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Own home dream

Written By: - Date published: 7:10 pm, February 13th, 2008 - 27 comments
Categories: housing, Media - Tags: ,

house_drawing.gifIs tax really the answer to housing affordability? The editorial in the NZ Herald today motivated a reader to send us these observations:

‘It has long been a dream for New Zealanders to own their own home and it is not a dream that we should dampen. Helping families own their own home may increase housing demand but that’s why it’s so important to address the supply of reasonably priced houses.

With policies from Welcome Home Loan Schemes to Kiwisaver, from new developments as the one in Hobsonville (‘economic vandalism’ still Mr Key?) and legislation that will see more land freed up and more affordable housing being built, there is a mesh of policies starting to reach critical mass.

Yes, much of the housing boom has been from investment properties. That;s why it makes sense to have introduced tax incentives to make other investments more attractive, giving real alternatives for long term investment. The recent changes to PIE taxation and the introduction of KiwiSaver provide alternative ways of saving and investing in a secure, simple and more profitable way.

Simply changing the tax structure around rental properties to discourage rental investment would mean landlords simply pass on the costs to tenants, and the supply for rental properties would decrease. This would simply punish students and young workers and make it harder for young families to save for a deposit.

Rather than pull these proposals apart why not ask for concrete plans from other parties so that we can really make an informed decision over which is the best policy to deliver?’

27 comments on “Own home dream”

  1. RedLogix 1

    “Simply changing the tax structure around rental properties to discourage rental investment would mean landlords simply pass on the costs to tenants, and the supply for rental properties would decrease. This would simply punish students and young workers and make it harder for young families to save for a deposit.”

    Absolutely. I’ve read a lot of ill informed prejudice about investment properties in the last year or so. Much of it stems from the jealous resentment too many tenants feel towards their landlord. In fact in recent times tenants have been getting a bargain. In many cases returns are less than 4%. Typically a tenant may be paying $15-18k for a decent 2-3 bdrm townhouse or house. If they had a generous 20% equity in the same home, paid rates, insurance and 2% maintenance… they would be paying close to $30k to own the same home. Landlords only stay afloat because they are able to claim their cash flow loss as a tax credit against other income. In effect the taxpayer has been subsidising rents for some years now.

    The fact is that young people usually start with little to no equity. It takes time for them to build it up, and if they cannot buy a home, they have to rent. It’s that simple. By renting they are effectively piggy backing on the landlords equity in order to have a roof over their heads. In return the landlord gets to keep the capital gain… if any.

    With the capital gains vanishing in the current market, and if the tax situation were to change against them, all landlords would immediately hike rents dramatically in order to stay afloat. Very few will sell unless other factors force them to.

  2. Billy 2

    Nah, I’m with Robinsod. The market will sort it out.

  3. The Double Standard 3

    A shame that Teh Party’s affordable homes aren’t eh?

    http://www.stuff.co.nz/4399693a10.html

    Miss Clark said the Government as yet did not have a target of how many affordable homes a year its policies would create.

    Yet another feel-good vapourware policy announcement from Clark.

  4. AncientGeek 4

    I see the troll is here as well.

    TDS: I still haven’t seen a detailed housing policy from the Nats on housing. The nats look like a party with no policy (even where they do release some it is so shallow that it might as well be non-existant). At least Labour puts policy out where it can be debated.

    Housing policies aren’t something that you can change in the short term. It definitely isn’t a area that you want to put in short-term solutions. We’re talking about a commodity that has a life usually measured at about 60 years plus when built. It depends on a considerable underlying infrastructure, you have to put in roads, water, power, sewerage systems, public transport, schools, phones and exchanges, etc etc.

    Anyone who has been around a development is always amazed at just how many pipes, conduits, wires go under the development. It is a lot cheaper to put in when it is being built than trying to retrofit later.

    Thats why the district plans that the councils put out are so damn massive.

  5. deemac 5

    Key on Radio NZ this a.m. said he would make housing affordable… by tax cuts! As already discussed on this site, even NIL tax for low earners would still see them struggling to afford cheese, let alone a mortgage – what a useless answer. And how pathetic that the interviewer let him get away with it.

  6. The Double Standard 6

    AG – yep, obvious 8 years is nowhere near long enough to make a positive change. And now you want the Nats to package a nice solution for Helen to copy?

    In case you have forgotten Teh Party is running the government right now, and according to H1, the election campaign hasn’t started yet. So why the shrill demands on Key?

    Is it because there is nothing really positive to say about Teh Party’s late, lame, response?

    BTW, is anyone who disagrees with you a troll?

  7. Dean 7

    “Key on Radio NZ this a.m. said he would make housing affordable by tax cuts! As already discussed on this site, even NIL tax for low earners would still see them struggling to afford cheese, let alone a mortgage – what a useless answer. And how pathetic that the interviewer let him get away with it.”

    How much is a low income? Just in rough figures.

  8. Dancer 8

    i listened to Phil Heatley on RNZ this morning saying there was too much red tape to let urban infill flourish (and hence boost supply). It might be ok if you can afford to live in a neighbourhood where people don’t want to subdivide or developers only do “tasteful” enclaves, but my friends and I have been on the receiving end of lax council rules with horrible towers emerging to overlook us. The last thing I want to see is lax Government guidelines!

  9. AncientGeek 9

    deemac – just listened to it.

    The guy is just shallow. The main reason that houses are expensive has bugger all to do with the RMA. He obviously hasn’t tried buying wood recently.

    What is the point of opening up land at the edges of the cities. The likelyhood of having a transport structure that even remotely resembles the current one in 30 years. About the only thing he said that makes much sense was looking at brownfield sites.

  10. mike 10

    “Housing policies aren’t something that you can change in the short term. It definitely isn’t a area that you want to put in short-term solutions. We’re talking about a commodity that has a life usually measured at about 60 years plus when built. It depends on a considerable underlying infrastructure, you have to put in roads, water, power, sewerage systems, public transport, schools, phones and exchanges, etc etc.”
    So in 9 long years Labour have done nothing but talk about it.(12 press releases) More talk but is anyone listening?
    I see in the Hobsonville trial the cost of each “affordable” home will 300k nice one Helen I’ll take 2

  11. Hey Mikey boy. Nice name you’ve got there – tell me bro, is nearly 100K below the average Auckland home price (and in a nice neighborhood too) really such a rip-off? Or is it that you live in like nightcaps or something? Shit – I can just see it now: [proud tone] “I’m the only libertarian in nightcaps” no wonder you think you’re special, boyo.

  12. dave 12

    Robinsod, if you are thinking othat an affordable home for a low income family is $100k below the average auckland home you are dreaming.

    A couple would have to earn $70,000 to afford a mortgage on a 300k afordable home.

    You havent a bloody clue do you robinsod. I dont think you even understand Labours Housing policy for low income earners on 70k.

  13. The Double Standard 13

    but my friends and I have been on the receiving end of lax council rules with horrible towers emerging to overlook us. The last thing I want to see is lax Government guidelines!

    Dancer, are you a nimby?

    It is likely that NZ needs to move more to apartment living in the cities in the future. Now, I seem to recall some complaints about the quality of apartments developed in Akl, but as you identify, that is more of a local council issue.

    As far ax tax treatment goes, altering the taxation rules on investment properties will disincentivise ownership of such, leading to a reduction in demand for housing stock and a fall in prices. As usual the effects are interrelated, but it wouldn’t necessarily be all bad for renters.

  14. Dave bro, you obviously don’t understand how bad the housing crisis is – there’s no way anyone on $70k can afford a house now. If $300k is the price (and I’ve not seen any evidence of this) then that’s a good start. You also don’t seem to know how the market works. A big chunk of below average-cost housing will exert downward pressure on the lot.

  15. AncientGeek 15

    Now, I seem to recall some complaints about the quality of apartments developed in Akl, but as you identify, that is more of a local council issue.

    And I remember very clearly the Nat government who gave us those quality issues.

    Their daft deregulation of building regulations in the early 90’s left what can only be described as a vacuum in terms of enforcing the building code. They privatized the building inspection, and didn’t make the requirements for liability insurance adequate. It was a really stupid National policy.

    The repairs to my apartment block started in Feb last year. Next month we will finally get to court. In August we will have the repairs finished. It has cost the owners about five million to correct the problems from the lax national policies.

    This is all from four simple errors that weren’t picked up because some morons thought that the free market was superior at regulating building regulations.

    Now TDS – about the national party policy on housing. I have an understandable concern about what fuckup they are wanting to do this time.

  16. Santi 16

    “A big chunk of below average-cost housing will exert downward pressure on the lot.”

    Your unlimited faith in the power of the government is unfounded, Michael Porton.

    Nanny state cannot organise health services (look at the current situation), let alone the building of houses.
    Forget your central dirigism, free up the regulations and leave it to the private sector.

    That’ll be hard to swallow for a socialist like you.

  17. AncientGeek 17

    It was a typical bit of totally short-sighted national party policy done for ideological reasons on an infrastructural area.

    If you look at the nats website under building and construction policy, they seem to think that their cockup in the 90’s is all the fault of the labour government. But it was their policies that currently have Auckland City alone facing a $370 million liability, that comes out of my rates.

    Probably some past national party minister looking for a quick fix to a housing issue. Something in the order of “lets cut the red tape to speed up housing construction and reduce costs”. That explains why I’ve had to fork out $70k as my share to fix the building, and been living on a building site for the last year.

    Now we have yet another national party leader looking for quick fixes to housing issues. I wonder how many people they’re going to affect this time.

  18. The Double Standard 18

    AG – wow, now we now why you are so bitter. Obviously Shane Jones is on the wrong track too. Have you talked to anyone who is trying to get a house built lately? It costs 10s of thousands and takes months to get through the red tape, and you think this is a good policy from Teh Party?

    How about if we let the govt run all apartment construction and resurrect the old M.O.W. After all, they never built anything badly right?

  19. The Double Standard 19

    AG – you might want to take a look at this story

    http://www.stuff.co.nz/4359037a6015.html

  20. Your unlimited faith in the power of the government is unfounded, Michael Porton.

    Dude, if anything this represents my faith in the power of the market. What’s your reading age? 10?

  21. r0b 21

    Santi: Nanny state cannot organise health services (look at the current situation)

    Here we are again, some muppet trying to score cheap points by bagging our health system (and by implication the hard working doctors and nurses who run it).

    New Zealand has one of the world’s best health systems. See for example a 2004 report issued by the New York-based Commonwealth Fund. This survey ranked New Zealand’s health system second among the six developed countries it covered. Germany is ranked first. We came in ahead of Australia, the United States, the United Kingdom and Canada.

    http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=364436

    So there you go, how about a big thank you to Nanny state for our excellent health system.

  22. AncientGeek 22

    Have you talked to anyone who is trying to get a house built lately? It costs 10s of thousands and takes months to get through the red tape, and you think this is a good policy from Teh Party?

    The short answer is YES. There is no bloody point in saving a small amount of money building a house or apartment when you have to fork out a third of the purchase price repairing it. That isn’t even counting the stress of having to go through the meetings getting everything organised, or living on a construction site.

    AG – wow, now we now why you are so bitter.

    I think that this about the second time that I’ve mentioned it on this site.

    However TDS your supercilious smug arrogant and utterly ill informed ignorant attitude just brings it out….

  23. AncientGeek 23

    Also I’ve thought that the nats were short-sighted idiots for at least 30 years. They just keep doing such stupid short-term thinking. At labour does try to get things right over the long term.

  24. The Double Standard 24

    AG – sounds like an excuse for Teh Party to never achieve anything.

    Did you read that Stuff story? Obviously all crap I guess.

    I wonder when the govt is going to regulate pre-purchase inspections for cars to protect you from buying a lemon.

  25. AncientGeek 25

    Some of us have to work, and aren’t paid to troll.

    I read it – what do you expect someone (a builder representative) with a vested interest to say? It also does not relate to the issue.

    The materials were fine – it wouldn’t have made any difference if the wood was treated or not. All that does is change how long it takes wood to rot once water gets into the walls.

    What I was talking about was inspection. Inspection of plans, inspection for approvals, inspection of construction. That was where the cockup was.

    By the way, your name is appropiately chosen – all you ever do is spout a double standard. Other people are responsible for every problem, and the nats are the solution. But of course it is is usually the otehr way around.

  26. dave 26

    there’s no way anyone on $70k can afford a house now

    We did.

  27. Matthew Pilott 27

    Hey TSD, I read the story. So can you tell me how many Leaky Homes these Certified Builders with 8000 hours experience have built? I’m going to bet it’s a few.

    But regulation is crap, of course.

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