1cLE

      … and John Key and Bill English on the issue October 2012 … the major Government Housing Affordability Announcement …

      https://www.youtube.com/watch?v=AuCchEb-XOk

      The reality was that John Key had no intention of facing the music in 2017 … so Bill English got the hospital pass.

      As I recall ( a Tracy Watkins article from memory ) early 2016 the Key / English team was to lead through to the 2017 election … then depart in glory as they handed the reins to a new generation.

      It was made clear Bill no longer had leadership ambitions. There had been 2002 of course. The TV interview with Bill and Mary English early December spoke volumes.

  2. They should plan properly and leave a 22 metre wide corridor for a railway to be built. And reserve land adjacent to the corridor for schools.

    Ban foreigners from buying old houses? I hope Aussies are exempt from the ban. I bet the money laundering foreigners have 3rd world passports rather than Aussie passports.

    • Your ideas on providing core infrastructure for the build-out are sound.

      However I hope Australians are not exempt from the ban. I hope it is just a big dumb rule. Then it costs effectively nothing to enforce and there are no loopholes (eg Australians fronting foreign purchases).
      Australia has tried the non-big-dumb-rule approach. Witness – hundreds of FIRB guys being paid good money while tens of thousands of houses are sold illegally (or with their acquiescence) to foreigners.

      No kiwi citizenship – no kiwi house.

      • As a dual national I can 100% support this. But rather than “No kiwi citizenship – no kiwi house” I’m satisfied with “No Residency Visa – no transfer of land title”. Couple that with heavy-hitting anti money laundering legislation and you will also weed out any proxy buyers. Can’t prove your source of funds – application denied.

  3. These are all good ideas, although partially band -aid. Getting back to good old and valid social Labor Party values here by helping the people who need help.

    Also needed is a target of ZERO population growth or the new corrupt Labor Party and Conservative Party values of high population growth via immigration will prevail.

    The big question here is, “Well…yes….Good idea Labor Party…Are you going to have high immigration levels to falsely inflate GNP and to negate your proposed housing ‘cure?'”

  4. “Banning foreign buyers from purchasing established homes”
    I look forward to seeing the detail of this – administration, enforcement and penalty regime.

  5. Why not just get it over and done with an offer the entire country for sale by way of competitive tender, with all proceeds to be divided equally amongst all citizens.

    • I agree. Don’t forget to negotiate a reservation somewhere in outback Queensland to accommodate the current population. Those with permits may work for the new owners but then only stay in special economic zone camps. Unfortunately the AUD will only be legal tender inside the reservation and camps and these second class citizens may not own property outside of the reservation.
      Mind, this strategy works best if you make an East/West reservation system whereby you give those on one side slightly more privileges than those on the other and tell them “the others” are gonna take their stuff.

  6. The housing market makes a poor start to the new year with house prices and sales volumes in decline

    http://www.interest.co.nz/property/85984/housing-market-makes-poor-start-new-year-house-prices-and-sales-volumes-decline-and
    “The decline in prices and slump in the numbers of homes being sold looks particularly ominous for the Auckland market because the REINZ reports that the number of homes coming on to the market for sale there is increasing, with the total number of homes available for sale through REINZ members in Auckland at the end of January up 17% compared to January last year. On the North Shore the median also declined for the second month in a row to $965,000, down from $1.105 million in November.”