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Government was advised the Accommodation Supplement increase will not work

Written By: - Date published: 8:25 am, May 29th, 2017 - 70 comments
Categories: Andrew Little, Economy, greens, labour, Metiria Turei, national, Politics, same old national, Steven Joyce, workers' rights - Tags:

Radio New Zealand this morning reported that the Government chose to ignore Treasury advice from two years ago as to how effective an increase in the accommodation supplement would be. And it is likely that it will enrich landlords, not tenants.

From Radio New Zealand:

Two years ago the government decided not to boost to the accommodation supplement because of fears landlords could pocket the extra money, and rents could be pushed up.

However, ministers have since changed their mind, introducing an increase of up to $80 a week for some families in last week’s Budget.

The changes are to due to come into effect from next April. People who would benefit the most are those on lower incomes living in cities like Auckland.

But advice from officials from the 2015 Budget showed the decision was made not to raise the accommodation supplement that year because they could not be sure tenants would get the benefit of the extra money.

The concerns about what were described as “landlord capture” were contained in advice from officials at the Treasury and the Department of Prime Minister and Cabinet.

That year, benefit payments were increased by $25 a week, but a plan to raise the accommodation supplement was shelved after officials concluded the risk rents would just be raised as result was too great.

“Some of the lower cost, more targeted AS [accommodation supplement] options could also have been included in the package, but concerns about the risk of landlord capture of the assistance and fiscal cost led to them being set aside,” said the officials.

Andrew Little summed up the situation well:

Labour leader Andrew Little said the total package meant it would be the top income earners that would benefit the most. The problem with the Accommodation Supplement was that it tended to be a subsidy to landlords.

“And actually, there’s a pretty good consensus – even amongst National Party MPs – we are going to have to do something about it, because it’s fuelling the wrong kind of response as a solution.” …

As did Metiria Turei who foreshadowed the effects of the increase in her recent speech to Parliament:

But what we also know is that National has been clearer and more upfront in the past about the risk of simply increasing the accommodation supplement. Just in 2015, it refused to increase the accommodation supplement, and its members said that they refused to do it because of “the risk of landlord capture of the assistance.”

Phil Twyford: Well, well, well.

METIRIA TUREI: Well, well, well. So National knows that by increasing the accommodation supplement and doing hardly anything else in housing, all it is doing is transferring a mass of money—and we are talking $400 million over the 4-year period—from the public purse. That money could be used to actually build the homes that New Zealanders want, but instead, by delivering it through the accommodation supplement, National is giving to private landlords, over 4 years, $400 million more. That is what it is doing, and it knows it because it discussed exactly that—that there would be landlord capture of the accommodation supplement if it put it up.

So why would it be doing that? It is doing that because it thinks it can fool the country. It thinks that New Zealanders will be fooled by this—giving a little here but taking a great deal more over there. It is a swindle. It is a swindle. National thinks it can fool the country. The country has seen time and time again that National promises big and delivers little, and we still have increases in homelessness, we have still increases in house prices, we still have increases in rent, and we still have increases in child poverty. So nobody is going to be fooled by this little swindle that National is trying to pull with this.

As he is prone to do Steven Joyce has claimed that there is no evidence of landlord capture despite Treasury warning the Government against the provision. Again from Radio New Zealand:

Finance Minister Steven Joyce said the possibility of landlords pocketing the increase was considered by the government before the Budget was finalised and government agencies would be keeping a close eye on the market.

He said research done by the Ministry of Social Development since 2015, looking at the market response when the supplement was last increased in 2005, found no evidence landlords took advantage of the higher subsidy. RNZ has requested a copy of the research from the ministry.

It will be interesting to see what the research actually shows.

Russell Brown in an excellent post poses the question, how as a nation did we get to the situation where Government handouts and not wages had to ballast workers incomes and the affordability of rental properties.  And how do we get out of here?

From the post:

It seems that an economy whose claim to fame has been getting rid of subsidies is now more reliant than ever on a subsidy to landlords which became the centrepiece of National’s housing reforms of the 1990s (and was embraced again when the party regained office) and a subsidy to employers that was a flagship policy of the Clark Labour governments (I’m told it was politically verboten in Treasury at the time to characterise WFF as a benefit, which it really is).

Both of these subsidies are expensive. Last Thursday’s announcements run to an additional $2 billion a year. That’s a hell of a lot of money not going to more conventional goverment spending on services.

Analyses from all points of the compass, it seems, arrive at the same, uncomfortable conclusion. We can bask all we like in our pretty-good-in-global-terms recent economic growth, but we have made a country many of us can’t actually afford to live in; one in which it is also proving difficult to maintain the services expected of a modern social democracy. Were it not for the stimulus of a high net migration rate, the numbers would look worse.

There’s a conversation I’ve been having in the past few years, which is, essentially, with all this good economic news, exactly who is doing well? The answer, in general terms, is people who don’t rely on wages. Labour as a share of income in the economy has fallen in the long term, but it did recover between 2002 and 2008. Since then, well, there’s a reason people might feel that another $25 a week – be it a tax cut or one of those subsidies – would help them manage. And that feeling in turn guides an affinity for economic policies that might not be to the eventual good of the majority of wage earners.

Tinkering for political purposes, as this Government is prone to do, will not work.  We need a fundamental change in approach.

70 comments on “Government was advised the Accommodation Supplement increase will not work ”

  1. weka 1

    The other one that’s come up is that the increase in accommodation supplement may decrease Temporary Additional Support, which is the hardship grant that many long beneficiaries rely on to survive (TAS is available to any low income person in hardship not just beneficiaries). I’ve only see a couple of Green tweets about this, so am having to guess that either the increase in income makes some people in eligible for TAS, or the way that the TAS formula works means that the AS increase decreases the amount paid out under TAS. If that’s true, that’s a benefit cut.

    • Chris 1.1

      It is true, and it’s always been true. The same thing happened with the old special benefit. The way the formula works means it’s a dollar for reduction, subject to limits. The only plus to increasing the AS is that it’s more likely people will receive it because the take up rate for TAS is deliberately abysmal, as it was with the special benefit, which just means that those who are better off are people who should’ve been receiving the TAS benefit but weren’t. But then on top of this there’s the inevitable rent increases so it’s all bad news.

  2. saveNZ 2

    I was agreeing with the Russel Brown article until “Were it not for the stimulus of a high net migration rate, the numbers would look worse.”

    Migration has helped the rich, not the poor. The shortage of houses, the price of houses and the lowering of wages is due to migration. You can not add 70,000 new people a year plus 188,000 working visas (plus have non resident investment in property) and not think that is going to create massive housing shortages, price increases. congestion, pollution, unemployment and wage lowering.

    The government made a choice to do that. In 30 years of immigration NZ productivity is static or decreasing.

    If we want migration, maybe focus on job creation, because government policy is all about get more wage earners to compete for jobs and houses and more property investors to buy the houses, driving up prices.

    • Draco T Bastard 2.1

      Immigration helps boost GDP because of all the extra borrowing introducing huge amounts of new money into the economy. Without that artificial boost the numbers really would look far worse.

      It just doesn’t make things good the way National wants people to believe.

      • mickysavage 2.1.1

        Yep per head of population NZ’s growth is anemic. It is only net immigration that makes it look like we are doing better than we actuallya re.

        • saveNZ 2.1.1.1

          Yes, but commentators should be clearer that it is perceived stimulus. In reality it is more like a ponzi scheme and migration has kept NZ interest rates higher than other countries. More local money to banks, less local money in economy.

        • Draco T Bastard 2.1.1.2

          I suspect that for a plurality of the population the ‘growth’ is negative and that it’s only for the housing speculators that it’s positive at all.

      • UncookedSelachimorpha 2.1.2

        “migration helps boost GDP because of all the extra borrowing introducing huge amounts of new money into the economy. ”

        Agree, while at the same time doing very little for actual quality of life in NZ. Another example of how all this focus on GDP is a load of rubbish when it comes to deciding what is good or bad!!

  3. The Fairy Godmother 3

    And you can add to this the huge amount of subsidies going to childcare centres. In the case of an under two child whose household is earning less than $800 per week therefore receiving the full amount of winz top up as well as the normal bulk funding payment this could be $439.50 per week. In the case of a child three or over receiving twenty hours free it would be $371.50. In the case of the two year old it would be $276.90. I am assuming here the child is in childcare for 45 hours per week because of some travel time to work and that the child is attending a centre with 80% qualifies teachers. Just imagine if this parent had two children in childcare. The amount going to the childcare in subsidies is what she would be earning. Seems ridiculous , a huge subsidy to the employer and the childcare centre when if it went to her instead she could look after the children herself, and have a much less stressful lifestyle. Her children could go with her to a playgroup instead of being in a huge noisy for profit centre. We make some strange decisions which favour corporations and not people. Remember too that in spite of all these subsidies she will probably be paying at least around $100 per child in fees as well.

    For too long our governments have given huge subsidies to businesses.

    https://education.govt.nz/assets/Documents/Early-Childhood/ECE-Funding-handbook/Early-Childhood-Funding-Handbook-Appendix-1-Funding-Rates.pdf

    /www.workandincome.govt.nz/map/deskfile/extra-help-information/childcare-assistance-tables/childcare-subsidy-current.html

    • saveNZ 3.1

      Yep, I’m all for encouraging one parent to stay at home with children for as long as possible, but the government and society seems determined to farm kids off into day care as soon as possible.

      Day care would be fine if it was a choice rather than becoming expected. And looking after children is not an easy option, whether a parent or day care worker.

      Remember the days when families could afford to live on only one wage? Now we have a society where people can’t even afford to live with 2 people working and the government (aka tax payers) is expected to top up the employee wages with WFF, accommodation benefit, and child care subsidies and grovel to the lowest common denominator of business interests.

  4. jcuknz 4

    The accommodation suppiement is a wild tiger which both governments are riding and neither left nor right have the courage to jump off …. and nobody seems to have a solution just hot air mutterings about ‘bad National’.

    Thankfully I am neither a landlord nor tenant but I feel sorry for the landlords indebted to the hilt to a bank with interest going up … just as I feel for the tenants put in an equally impossible situation while all I see is hot air mutterings both here and English on RNZ this morning.

    • Draco T Bastard 4.1

      and nobody seems to have a solution just hot air mutterings about ‘bad National’.

      There’s a solution. Just not the commercial one that enriches a few at the expense of everyone else which seems to be what both Labour and National are looking for.

      Thankfully I am neither a landlord nor tenant but I feel sorry for the landlords indebted to the hilt to a bank with interest going up …

      I don’t. They took the risk that is inherent in capitalism after all.

  5. saveNZ 5

    Someone should crunch the numbers to see whether it is just as effective to put in a UBI and no more subsidies.

    If people had a guaranteed UBI ‘wage’ and could add income to it with no penalty then people could move away to cheaper accommodation, set up a business or mind their own kids with out spending all their time on ‘busywork’ and trying to make heads and tails of all these subsidies.

    Maybe a transaction tax to fund it, so that those who are spending the most, pay more.

    It would shake out the minimum wage employers who might have to offer better conditions and wages to attract staff. And those who can’t, well they will just go under and leave the better employers who can keep their staff to grow….

    • Craig H 5.1

      Depends on the UBI and which subsidies you’re replacing. Budget spending is here: https://budget.govt.nz/budget/2017/economic-fiscal-outlook/what-we-spend.htm . The budget forecasts that we will spend $26.8 billion p.a. on Welfare ($12.6 billion) + NZ Super ($13.7 billion) + Student Allowances ($0.5 billion). Some of the welfare spend is departmental expenses ($1.6 billion) which would be reduced but not entirely replaced, so a figure of about $26 billion p.a. including savings in student loans (living costs) and departmental expenses at MSD and IRD is closer to the actual spend that can be reduced.

      In the 2013 census, there were just under 4.25 million NZers, of whom just under 3 million were aged 20+, and a bit over 3.1 million were aged 18+ ( I realise population is higher now but nobody’s quite sure exactly by how much, or how many of the additional population would actually be eligible for a UBI).

      Cost of a full UBI:

      A UBI of 220 per week for adults 20+ (the current weekly jobseeker support/dole payment) would cost $34.4 billion p.a. If WFF was being retained as a UBI for under 20 of $80 per child/youth, that would cost about $5.2 billion p.a. Total then to retain something like what we have without targeting it would be about $40 billion + a top up for Supported Living Payment (what used to be called Invalids Benefit). This assumes NZ Super as we know it is eliminated as the UBI replaces it. Making adult UBI 18+ rather than 20+ costs about $1 billion p.a.

      If the plan is just to replace work-tested benefits, student allowances, WFF, AS and NZ Super within existing costs, that could give a UBI of $140 per week for 18+ and $60 per week for children.

      You could just replace WFF and accommodation supplement (AS) with a smaller UBI and then use the tax scale to claw it back from higher income earners as a means of targeting but that doesn’t really target AS to actual accommodation costs, although it would at least ensure basically everyone actually gets it. Calculations to replace WFF/AS with a UBI without increasing forecast spend:

      AS is forecast at $1.2 billion and WFF is forecast at $1.8 billion. At $3 billion p.a., the resulting UBI would be approximately $1,000 p.a. per person who is 20+ or approximately $700 p.a. if we give it to everyone. With some taxation changes, it could be scaled up, but the increases would have to be significant. Targeting of these particular subsidies is cheaper – at $3 billion p.a. there’s not a lot of room to spread it wider without increasing the total cost significantly.

      If we are looking at tax changes to collect more for a UBI, I’d prefer a land tax personally to a transaction tax – easier to collect and would push land prices down.

      • saveNZ 5.1.1

        Yes, but a land tax is already in place really with rates. In NZ a big problem is that many people have little income but still own a property. My mother is in that category. She can barely afford her rates already, but if it was a transaction tax then she is only taxed on money she is already spending.

        I would prefer to tax those who might be spending 530 million gambling at Sky City for example with transaction taxes….. a lot of money is coming through NZ and the government (apart from donations to their party!) is not getting any of it, in fact the tax payers are subsidising us being routed by all this free flowing cash here…

        • saveNZ 5.1.1.1

          I would support a land tax for those who are not permanently resident in NZ and holding property here and a tightening of all the corporations, companies and trusts holding NZ property with much clearer individual ownership details.

          For example someone I know came to NZ from Korea 25 years ago with 2 small children. Her husband never worked in NZ but he was a multimillionaire. He left and she was able to go onto a benefit in NZ although living in a million dollar house. The children were all tertiary educated in NZ and are citizens here but work overseas.

          The mother transferred all her property assets into the kids names so she could try to access more benefits but WINZ had somehow realised she had assets so would not give her the benefit as all her assets had ‘disappeared’ overnight.

          Now her other adult children with their husbands from Korea have come over to NZ and their pre school children are being educated here and now accessing WFF etc, probably accommodation benefit too, but the house is owned by a family member. The grandparents of the husbands now are thinking of coming to NZ.

          The women has entered a relationship with an elderly Kiwi man, and now gets 1/2 his pension.

          So you have to wonder how this type of immigration policy is going to end. NZ taxpayers are welcoming in migrants, their husbands, elderly parents and little to zero taxes ever paid by anybody in the extended families over decades, while holding millions of dollars in property in various different names and accessing health, education, super and god knows what else.

          Before trying to tax people in this country more, maybe look at those who are rich but pay nothing and were not even born here. The biggest P bust, showed that the 2 men had lived in NZ for 26 years, by our government never required them to fill in a tax return (let alone an audit), but were arrested driving around in Ferrari’s with millions in Meth. Now the NZ taxpayer has to pay for their stay in prison for years and they get out a free NZ citizen by the looks of it.

          20% of the NZ population now were not even born here, 40% in Auckland. How many people just never got around to paying any NZ taxes… and get their money from god knows where?

        • Craig H 5.1.1.2

          Land taxes can be ameliorated either by limits (e.g. only tax the value above $500,000) or by income-based rebates, similar to the current rates rebate run by Internal Affairs.

          • Molly 5.1.1.2.1

            Land taxes can be issued on undeveloped residentially zoned land, with the option of having primary producers have their land rezoned rural.

            This avoids the hit on property owners living in their sole property, and discourages land-banking.

            • Craig H 5.1.1.2.1.1

              Could do – that would be a reasonable limit. Doesn’t do anything about land banking of really poor rentals or unoccupied housing, however.

  6. Bill 6

    Could scrap the AS altogether while introducing squatters rights. Not saying that’s not going to be a ‘shock’ to the system. Just saying we could.

    Could also set about re-focusing the balance of power in the labour market so that workers once again had the whip hand. Not saying that wouldn’t be a ‘shock’ to the system too. Just saying we could.

    Could legislate that entitlements tracked the minimum wage in an environment with an empowered workforce.

    Could legislate on maximum allowable rents and rent increases.

    And more. Much more. But for as long as we’re content to let the clatter of clowns who have squeezed themselves into NZs so-called “political spectrum” play the role of ring master, well…

    • Draco T Bastard 6.1

      +111

      Exactly.

      The real problem we have is that the politicians are ruling for business and not the people.

    • tom 6.2

      Yes you are right Bill there are many options but none are politically viable given that govt panders to those that fill there election coffers not the public and their actual needs.
      Another example i always tell people is that we could transfer WFF to be a small business tax credit for struggling NZ businesses and have a living wage as minimum wage, and this would eliminate all the Multinationals and big corporate players who make good profits (and generally take the profit offshore so we lose again) and pay minimum wage safe in the knowedge there will not be a popular revolt against there crap wages due to WFF. It is a subsidy on employers paying a decent wage.

      • Bill 6.2.1

        Oh, I think plenty of options are politically viable, just not politically convenient.

        • Wayne 6.2.1.1

          Bill,

          “Squatters rights” is not viable in a democracy, unless it of of the Venezuelan type.

          More seriously, what is the practical alternative to AS? Its major advantage is that it is targeted. Both National and Labour have understood that.

          It will be up to $305 per week in Auckland. The alternative of giving all people/families a $200 to $300 increase per week is simply not affordable. I reckon the cost would be at least $5 billion (500,000 families getting an extra $200 per week).

          Not unless you drastically increase tax rates. It would be a 7% increase in total govt spending. The top tax rate would have to be at least 45%. But I guess you be ok with that.

          • Stuart Munro 6.2.1.1.1

            Squatters rights worked perfectly well in England for quite a long time Wayne – so it’s merely unthinkable to far-right trolls – not undemocratic.

          • Bill 6.2.1.1.2

            Squatted in both Holland and in England. Legal in both countries at the time and well, if you want to compare Thatcher’s UK to Venezuela, what can I say?

            Alternative to AS is affordable, capped rents with limits placed around increases…and squatting rights of course.

            Other measures would be good legislation around housing co-ops/collectives – ie, tenant as owner while they live in a co-op – but with no option to sell their ownership. When they leave, they’ve left. End.

            I’m fucked off with the public purse being bled to enhance the financial position of employers, landlords and others who lack need.

            • David Mac 6.2.1.1.2.1

              Really? Lift your kids into their new home through a broken window? “We’ll use candles kids, we don’t need electricity.”

              Squatting is hard work when you’re 19, robust and single. We need family houses that can be legitimately occupied.

              It is currently illegal to charge more than market rent or raise it more frequently than six monthly.

              https://www.tenancy.govt.nz/rent-bond-and-bills/rent/increasing-rent/

              • Bill

                You’ve obviously never squatted if that’s your image of what a squat’s like!

                No broken windows and no lack of electricity in any from my life 😉

                • David Mac

                  You’re right Bill, I’ve always paid the rent. A government that introduces squatters rights is setting a dangerous precedent with regard property law. I’d squat in a mobile home in Queesnstown…then Wanaka…on to Golden Bay.

                  Highly unleft of me (sorry) but I think shelve the urban train plans and spend the billions and billions on 1000’s of state houses instead is a superior scheme.

                  I’m concerned that the advent of self drive cars will see the Iwi that operate Waitomo Caves negotiating to turn Britomart into a Glow-worm Grotto.

    • Greg 6.3

      Problem with cutting the Accomidation supplement is you can’t turn off the tap off on a Ponzi scheme without a collapse all that houseing debt depends on it, that 2 billion would build a lot of houses there is no easy way out of the mess national has created at this point a managed exit from the bubble is impossible.

      • Bill 6.3.1

        What? You can’t crash it and you can’t manage your way out? Of course you can crash it if needs be!

        Will that mean people who had been ripping tenants to service their mortgage payments could be in the shit? Well, they can always sell.

        Does that mean that house prices will tumble?

        Scratching my head and not really seeing much a downside to be honest.

        • RedLogix 6.3.1.1

          In rough terms NZ housing is about 40% overvalued relative to incomes. So in order to crash the market as you seem to be so keen on, this is the sort of drop you would need to be useful.

          Fine and dandy, except now say 20% of existing home owners would be deeply underwater. They cannot sell, they cannot move, they cannot do anything except take a big loss. And in this country you cannot walk away from a mortgage.

          So now about 20% of homeowners have lost their equity and eventually will default on their debt. Leaving them totally unable to qualify for a mortgage ever. So now they will crowd back into the rental market, and the mortgagee sale on the home they owned will be snapped up by big rental investors.

          Probably not the effect you were looking for.

          • Draco T Bastard 6.3.1.1.1

            In rough terms NZ housing is about 40% overvalued relative to incomes.

            House values should be around 3 to 4 times the average wage. They’re presently about 10 to 11 times the average wage. Which means that they’re closer to 200% over valued.

            Fine and dandy, except now say 20% of existing home owners would be deeply underwater.

            All of whom were told that it was a housing bubble and took the risk anyway.

            And in this country you cannot walk away from a mortgage.

            Which I believe is wrong and needs to be corrected. Losing is part of the capitalist dogma after all.

            So now they will crowd back into the rental market, and the mortgagee sale on the home they owned will be snapped up by big rental investors.

            Or HNZ could pop in, buy up the mortgage and then rent the house back to the previous owners at 25% of income. State housing increases by one, speculators zero and homelessness doesn’t go up either.

            • Wayne 6.3.1.1.1.1

              I can recall no time when Auckland house were only 3 to 4 times averages wages. Never really below 5 or 6 times, at least not for the last 30 years

              Because interest rates are at historic lows, this has helped push up the multiple. If they went to 7% or more, the multiple would drop, i.e. prices would drop.

              Of course high population growth has also been a driver. Current population growth in Auckland is in excess of 2% p.a. Historically (last 30 years) it has been 1% or so.

              • Draco T Bastard

                I can recall no time when Auckland house were only 3 to 4 times averages wages. Never really below 5 or 6 times, at least not for the last 30 years

                Your memory is faulty:

                http://www.newshub.co.nz/home/money/2016/08/housing-through-the-decades-what-is-affordable.html
                http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2016/2016jan79-1.pdf
                http://propertyclick.nz/2016/02/02/residential-house-prices-in-nz-the-last-50-years/
                http://www.interest.co.nz/news/44330/opinion-why-golden-oldies-are-wrong-housing-less-affordable-now-1987-and-1975-corrected

                In reading over those it seems that Auckland house prices, although higher than the rest of the nation, would still have been in the 3 to 4 times the average wage back in the early 1980s.

                Because interest rates are at historic lows, this has helped push up the multiple. If they went to 7% or more, the multiple would drop, i.e. prices would drop.

                That sounds nice but I wouldn’t count on it. It’s not the interest that people pay attention to but how much of their weekly income is disappearing to the bank. A higher interest rate just means that the mortgage will be longer not that the prices will go down.

                And then there’s the speculators pushing up prices as they buy and sell to each other in a feeding frenzy that would make piranha’s jealous. They pretty much ignore interest rates as the house price rises are greater than the interest.

                • Wayne

                  I looked at the three items. They note Auckland for the last 30 years (since 1987) has been out of kilter with the rest of the country. Not really surprising given the international appeal of Auckland.

                  Certainly no statement that since 1987 Auckland house prices been only 3 or 4 times average income.

                  • Draco T Bastard

                    From the interest.co.nz:

                    Back in 1987 the average house price was NZ$88,900. The average pre-tax income was NZ$485.98 a week

                    485.98 * 52 = $25270.96

                    88900 / 25270.96 = 3.5 times the average wage.

                    1987 is when my brother bought his house in Auckland for ~$82000.

                    Now, you’re probably going to point out that Auckland was more expensive but looking at fig. 2 in the RBNZ document we see the ratio of Auckland to the rest of the country in 1980 was ~1 and that by 1987 it still wasn’t much above that (~1.1) so we can ascertain that at that time Auckland houses prices were still within the 3 to 4 times the average wage.

            • greg 6.3.1.1.1.2

              i blame the banks they pushed debt like a crack dealer Auckland at 10 times incomes has caused a social disaster and thats before the ponzi scheme blows up. no country has ever managed to deflate a bubble and by any definition nz is a bubble
              http://www.investopedia.com/terms/h/housing_bubble.asp

          • Bill 6.3.1.1.2

            Couple of things.

            My comment mentioned refocusing the balance of power to favour workers demands. That would have impact on that 40% figure.

            If someone is paying their mortgage, nothing will change for them in a crashed market. They still have their home and they continue to buy it from the bank.

            If they move they take a hit on the selling price but score on the buying price. Swings and merry-go-rounds.

            And their original level of debt and service payments towards clearing that debt continue in an environment of rising wage levels.

            In the absence of AS, I’d suggest the attraction of buying a place to have a tenant pay it off for you diminishes somewhat (for all sizes of portfolios).

            You say 20% of current wannabe house owners would never get another mortgage, which I’m not quite following because it’s not as though their outgoings suddenly sky-rocketed, but taking that as the case, what about stacking that against the numbers of people right now who cannot afford rent, who will never secure a mortgage, who are stuck in under-paying jobs, who wind up in garages or on the streets, who have abysmal prospects?

            • RedLogix 6.3.1.1.2.1

              Just pointing out an unintended consequence of what you are wishing for.

              I’m on record here as being just as critical of the current housing situation as anyone. Over the years I’ve made many, many suggestions as to how we could improve matters … from the modest to quite radical.

              But in general there are many root causes of our current problems, and I guarantee you there is no single magic bullet cure for them.

              • Bill

                Yeah, ‘cept I don’t think that would be a consequence. The only ones who’d tank are those who bought houses for speculative purposes – not those who bought houses to live in – who bought themselves a home.

              • Bill

                btw – what is this crap about houses?

                You buy a car and enter into a loan agreement knowing that you purchase is losing monetary value hand over fist.

                Bar some artworks or some antiques, I can’t readily think of anything that’d be bought with any expectation it’d accrue monetary value over time.

                • RedLogix

                  There are two components here:

                  1. Land value is what is being speculated on. They ain’t making any more of it, and compared to say Aus we don’t have all that much of it that people want to live on. Make ALL residential land leasehold with leaseholder being your local govt. A surprising portion of it already is and it works fine. Instead of paying rates you simply pay land rent.

                  Not easy to implement I agree, but It would work.

                  2. Building value. We are emphatically being ripped off. Building costs in Aus are about A$1100/m2 compared to almost NZ$2500/m2 locally. In some cases from the same companies.

                  3. Let Local Govt back into the subdivision game and section prices will tumble. Trust me on this.

                  • Bill

                    I’m aware that the building industry in NZs a ‘have’ – especially with regards supplies of building materials.

                    But if it’s land that’s been speculated on, and not the structures on the land, then why is it that the cost of structures on leasehold land is going through the roof too?

                    It can’t be a case of the prices are being dragged up to stay somewhat in line with structures on free hold land…if it’s the land that’s increasing in value.

                    • Tamati Tautuhi

                      Something horribly wrong with the price of building materials here in NZ especially when we have a glut of timber, market manipulation by the oligopolies. We have a Commerce Commission with no teeth who are reluctant to look into the industry with objectivity?

                  • mikesh

                    [Not easy to implement I agree, but It would work.]

                    Where the land value is less than the outstanding mortgage the government could purchase the land with fiat money, subject to the condition that the proceeds should be applied to repayment of the mortgage. If the land was then leased back to the homeowner there should be little or no increase in the money supply, so very little inflation.

                    Where property is being sold, including the situation where it is being sold to a trust, insist that the land be sold back to the government and that the purchaser, or trust, purchase only the house. Again the land would be leased to the purchaser of the property. Apply the same rule to bequests under a will.

                    All land purchases by government under these arrangements should be at Valuatuation NZ values.

            • weka 6.3.1.1.2.2

              “If someone is paying their mortgage, nothing will change for them in a crashed market. They still have their home and they continue to buy it from the bank.”

              Probably need to build in some protection from the banks, who I think can ask for their money back just because they want it. So anyone with an upside down mortgage that is seen as a risk could lose their house because.

          • Rae 6.3.1.1.3

            Either way, one sector or another suffers, I guess maybe we just toss a coin to decide which one it is.

            • Bill 6.3.1.1.3.1

              Nah. In one scenario, there are people who take ‘a hit’. In the other, people suffer.

              • David Mac

                I agree Bill. On one side of the coin folk are downgrading their Rarotonga unit, on the other a kid is off to hospital.

                Other parts of the world, it happens. In NZ? We need to refocus on what matters.

  7. adam 7

    Is this not the dreaded welfare dependency, where by the state doles out money to keep the masses happy and their interpretation of an economy going?

    Is this not what the right have screamed about for years, or what the left have said that it represents persistent poverty?

    Unfit to rule, more like dizzy with idiocy. A government both failing the left, and the right.

    The radical center gets stranger by the week.

    • Draco T Bastard 7.1

      Businesses have always been dependent upon state welfare in one way or another. It’s just that the businesses have always said the opposite and that lie has become the belief of the masses.

      We even had Wayne saying that we needed the state subsidy for landlords the other week.

      • David Mac 7.1.1

        Businesses want to see people with $1000 disposal income every week, not struggling to pay for the rent and power. Strugglers aren’t buying jet skis and Wild Turkey.

        At the moment, yes we do need the state subsidy for struggling renters. Parks full of tents serve nobody well.

        Rich people don’t need you to be poor Draco, they’d prefer you were cashed up too.

        • Draco T Bastard 7.1.1.1

          Businesses want to see people with $1000 disposal income every week, not struggling to pay for the rent and power.

          This lie is proved wrong by the businesses not paying the living wage and complaining about the rise in the minimum wage and not voluntarily paying $40 per hour or more.

          Strugglers aren’t buying jet skis and Wild Turkey.

          But they are paying rent which pays off the capitalists mortgage for them allowing them to own even more and thus get even more of the strugglers limited income without doing anything productive themselves.

          At the moment, yes we do need the state subsidy for struggling renters. Parks full of tents serve nobody well.

          Both of which are the result of capitalism and the greed that it engenders.

          Rich people don’t need you to be poor

          Yes they do else they wouldn’t have a captive, exploitable class.

          Adam Smith Quotes:

          Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many.

          Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.

          • David Mac 7.1.1.1.1

            Rich people aren’t stopping us from taking advantage of the abundance that surrounds us all. I can’t afford to acknowledge the invisible barriers of suppression, I like Rarotonga too much.

            As with the accommodation supplement, when everyone’s pay has a lift, inflation will rise to match. We will be no better off. The best way forward is for individuals to look for ways that they can raise their productivity. Add more value for their bosses. eg: The till jockey at KFC that asks their boss what they would need to do to be considered for a supervisor role is on the right track.

            I fear you’re waiting for a government to make your life fabulous Draco, that ain’t never going to happen bro. You’ll need to organise your week in Raro yourself.

            • Draco T Bastard 7.1.1.1.1.1

              Rich people aren’t stopping us from taking advantage of the abundance that surrounds us all.

              Yes they are by having control of them.

              As with the accommodation supplement, when everyone’s pay has a lift, inflation will rise to match. We will be no better off.

              True

              The best way forward is for individuals to look for ways that they can raise their productivity.

              Also true but only half of it. The other half is diversification.

              Add more value for their bosses.

              And that just adds to the suppression and oppression that having rich produces by default. You can’t make things better by doing more of the same failed system.

              I fear you’re waiting for a government to make your life fabulous Draco, that ain’t never going to happen bro.

              Nope. I’m doing all that I can to make people realise that they are the government and that it’s up to them. Rather than having people divorce themselves from the government and make themselves powerless – as you’re doing. Although I’m sure that the rich are glad of your helping them to continue to oppress people.

  8. saveNZ 8

    Just organise a time machine back to the good old days of social mobility… heres how Paula Bennett ex Beneficiary turned National benefit basher, did it…

    “At just 17, she gave birth to her only child, a daughter she named Ana. Just two years later, she got a Housing Corporation loan to buy a $56,000 house in Taupo. All of this while on the domestic purposes benefit.

    The Training Incentive Allowance that paid for Bennett’s university education meant she was not lumbered with any of the $15 billion debt that 728,000 other Kiwi students are now facing. Her tertiary education was free.

    Bennett was also fortunate in getting a training allowance to go to university when her daughter was 8. Her backstory suggests that she was still on a benefit while studying.

    In opting to chuck in her paid job and return to the DPB, she became an oft-parroted cliche that many on the Right – especially National/ACT supporters – often accuse welfare beneficiaries for.

    From being an on-again-off-again beneficiary on the DPB, in 2005 Bennett became a beneficiary of the Parliamentary Service and she entered Parliament on the National Party List.

    Today, as Deputy PM, the tax-payer is responsible for meeting her $326,697 p.a. salary, plus free housing, and other perks.”

    Source http://thedailyblog.co.nz/2017/05/29/tips-from-paula-bennett-on-how-to-be-a-hypocrite/

    • Rae 8.1

      Shit, if they dropped all those ladders back down, someone is bound to get a nasty knock on the head.

    • exkiwiforces 8.2

      Didn’t this silly women along with her NATS mates the cut/ turn off the benefits that allowed her to improve education and allow her to enter the workforce. But at the same time stop other people who are on some sort benefit to use the same pathway as she did?

    • saveNZ 8.3

      Yep, never a mention of this in the MSM about our deputy PM and bene bashing is one of their favourite pass times and Paula is being groomed for PM, post English being rolled.

  9. greywarshark 9

    What about easing out of the AS. Put up the minimum wage to the living wage level and continue to diminish the AS. What then? The rents would go down because fewer people were able to afford them. This should be implemented in summer! There would be some dislocation until the market adjusted to new reality.

    The beneficiaries would be paid to be students learning skills, and sort out where they wanted to live according to where the nearest educational institute was. They would make a plan for studying and putting their children into the local schools and give themselves stability. They would spend as much time working in a community facility as possible, growing food, learning new cooking and ingredient use, and general parenting skills, and meet a wider variety of positive people. They would receive a generous benefit and counselling as needed if problems arose.

    There would be less school and house churn, and the accommodation money would be part of their payments to enable them to find better accommodation,

    Also some of those way-out schemes that work with beneficiaries not impose conditions on them. They would have a huge drop back on marginal tax rates, so they could be sure of a decent income, hold down a job and be around to look after their children. (Not thinking of including prostitution in this. The jobs would be rates with some being unsuitable for parents.)

    Also the government have sweat equity gangs and start a planned program of build your own on approved land that had facilities. It would bring people who wanted to do practical things together, with mutual help like an old-fashioned USA barn raising.

  10. greywarshark 10

    National know that most of their supporters aren’t financially savvy and so they can get away with smoke and mirrors – only a child of five can understand, (Groucho Marx and Tom Lehrer).

    Most Nats have had a silo education, it prepared them for x job and if that works out, then further reflection and broadening thought is not needed. They are into a rut of thinking (why think when everything is working out right for you), and consequently they are happy to believe any subterfuge that the Nat government and 1984 leftover RW termites in Labour set up for them.

  11. Rae 11

    Given that in the hot areas of shortage where you are in a virtual auction situation for a rental, that extra accommodation supplement will be gobbled up pdq, it and then some, I suggest to you, and for all of Joyce’s “keeping an eye on landlords” there will be zilch can be done about it, because of that. The rise in rents due to the rise in the accommodation supplement will, of course, apply to those that do not qualify for it as well.
    Then there is that app (Rent Berry I think) that will soon be here, bet he never took that into account.
    We are going to have to bite the bullet and provide truckloads of social housing, they will be for more than just the very worst off, they will be there to deliberately skew the market back to where it needs to be. And we need new housing not subject to onerous covenants that demand huge houses that look ok on the surface but are actually shoddily built and start falling apart from day dot.
    The government is the only body that can carry out what needs to happen, the market will only ever look after itself.

    • Stuart Munro 11.1

      There’d be a quite easy move for councils in the squatter’s direction though – raise a vacancy tax on untenanted properties. $100 a week would do it – enough to make it worth the trouble of finding an agency if the owner can’t be bothered doing it themselves. Place next door to me was vacant for 18 months – it isn’t helpful to society at large. Councils could offer to find tenants if necessary – in Auckland they’re not hard to find. Costs nothing, earns the council money, modestly affects the housing shortage.

      • Rae 11.1.1

        Think that is an issue of its own, but does need something done about it

        • The Fairy Godmother 11.1.1.1

          In the last Local Body Election in my area – a Labour Stronghold you could tell which were the empty properties. They were often the ones with the hoardings for one of the right-wing tickets.

  12. The money is going to exactly the people it was directed at. The uber-wealthy speculators

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