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Polity: Smoke and mirrors on housing

Written By: - Date published: 12:11 pm, August 25th, 2014 - 14 comments
Categories: housing, national, same old national - Tags: , ,

polity_square_for_lynnReposted from Polity.

Over the weekend, National said it would help 90,000 people buy their first home in the next five years. For this post, I’ll leave aside the macro-effects of their policy. (Short version: addressing a supply-side problem on the demand-side is a band-aid, not a solution). Today, I want to talk about smoke and mirrors.

National’s policy says first the 90,000 home buyers can receive up to an extra $20,000 per couple – as a grant, not a loan – to help them buy their first home. There are a few other bits to the policy, too, but this was the headline grabber.

$20,000! Wow, that is a lot of money! And that eye-grabbing headline number was dutifully reported, with graphics and everything, on at least one of the TV channels.

But then there’s the fine print: to get $20,000, you have to have both been in KiwiSaver for at least five years, you can’t be earning over $120,000 between you, and you have to be building a new home.

Almost nobody will get it. In fact, National admits that the top grants will only be available to one in nine people the scheme touches.1

So National’s own fine print takes us from “you can get up to $20,000!” to, at best, “11% of qualifying couples get up to $20,000.”


So how much help does the policy provide on average? That seems like a pretty important number, but not one National wanted to share.

Here’s an easy way to calculate it. National says the entire policy will cost $218 million over five years, and help 90,000 people over that same period. So the average per person cost to the government is $218 million divided by 90,000, which is $2,422.That is the average per person. $2,422. Take out administration costs and the like, and the average will drop to little more than $2,000 each.


How much difference will this make to housing affordability to young New Zealanders? $2,000 a pop in a market where house prices are ballooning by tens of thousands each year? Not much.

Typical National. Long on glitz. Long on smoke. Long on mirrors. Short on actually helping people.

  1. It was not clear whether this category included only the people looking to build a home, or whether it also included couples that qualify for larger grants but decide to buy an existing home instead. I have given National the benefit of the doubt on this. Because I am generous like that.

14 comments on “Polity: Smoke and mirrors on housing ”

  1. mickysavage 1

    And, from the you read this right file, Josie Pagani nails the argument with her NZ Herald column from today.

    If Labour had announced a policy to hand out free money to house buyers, it would be accused of being fiscally stupid and economically ignorant. They would have been accused of throwing around money we don’t have.

    Handing out money without increasing the supply of housing will simply put up prices even more. The economics of National’s plan don’t stack up.

    In Auckland an average working family can’t afford to buy the average house. National is coming face to face with the reality of its own philosophy. It operates the economy for absent landlords, not for working people or families. Its belief in the market has collided with market failure.

    We are seeing the beginning of the end of the affair with John Key. Chucking around a couple of hundred million dollars over five years won’t make Auckland housing more affordable, but it will make him look even more like just another politician.”

  2. crocodill 2

    “The property ladder” – there’s your problem right there. Any party talking about affordable housing that also condones the “property ladder” or tries to soften it by saying it “gives young couples a leg up on the property ladder” needs a goddamn good headbutt. It’s like watching a dog chase it’s tail. Will NZ’s intelligent pollies please stand up.

  3. emergency mike 3

    Anyone remember when David Cunliffe announced that families with new babies would get an extra $60 per week, but neglected to mention that those already on paid parental leave won’t qualify? I seem to recall the media going spastic over that. Looks like it’s time for Patick Gower to write another rabid woe is the world why do politicians lie my anger overfloweth article.

  4. dv 4

    The numbers are crap!!!

    90,000 *20,000 = 1,800,000,000 (1.8 billion)

    1,800,000,000 – 218,000,000


    So there policy is really going to cost 1.8 billion
    NOT 218 million
    Thus there a shortfall of 1.582 billion

    • McFlock 4.1

      as polity said in their post, your 1.8bil is predicated on everyone getting the full 20K.

      National only expect to spend $218mil, so dividing that by 90,000 applicants means an average of $2422.

      Now, it gets worse. As the linked news article said “But officials expect only about 10,000 first-home buyers to qualify for the full cash grant”. So that’s $20,000 * 10,000 = $200,000,000.

      So of the remaining $18million, 80,000 applicants will get $225 on average?!

      Sounds a bit fucked to me.

  5. RedLogix 5

    Well if one in nine do qualify for $20,000 and the mean value is $2,422 – then the median has to be a lot lower than this.

    So low as to be meaningless.

  6. vto 6

    the policy has a similar number of smoke and mirrors as a bank

    funny that

  7. MrSmith 7

    Headline: National now proposing to ‘Print Money!’

  8. Bob 8

    My god, this release is as flawed as Labour’s baby bonus!
    What the hell has happened to politics in this country, has everyone forgotten how to use a calculator!

    Edit: Sorry, I didn’t read the policy correctly, this is over and above the existing HomeStart loan (of $3,000-$6,000) and they have only said 90,000 people are ‘eligible’ not 90,000 will take it up, so this policy does make sense and it ‘can’ add up.

  9. Draco T Bastard 9

    How much difference will this make to housing affordability to young New Zealanders? $2,000 a pop in a market where house prices are ballooning by tens of thousands each year? Not much.

    Going to be great for those ultra-rich people who don’t pay the top tax rate though.

  10. Draco T Bastard 10

    And this is what Steve Keen thinks of National’s subsidy to the rich.

  11. Paul 11

    The NZ Herald asked its readers their views on the Nats housing policy.
    Seems like the only people who like it are the Nat MPs and their media puppets…..

    Here’s a sample of the most popular comments…

    “So, after years of telling us that there is no housing crisis, here comes National at election time telling us how they can fix the ‘problems’ that exist in the housing market.
    Their solution is laughable. Making a little more credit available will just increase prices. And besides, the top amount you can get – if you meet all their criteria – is $550K. That gets you two-thirds of sod all in the Auckland housing market.
    New ‘starter’ homes at the much-heralded Hobsonville Point development start at $770K.
    Why don’t they just promise to do what Labour is promising – to actually build affordable new homes.
    This policy is a lot of noise with no promise of real results. Fail.”

    “It wont address the issue. It will just push the house prices up, and still be a haven for property speculators. Once again, this government is just tinkering around pretending to do something to address the real issue.”

    “It is a typical answer from a market/growth driven Government. This solution is still avoiding the market driven problem of overvaluation that has caused finance collapse all around the world – of course it is good for banks and merchant bankers – another boost to ponzi economics.”


  12. Herodotus 12

    He are a few ideas as both national and labour have NO idea on this topic.
    Allow overseas buyers to be only allowed to purchase new houses, no demolished and rebuild.
    Overseas buyers have stamp duty applied to purchases. This gives govt money on the day of purchase, instead on disposal.
    Instead of Labour selling state owned assets or public lands:land that HNZC owns, build state houses reduces the need for HNZC renting from the private, and any vacant govt land to be assessed for its ability to be used to increase HNZC stock. Selling public land should NoT be an option.
    Reduce or eliminate interest as a deductible tax expense. Govts use incentives or disincentives for many forms of investment, disincentives rentals
    Instead of CGT target those who have been trading and cannot supply a business case for negative equity finance and charge the coy rate.
    IMO labours policy is superior to nationals but any alternative policy would be superior !!

    • Colonial Viper 12.1

      looking good to me. Something which encourages development out in the regions as opposed to Auckland All The Time wouldn’t go amiss either.

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