Housing, land tax, and associated things

The Prime Minister attracted considerable coverage last week for his suggestion that a tax might be applied non-resident (however defined) holdings of land.  The Prime Minister wasn’t very specific about the options he had in mind, but it probably didn’t matter – it got some mostly favourable coverage on an issue (house prices, in Auckland in particular) where the government probably senses that it might be politically vulnerable.

Quite how house prices play politically has never really been clear to me.  I’ve noted before that I’m not aware of a single example of a city or country that, having once put in place restrictive land use regulation, has ever substantially unwound those controls.  I can well understand existing users’ unease about greater intensification, and in particular the coordination challenges that can arise. Existing owners as a whole in suburb near the central city might be (considerably) better off financially from allowing their land to be used more intensively, but that won’t necessarily be so for each of them if such development occurs piecemeal, or if benefits are captured by those first in the queue.   The market seems to deal with these issues through private ex ante contracts, the covenants that are now used in most new subdivisions (and which the Productivity Commission was quite disapproving in its report last year).

And I can also understand that no one really wants the value of their property to fall much.  Of course, for many it actually doesn’t matter very much.  If you haven’t got a mortgage and plan to live in the same city for the rest of your life, the market price of houses in your area just isn’t (or shouldn’t be) that important to you.  For those with very large recent mortgages it is another matter.  For them, and especially those who aren’t owner-occupiers, falling house prices look like a visceral threat.

But then the mortgage-free are in many cases those with children, already adult or approaching adulthood, who face the huge –  increasingly insurmountable – hurdles to entering the owner-occupation market.  That should be quite some motivation to be concerned about policies which keep house prices very high, or keep driving them up further.  Increasing the physical footprint of cities, and allowing that process to happen in ways and in places that offer the best opportunities (rather than where Council officials and politicians dictate) looks as though it should be the answer.  But bureaucrats and politicians obstruct those processes, and seem to get away with it because the issues are complex, and because they cover their tracks, blaming high house (and urban land) prices on banks, the tax system, the building industry, “speculators”, “land bankers”, becoming a “global city”, or whatever.

Other bureaucrats and politicians peddle the line that high levels of non-citizen permanent immigration are somehow good for us.  High house prices are just one of those things –  a price of progress, indeed of success, so the Prime Minister would often have us believe.

Once in place, distortionary policies, even very costly ones, often last for a long time.  We saw that in New Zealand with the import licensing regime first put in place in the 1930s, which wasn’t finally abolished until 1992.  It was an enormously inefficient system, driving up costs on many items (and restricting choice) for most people, it was contested politically (largely unwound in the early 1950s, and then re-imposed by the next government).   But the entrenched interests of those who benefited from the system (or thought they did) combined with ideologies of “national development” to make it very difficult to undo.  Licence-holders themselves obviously benefited, but many of the employees of firms producing products protected by the licensing regime thought they did too.    And transitions are/were costly – we saw a lot of that in the 1980s, when big steps were finally made in dismantling the regime.  A larger proportion of the population is employed now than was then, but that didn’t mean the transition wasn’t difficult, and even traumatic, for many individuals, and even for whole towns.

One might have hoped that the rigged housing market was different, but it doesn’t seem to be.  The distributional effects (winners and losers) are far larger than any aggregate adverse effects (I’m skeptical that GDP is much smaller than otherwise because the housing market is so badly distorted).  And unfortunately, those most adversely affected tend to be the poorer, younger, less sophisticated elements in society –  those on the peripheries.  One might have hoped that one or other main party would have made grappling with these issues a real priority, consistent with the underlying values they claim to represent:  National perhaps on some ‘property-owning democracy’ line, in which communities will be stronger etc when property ownership is more broadly based, providing a “fair go” to the hardworking and aspiring classes.  Or Labour, built on a fight for the rights and interests of ordinary workers, campaigning for the full inclusion and equal opportunities for peripheral groups.

But it simply doesn’t happen.  Instead, the Prime Minister keeps talking of high house prices as “a good thing”, and a sign of success.  And for all the somewhat encouraging talk from Labour’s Phil Twyford, less than 18 months out from an election, there is little public sense of a party making fixing the housing market a defining issue.  Time will tell.  Rigged markets are hard to unscramble –  politically hard, not technically so.    Doing something far-reaching could be very costly for groups who would quickly become quite vocal, and loss aversion is a powerful force.

Where do land taxes fit within all this?  I outlined some of my skepticism about a general land tax in a post late last year.    But the Prime Minister’s latest comments relate only to non-resident purchasers.  The theoretical arguments for a general land tax don’t apply to one explicitly targeted at a specific subgroup.  Instead a land tax appears to be one of the few possible tools (specific to foreign purchasers) left to the government –  having signed up to a succession of preferential trade (and other) agreements – if, as the Prime Minister put it, it could be shown that non-resident purchasers were a big influence on the housing market.  Of course, we haven’t yet seen the data the government has started collecting, but even when we do there will no doubt be lots of debate about what it means.    Say that it shows that 1 per cent of purchases in the last six months have been from non-resident foreigners.  One per cent doesn’t sound much.  But the significance depends on a various things, including a variety of elasticities.  If the supply of houses and urban land was totally fixed (it isn’t, but this is just an illustrative example), a one per cent boost to demand could have a considerable impact on the price of houses.  If New Zealand residents were deterred from buying by even the slightest increase in price, then an increase in non-resident foreign demand might have very little impact on price even if supply was largely fixed.    Various quantitative researchers will have various estimates of these different elasticities.   But some past work has suggested that a 1 per cent increase in population, say, can have a material impact on house prices.

I had a couple of posts on the non-resident purchases issues last year.  Despite my general stance strongly favouring a pretty liberal regime for foreign investment, the housing supply market is so badly messed up that I don’t think we should rule out restrictions targeting non-resident foreign purchasers, as a second or third best option (perhaps especially if there was evidence that a large proportion of such purchases were being left empty).  The capital outflows from China –  which is where the main issue is –  are historically unprecedented.  They aren’t a normal phenomenon of an emerging economy, but a reflection of a whole variety of things that are badly wrong with the governance and rule of law in China.

But is a land tax the answer?  If it is, it is a pretty unappealing one.   It would seem to be a tax planners’ dream.  One of the appeals of a general land tax is that the land is fixed, and some identifiable entity (person, company, trust, government) one owns each piece of land.  It doesn’t really matter who owns it, but someone will have to pay the tax.  A land  tax focused only on some definition of non-resident purchasers means it makes a huge difference who owns the land.  If I own it, there is no tax liability.  If a family in Shanghai owns it there is.  Which looks like a pretty clear incentive to have the land owned by New Zealanders, and (to the extent there is demand) the things on the land owned by the foreigners.  No doubt lots of clever intrusive anti-avoidance provisions could be added to any land tax legislation but to quite what end?  Are we better off if, say, the non-residents purchasers bought apartments (which typically have a smaller land component) rather than, say, standalone houses?  Perhaps if it stimulated a supply of new apartments –  for which there would be an enduring demand –  but not if it largely just reallocated who owned what within an existing housing stock.

And there is, of course, the question of what might be a reasonable rate of land tax.  Long-term New Zealand government bond yields in New Zealand are among the highest in the world.  At present, those real bond yields are just over 2 per cent per annum.  Imposing a tax of 1 per cent per annum on value of land (including farm land?)  would be a very heavy burden in such a low yield environment.  Perhaps it might not matter too much to those seeking to safeguard their capital (return of capital rather than return on capital), but if so it might not make that much difference to offshore demand either.   I’ve seen talk of higher rates –  Rodney Hide’s Herald column yesterday talked of a 3 per cent annual rate –  but in such a low yield environment such tax rates could quickly starting looking like expropriation, confiscatory in intent.  I suspect our preferential trade agreement partners might start looking askance at that.

For what it is worth, I think a serious response to the house and urban land price affordability issue would have several dimensions, including:

  • limiting the assessability and deductibility of interest to the real (inflation-adjusted) interest only.  The ability to offset losses in one activity against profits in others is a good feature of the tax system not a flaw, but there is no good economic case for taxing the inflation component of nominal interest, or allowing borrowers to deduct the inflation component.  This is a small issue, especially at present when inflation is so low, but it would be good tax policy and work towards slightly better housing market outcomes.
  • creating a presumptive right for owners to build, say, two storey dwellings on any land, with associated provisions to developers/purchasers to cover the costs of associated infrastructure (whether through private provision, or differential rates).
  • sharply cutting the target level of residence approvals under the New Zealand immigration programme, from the current 45000 to 50000 per annum to perhaps 10000 to 15000 per annum.  Since there is no evidence that New Zealanders, as a whole, have been gaining from the high trend levels of immigration –  and indications that Auckland, prime recipient of the inflows, has been persistently underperforming, this would represent immigration policy reform in any case.  But it would also have material implications for trend housing market pressures as well.

The third element would be the one that would be easiest to implement.  But, of course, like the policies around housing supply –  or import licensing (see above) –  the distributional implications of the current arrangements (positive and negative) are probably larger than the overall economic effects.  Those who see themselves as “winners” from the current arrangements –  a funny mix , including those who genuinely benefit, and those with a “feel good” preference for diversity  –  are likely to be more vocal, and more easily heard, than those who pay the price of an misguided approach to economic management: a “critical economic lever” (MBIE’s words) that has done little or nothing positive for New Zealanders as a whole.  The parallels with Think Big in the 1980s, or with the protective regime of the 1930s to 1980s, each well-intentioned and with their own internal logic, are sobering.

 

 

 

29 thoughts on “Housing, land tax, and associated things

  1. I have just shifted my vote from National to ACT Party. David Seymour is now my preferred top dog. I am voting for no CGT and no Land Tax.

    “National promised ‘no new taxes’ during the last election campaign. Then they introduced a travel levy and a capital gains tax. For the third time now, this promise could be broken, as the Prime Minister ponders a land tax. It’s another example of National campaigning from the Right and governing from the Left.”

    Liked by 1 person

  2. I couldn’t agree more, I think this is going to be the defining political and economic divide for the next 20 years. The Guardian did an excellent piece (in its own way) walking down a street in East London interviewing the residents on the impacts that rising house prices were having on the character of the area.

    http://www.theguardian.com/money/2013/oct/27/albion-drive-revisited-property-divide

    One of the residents presciently said that it’s a similar kind of divide to that of the Corn Laws way back in the 1800s, with lawmakers being comprised pretty much entirely of landowners. I think he’s right. But it’s worth remembering that the Corn Laws took a very long time to come undone, and inspired an awful lot of economic devastation before they were unwound (remember the Irish potato famine?).

    When they are finally unwound, it’s going to be bad.

    Liked by 2 people

  3. Problems with a Land Tax on non residents

    1. Establish who is a non resident? There are perhaps a million New Zealanders who are non residents.
    2. Getting a correct address to determine residency could be major administration nightmare
    3. Lots of old folk living in properties owned by their children who may be overseas
    4. Lots of kids living in properties owned by their parents who may be overseas

    A lot of residential properties are not taxed as they have no income. To lump a Land tax with no income to cover the tax would be unfair to parents looking after their children and or on children looking after their parents.

    5. Commercial land or farms with numerous shareholders would be also affected. Determining the address of all shareholders to determine residency would be a major problem.
    6. What about the recent introduction of crowd funding where the FMA licence holder would have 1500 shareholders for every property? Determining the tax residency of the ownership would be a nightmare.
    7. Family Trusts do not have any transpareny. Determining the tax residency of benficiaries? Trustees? Settlors all night mare administration.

    Throw in a 3 year exemption and the nightmare is increased 10 fold.

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  4. Apart from the obvious (property speculators) who exactly benefits from high and rising house prices? (as you point out repeatedly above) However, where you say that GDP is not necessarily much smaller than what it otherwise would be I am less convinced.

    Overly inflated house prices would seem to me on the face of it to effect the following:

    1. Miss-allocation of capital; the number of wealthy individuals I have come across that would sooner plow money into land rather than business (comprising, capital, land and labour) is phenomenal – after all its better to be a rentier than a capitalist one requires work and effort and the other doesn’t.

    2. Saving not for delayed consumption but for acquisition of a home. Couples etc. looking to get on the ladder forgo consumption in order to save a deposit at a vastly greater rate than if prices were reasonable – I don’t buy the view that the vendor then makes up for this short-fall in consumption post-sale (see point 3)

    3. Distorted decision making. Anecdotally many Auckland families appear to be holding on to their first home when purchasing a second (for living in) and using the equity in the first for the mortgage on the second for their purchase as they are afraid of losing or minimising exposure to the Auckland market.

    4. Less risk-taking. It would seem to me that highly-indebted families will be less likely to change jobs, take time off to upskill or retrain or to give a new venture a go when the risk of failure in such endeavours is so high to their personal financial position (a visceral threat as you describe) – resulting over time in lower productivity and lower economic output.

    But overall I think that the main outcome of the patently ridiculous situation with housing in New Zealand is that we are heading towards a society where only a minority of people own property (particularly in Auckland) which ironically is what many immigrants escaping Europe for New Zealand were seeking to get away from.

    The negative outcomes of this type of policy I think are perhaps best illustrated in the respective economic development paths of North and South America. The North was built on the idea that one could gain property rights and a stake in society through hard work and sacrifice and enjoy the economic fruits of this effort. Whereas the South was built on a corrupt small land-owning class with the rest of society left to scrap for whatever was left. It takes a long time for such changes to wash through but you can see it happening in Auckland where many workers (especially essential workers such as cleaners, teachers, nurses and police officers) if they don’t already own property have given up on any such opportunity and consigned themselves to a life of renting or to moving somewhere else.

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    • JUst on your points 1 to 4 above, I’m sure they are all true at the level of individuals, but remember that NZ does not have a problem of too many houses. If anything, we probably have too few (given the population growth) and they – or the land under them – is ridiculously expensive. So real resources – esp labour – haven’t been misallocated to housing, but buyers have paid much higher prices for existing houses than they would have in a more sensible, less rigged, market.

      I suspect there are some real economic costs to all those distortions – as well as the sheer injustice of it all – but I doubt they are of first order significance. After all, the one paper sometimes cited in support of large real costs looks as US cities and models the extent to which people didn’t move within the US to over-regulated housing market cities, thus missing out on the more productive opportunities in those places. But in NZ, Akld was already far and away the largest city, has grown (population) much faster than the rest of the country, and yet has achieved underwhelming GDP per capita growth. It doesn’t seem superficially credible that few people have relocated to Auckland.

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      • I guess just from my anecdotal experience in Auckland I see so many people making the seemingly rational choice to direct capital and labour (i.e. how they spend their time during the day) to property that it seems like a gross miss-allocation of resources. Many of these people are what you could perhaps describe as “captains of industry” in that they are of the the limited decision making strata of New Zealand that genuinely do make decisions about where to allocate significant chunks of capital and labour activity.

        As individuals they do get decidedly “wealthy” off of this property focussed effort but I don’t see many business of significant scale or international focus being born in New Zealand as a result. Nor do I see them investing in people etc. in the way that may reverse the poor economic performance/productivity paradox.

        My cynical take on it is that the economic choice in New Zealand is clear – there is no rational reason to invest in capital deepening in New Zealand. Your efforts are best directed to resource extraction and then rentier land ownership and a comfortable life will be your reward.

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      • If there is a shortage how can there be a misallocation of resources? A shortage means that we have not allocated enough resources. Our problem is insufficient expenditure on basic infrastructure and the funding of that infrastructure. Trying to make the developer pay for everything is a piecemeal approach rather than a planned approach. Piecemeal planning inevitably leads to escalating costs and therefore increasingly expensive buildings as a developer has to make a margin,

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      • Yes, I am saying exactly that (your first two sentences). oF course, I argue that immigration policy is skewing the whole economy, but given that policy if anything we underinvest in building. this shows up in cross-country comparisons where, given our rate of population growth, we have a lower than expected share of GDP devoted to building houses. It isn’t a huge undershoot – the big issue is land prices not physical shorages of accommodation – but it is there.

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      • CHINESE TOURISTS ‘COULD TOP ONE MILLION’

        But Key, who is also Tourism Minister, has admitted hotel infrastructure will need to be increased – perhaps tripled – to meet expected demand in the future. A major scoping study, dubbed “Project Palace”, is underway to attract foreign investment in hotels as tourist numbers threaten to outstrip accommodation.

        “What’s been happening in tourism, is we’ve been looking at the issue in relation to; is there enough hotel capacity, the answer is there is not.”

        I think your migrant bias is somewhat misplaced. I am pretty sure John Key’s 4 million tourists, an increase of 800,000 from this year is a much more significant impact on NZ infrastructure, housing and the NZD than the 45,000 migrants of which 31,000 international students already double counted as Permanent and long term migrants.

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  5. Most municipalities in New Zealand used to levy rates on land (ie unimproved) value. The advantage of unimproved value rating is that for most council services (in particular the three waters, roads) the cost is proportional to the area of land served. The cost of laying a sewer depends on the length and the design capacity, not the number of connections. The design capacity increases with the square of the pipe radius while the cost only increases with the radius. It may be counterintuitive, but rates on land value would much better reflect the cost of council services than rates on improvements. Capital value rating was pushed by the municipal association on the basis that it ‘reflected ability to pay’ and is unfortunately legislated in the Act establishing Auckland City. It is, in my opinion, wrong for municipalities to be engaged in income redistribution. But not only is it wrong, but it is an unintended contributor to the housing crisis that is having the opposite of the intended effect.
    So to me, the best land tax initiative would be to replace capital value rating in Auckland with land value rates. This would have the desired effect of discouraging land banking or holding unproductive land, would encourage densification where it was economic, but would have very little impact on the average property owner – hence having only a soft downward impact on house prices.

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    • I agree with you, altho I wonder how large the magnitude of any effect from a move to land value rating would be. I recall talking last year to someone who told me that Nelson and Tasman had two different rating schemes (one land value, one capital) and it wasn’t obvious that it had made a huge amount of difference (casual impression only).

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  6. One of my observations of the housing market is the distinct preference over many years for stand alone houses… looking at the most recent data for Auckland after the March building consent data cam out shows that around 75% of new dwelling consents were for houses, with the remaining 24% for apartments, flats, retirement units etc.. 11% of the total was for apartments – so roughly 1:10…

    Auckland is not going to become the planners wet dream of an intensified city with that sort of consent ratio. And economically for any developer, houses are a lot lower risk than apartments.

    The market is horribly distorted with useless planning regulations, significant time delays in the consenting process and and endemic under build relative to population growth, in Auckland in particular.

    The LVR tweaking by the Reserve Bank hasn’t work thus far and a tax option comes to the table as a way of releasing some pressure politically. But it is an unappealing option.

    The drivers of the market, as the case of the LVR restrictions have shown, will rapidly overcome any tax barriers (albeit driving up costs further)…

    The only sensible policy option is getting more dwellings built, removing barriers and getting consenting and planning processes streamlined to deliver outcomes (more dwellings!).

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    • Every apartment building I have noticed appear to have structural problems due to leaks or earthquake strengthening. It may have something to do with massive use of rubber sealants between joints to allow movement during an earthquake. It is this sealant that eventually deteriorates I would harbour a guess that allows water into the apartments. I have noticed water marks on paintings even in a fabulous building like the Metropolis in Auckland and newly painted hallways covering over watermarks when I visited a friend of mine asking about damp smells and watermarks around her kitchen sink and for my personal opinion.

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  7. I agree with RR, if we made property boring again the productivity dividend might surprise us. Of course it all depends on what other changes are made at the same time.

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    • I must admit I did chuckle to myself to the other day thinking about an angel investment evening I recently attended at the conclusion of which I was having a beer with many of the attendees following the pitch evening where the topic that dominated discussion was not Series A funding rounds or hiring new staff but how various residential and commercial property portfolio returns were doing. With many of the angels readily admitting that they attended angel investment evenings mainly as an excuse to get together and have a few beers rather than for any economic benefit or helping to commercialise an innovation.

      Not long after that evening a report authored by various Wellington technocrats and bureaucrats was released extolling the virtues of the activity in NZ’s burgeoning tech and start-up scene and the bright future this painted for the nation. Whereas the reality in my experience is a discussion dominated by a focus on how to play off “Greater Fools” in the real estate industry. I thought to myself no-wonder Auckland’s real gdp per-capita performance is declining and I wondered whether any of these techocrats had ever spoken to a real-life “investor”.

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  8. Property development is a high risk commercial activity. In order for a developer to initiate a building project, prices of existing property must rise above a price point before it becomes profitable to build.

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  9. Michael if property was boring. Say if after 2008 due to effective reforms that house prices had gently dropped and were now headed towards our historic ration of medium income to medium house price of three to four.

    What do you think the effect on interest rates, exchange rate would have been?

    If the Reserve Bank didn’t need to worry so much about financial security from a housing boom/bust cycle do you think monetary policy could be more effective at growing the economy?

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    • Brendon

      As I noted to Blair, it depends on what had made the change.

      One could think of far-reaching land supply reforms. In that case, we would probably see a lot more building (at least for as few years) and if anything more pressure on real interest rates and the real exchange rate. Building is really quite intensive in domestic resources (by contrast, as I’ve shown before high house prices don’t seem to boost consumption, they just redistribute wealth (in pretty unjust ways)). Freeing up land supply would be a good thing, but whether it boosts the economy much in the long haul depends on whether land use restrictions have prevented people and firms flowing to Auckland when (optimally) they should have. I’m skeptical of that, but it is where some of the debate should turn.

      On the other hand, one could think of a change in immigration policy (cutting the residence target to 10K to 15K people pa. That wouldn’t solve underlying rigidities in housing supply itself, but would make them much less salient. In that scenario, we would have less building activity, and lower interest and exchange rates, and more activity finding its way towards the tradables sector.

      As you know, I am at times quite critical of some of the RB’s mon pol decisions in recent years. But bear in mind that the difference between our OCR and “world” rates is at least 200 basis points. If the RB were responding appropriately at present to the lack of inflation (and some of that error is probably down to housing) we might have an OCR at 1.5% – still well above “world” normal interest rates. the RB isn’t helping, but it isn’t the real source of the problem.

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    • Tourism is now ahead of Dairy as our largest export sector. GDP is still running at 2% to 3% without inflation. With tourism headed towards 4 million visitors I think the RBNZ would still hold interest rates at current levels. Clearly changing migration targets from 45k to 15k is not going to impact on housing pressures significantly. As we are clearly not building hotels, the pressure on housing would still be high as Auckland is a tourist hotspot and hotels already register a 80% occupancy.

      “High levels of hotel and motel occupancy were particularly apparent in key tourism hotspots, such as Auckland (80%), Rotorua (79%), and Queenstown (87%), where occupancy was 10-16 percentage points ahead of long-term averages.

      With spare rooms hard to come by, hoteliers also pushed up their prices.

      Over summer there were an average of almost 39,000 additional visitors arriving at airports each month than a year ago. In total, this influx translated into potential demand of around 700,000 additional international visitor guest nights each month. However, data shows that commercial accommodation only accounted for an additional 140,000 international visitor guest nights each month.

      http://www.interest.co.nz/opinion/81365/benje-patterson-says-pressure-accommodate-surge-tourism-and-unoccupied-private-holiday

      This means that there is potentially 560,000 international visitor guest nights taken up by private housing accomodation. Weekly residential rents have not moved up very much possibly because international visitors pay $120 plus a night.

      Don’t forget the main international gateway is still Auckland.

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  10. Thanks Michael -so the economic gains of housing reforms, if any, over the long term would likely be related to greater equality of opportunity, that a few of you other commentators have already referred to.

    Michael can I summarize that in the short term, housing reforms could lead to a building boom which raises interest and exchange rates, if immigration is not also adjusted down? Also depending on how the RB Governor thinks (do we really know??) interest rates may not need to be so high in some parts of the economic cycle, if protecting the financial system from a housing bubble was less of a consideration and the Governor made more of an effort to meet their inflation target.

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  11. Andrew Little really do not know who his target audience really is. Labour sure has a lousy policy advisor. Going on and on about tenants needing heat pumps is ridiculous. Transport NZ put in HRM/DRM systems into 3 of my rental properties for free, costing tens of thousands of dollars due to a motorway extension. The tenants do not turn it on even though I keep telling them it will keep the houses clear of moisture and circulates the heat collected in the roof. Therefore a warmer and healthier home. They just turn it off because they do not want to pay the electricity bill. Most tenants do not want heat pumps they do not use.So he puts of landlords and he makes zero impact on tenants. Tenants that do want heat pumps, landlords would already have installed as they get more rent out of the tenant anyway. Ridiculous.

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    • Yes, well instead of government spending $2 billion + pa on accommodation supplements, they might be better off subsidising electricity costs – rents would have to go down accordingly and folks could afford to use those heat pumps :-)!

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      • The government could have bought houses with the $2 billion and does own $10 billion in state housing properties but Bill English who so very enthusiastically put up his hand for the Housing NZ Ministry found that he was playing with a political football. You can’t build more houses on existing land because you can’t get rid of the existing welfare tenants on million dollar large plots to build high density. Therefore it does not make sense for the government to own property that it has zero discretion over. You can guarantee that that $2 billion figure will just keep going up as the government will try and divest existing Housing NZ residential houses.

        Anyway the $2 billion is to meet market rents and is not a subsidy. The alternative is to keep letting that lengthening queue of unhoused welfare dependents live in cars and parks. There is no shortage of people prepared to pay market rents to get into a property.

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      • Well yes, plenty of folks “prepared” to pay market rents, but very few “able” to pay market rents – hence these “market rents” have to be subsidised by taxpayer dollars in order for a big chunk of the population to be able to afford to house themselves. I laughed last year when it was reported that a sitting MP who was also a landlord told his tenant that he intended to increase the rent. The tenant said he couldn’t afford to pay it and would have to leave. The MP referred the tenant to WINZ to apply for the accommodation supplement. The tenant did so, the rent went up and everyone (aside from the taxpayer) was happy.

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      • That’s why you have the average number per household climbing upwards. Lots of people rent a room out these days to tourists on BnB and also playing host to international students. Some will cram 2 families into a single dwelling or into car sheds. Unfortunately they can afford to pay market rents and those rents just rose another 5% on todays statistics. I hear they r=are renting out beds now in the city. $120 per bunk.

        The Unitary plan also will provide for a second dwelling on all residential zoning, single, suburban, urban and apartments, the minimum size to have a separate kitchen now is 30sqm attached to your main dwelling. Existing dwellings will get bigger with separate kitchens and will cater for more than one family in September 2016.

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    • Andrew Little is still harping on and on about heat pumps. No one who needs to save wants a heat pump. The power bill is just an extra cost which means those heat pumps will just gather dust and as soon as it goes into tenancy especially, those tenant rents will rise. There is no free lunch.

      If he wants to seriously be a contender he needs to connect with voters. I would support an extra holiday for the Land Wars. I would support a 35 hour working week. I would support a change to legislation that now allows employers to pass on Employer kiwi saver contributions onto employees by changing contracts to read as total remuneration rather than salary. I would support employer kiwis average contributions going up to 5%. Surprisingly non of which a party called Labour does not support. Not sure why they call it labour party when they do not even touch on labour issues. DUMB.

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