New Zealand teamed up to form a 5 million team to beat Covid. How is it that only 1% of them get rich while more and more Kiwis consider home ownership to be out of reach?
The combination of lower interest rates, loose lending rules for investors and our successful response to the Covid crisis has led to a boom in property prices. If you own luxury homes or a range of rental properties, sit nicely while the market drives up your property values.
Indeed, 2020 has proven “spectacular” for real estate agents, reports the Herald Today, who started the year on fears of an economic downturn and ended it with record sales. Even in the middle of the recession, the real estate market proved unsinkable.
But if you don’t already own a home, your chances underwater have increased even further. If we don’t fix this, the legacy of our unity will be an even wider gap between rich and poor in the face of Covid.
Everyone should have a warm, healthy, safe, and affordable place to call home. Instead, homes are being confiscated from investors – too many of them are charging too much for homes they cannot live in.
The real estate crisis destroys the kiwi dream. Jacinda Ardern’s government is being punished by the new generation of voters for failing to act to address this.
The good news is that it is possible.
With shared goals and strong government leadership, we beat Covid. We can use the same spirit to overcome the real estate crisis.
New house construction is now in line with population growth, but the 70,000 shortage left by the previous government needs to be addressed.
Building permits and construction are at record levels with tens of thousands of state houses, KiwiBuild houses, and market houses built or built en route through Kāinga Ora – but many more are needed. National debt is now said to be USD 25 billion below expectations in the elections. It should use some of this to help build more houses faster.
The councils need to adopt the government’s urban development strategy to allow for densification and reforms to the Resource Management Act need to be completed.
Speculators who leave residential lots empty and houses empty should be charged penalties to keep land banking from paying. Prices should only be calculated for the value of land, not the value of buildings, to promote densification.
The government shouldn’t be afraid to use their new compulsory labor powers to take property away from land bankers sitting on it.
Remove the tax break from investors
An investor can claim the mortgage interest they have paid as a tax deduction. a homebuyer cannot. This enables them to raise property prices above what home buyers can pay for. In total, investors receive one billion dollars a year for this subsidy.
We can level the playing field by capping this deduction to $ 1,000 per household and giving it to all homeowners. It’s a small hand for first-time buyers and would put big speculators out of business.
Being a landlord should be a business, not a hobby. Landlords should require licenses (which can be revoked if they break the law). Rent standards should be strengthened through a second round of healthy home standards and further improvements to tenancy law.
This is all doable – but it will require leadership.
The government was hit by the sudden spike in house prices: in May, the Treasury Department informed them that prices would fall. But it has also given them the opportunity to adopt new, courageous guidelines.
Jacinda Ardern is in top form in a crisis. Their willingness to make big decisions and their ability to communicate their underlying values to unite the public are unparalleled. She has to use these skills to make 2021 the year we overcame real estate crisis like Covid-19.