Labour’s housing plan is much better

• mickysavage
• 10 years ago
• Categories: election 2014, housing, john key, national
• Tags: kiwisaver

So National has announced its flagship policy, enhanced assistance for first home buyers through increased grants through Kiwisaver.

It is interesting that policies that Labour introduced and National opposed such as Working for Families, interest free student loans and Kiwisaver have all become mainstream policies and National is now afraid to take away their benefit, although some tinkering has reduced their effectiveness.

And National is using a variation of one of these mechanisms to seek popular support.  This is all part of the process where National wants to appear to no longer be the servants of the rich and powerful although that reality remains.

Some comments based in part on twitter feed responses which I have read so far:

• The policy spend is small, only $218 million over 5 years.  That is less than $45 million a year.  Labour’s Kiwibuild capital commitment in the first year is $195 million and Universal Kiwisaver will cost $141 million in the first year under Labour’s fiscal plans.
• The numbers are not huge.  Nick Smith estimates that the policy will result in a further 10,000 grants being made each year.  New house builds will be up to the market.  Labour’s Kiwibuild policy is to build 10,000 houses each year for the next decade.  And a variety of other policies including a Capital Gains tax will gradually ease crushing house prices in places such as Auckland.
• The policy will disproportionately help those earning more as the size of the grant will be greater depending on income.
• The policy only addresses demand without the supply of houses being increased and is therefore likely to drive prices up.
• The extra $20,000 represents about 4 months worth of Auckland’s house inflation rate for the past 5 years.  Get that?  The benefit will soon be lost to continued inflation.

Like many other of National’s policies they are using a slight increase in funding for existing programmes to claim that they are doing something about a significant problem.  But there is no real thinking in the policy and apart from those fortunate to be earning above average wages the policy will not do anything about affordability.

So what would you prefer to have?  10,000 new houses built and many jobs created or more house inflation?