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.