The housing crisis is without doubt the most grievous of Labour’s failings. Super-inflated rents and mortgages are claiming ever greater portions of incomes. Inequality is worsened as workers are bled dry by landlords and the banks. Every day the media carry news items on the crisis. To deflect responsibility falling on her government, Ardern claims the crisis has been years in the making. But as time goes on – Labour has been in power since 2017 after all – it becomes increasingly less credible to pass blame onto previous governments. Yes, the crisis was brewing under National, but it has blown up on Labour’s watch and they need to take responsibility for doing something about it.
The plans announced by the government on 23 March will do little to abate, let alone solve, the housing crisis. Labour’s timid approach is focussed primarily on the private sector: increasing the supply of houses to the market and home ownership. The new suite of measures only tinker around the edges of the problem.
One of the main drivers of high property prices is that speculators and landlords are buying up a high proportion of properties coming onto the market. Speculators can make an easy profit just by flipping houses. Landlords are buying because landlordism is so profitable. In this area, Labour’s announcement is step, but all too modest a step, in the right direction. The bright line test, a lightweight capital gains tax, is to be adjusted so that profit is taxed if a property is sold off within 10 years of being bought instead of 5 years, except that if the property purchased was a new house the 5-year rule will still apply. Secondly, the government is to phase out, at long last, the incredibly generous tax loophole that has allowed landlords to off-set their loan repayments against profits from renting.
The price caps for loans and grants for first-time buyers are to be adjusted, but few properties coming onto the market fall within the caps anyway.
The most objectionable part of the announcement is the creation of a $3.8 billion Housing Acceleration Fund. This money will be used to install infrastructure – roads and pipes – in new housing developments. Developers will welcome this corporate welfare. Under the Resource Management Act developers are supposed to pay development contributions to the local council to defray the infrastructure costs necessitated by the development. The fund is a concession to developers on whom Labour is relying to get houses built.
Another part of the announcement is that Kāinga Ora will be able to borrow $2 billion to buy land to build on. Providing that this land will be used to build state homes, which is far from certain, this measure is welcome, modest that it is.
While some parts of the government’s announcement are supportable, overall it is completely inadequate. What is needed is a completely different approach. Jacinda Ardern said there is no one silver bullet to solve the housing crisis. Actually, there is; a massive state housing programme for our times. Such a programme should be carried out by the government directly – bringing back the Ministry of Works – to build high-quality homes, using green building techniques, including built-in solar power, that are fully accessible to all and integrated with public transport and cycle and walk ways. Tenancies should be secure and rents made low in order to boost household disposable incomes.
Tens of thousands of state homes are needed to absorb the 22,000 applicants accepted onto the Housing Register and to open up the eligibility criteria for state housing to all working people. Labour is building some state homes, but not nearly enough. Instead of building less than 3,000 homes in three years, as it has, the government was to build 10,000 a year – the number of homes they said would be built under Kiwibuild – the housing crisis would soon be resolved. The availability of state homes would pull the rug from under the private rental market and the property market. As more and more state homes were built, rental and residential property prices would drop. Ironically, it is the state housing route that would achieve the government’s aim of making home ownership available for those currently excluded by high property prices.