By getting ahead of the Government’s much-anticipated housing announcement next week, the Greens have shown the issue will be a hotly contested space among political parties, Sam Sachdeva writes
Of all the inopportune times to launch a housing policy package, the day Team New Zealand officially retained the America’s Cup would have to be up there.
If the wind was taken out of the Green Party’s sails somewhat by the scheduling snafu, the party certainly cannot be accused of lacking in boldness.
Among its proposals are removing the five-year cap for the bright line test, instead applying the tax to investment properties sold over any timeframe – essentially a capital gains tax by another name.
That would likely make it a non-starter for the Government given Jacinda Ardern’s decision to rule out a CGT last term.
The Greens would also kill off interest-only mortgages and put restrictions on debt-to-income ratios (both already under consideration by the Government and the Reserve Bank) while also requiring cash deposits for investment properties.
In principle, the latter idea seems like a promising way to curb speculators leveraging their property portfolios to accumulate wealth while shutting out first-time buyers, although how it would work in practice without loopholes being exploited is unclear.
Imposing debt-to-income limits would almost certainly have a significant impact on prices, although the bluntness of that particular tool could deter politicians and the Reserve Bank from putting it to use.
Green Party finance and urban development spokeswoman Julie Anne Genter has also called on the Government to provide “direct economic stimulus” through raising benefits, as recommended by the Welfare Expert Advisory Group.
There are good social grounds for doing so, but without a sufficient supply of housing there is at least some risk of any income increases getting soaked up by rent rises.
On the supply side of the equation, the party has called for “a massive urban redevelopment and home building programme led by Kāinga Ora” to produce at least 5000 new builds every year.
Any suggestion that prices should go backwards is still a politically sensitive topic. There is a reason, after all, why Ardern agreed last December that ‘sustained moderation’ – rather than any decline – was the Government’s preferred setting for house prices.
All in all, it is a fairly ambitious suite of proposals, albeit developed far from the levers of power.
The party has form when it comes to getting ahead of the political pack on housing: in 2016, Greens co-leader Metiria Turei sparked an uproar when she suggested Auckland house prices needed to halve over time, leading Labour leader Andrew Little to publicly accuse the party of being irresponsible.
Genter has not gone quite as far this time, writing for BusinessDesk of a “soft landing” for the housing market, “a moderate decrease and then a long period of no growth”.
Any suggestion that prices should go backwards is still a politically sensitive topic. There is a reason, after all, why Ardern agreed last December that “sustained moderation” – rather than any decline – was the Government’s preferred setting for house prices.
But the preposterous growth in the first quarter of the year may just shake off the notion that it is taboo to talk about dropping values.
When Turei made her remarks five years ago, the median house price nationwide had just tipped over $500,000; now it is knocking on $800,000.
Even the National Party’s housing spokeswoman Nicola Willis has tacitly acknowledged that a fall in prices might not be the worst outcome, saying growth on paper “would not feel very real” to many Kiwis given the wider ramifications.
Despite that, there is good reason to suspect, or fear, the Government’s own package of housing measures next week will err closer to incrementalism than transformation.
The Reserve Bank has previously written about the link between house price growth and increased household consumption; having even a paper tiger by your side makes you feel more secure, it seems.
And while New Zealand has weathered the Covid-19 storm better than many other nations, the worse-than-expected GDP decline in the last quarter of 2020 shows there are still some signs of fragility in the economy.
Ardern and Finance Minister Grant Robertson are more pragmatic, bordering on conservative, than both their supporters and critics claim, and may baulk at the short-term pain caused by any major intervention in the housing market irrespective of the longer-term benefit.
That provides an opportunity for the Greens to push their own progressive bona fides, and they have pre-emptively positioned themselves to criticise the Government’s own plans as too timid.
Of course, the party tried a similar approach during last year’s election campaign and yet did not appear to chip many votes from Labour’s left as Covid trumped all.
But housing is rocketing back up the list of concerns for New Zealanders, with 60 percent identifying it as their top issue in the most recent survey from market research firm Ipsos.
That creates an opportunity for the Greens, or National, or any party, to tack past the Government if it does not show it is up to speed.
