Some way from ‘disruptive’ action

The financialisation of New Zealand houses, as a United Nations’ special rapporteur called it, will not be addressed by a capital gains tax. The potential wealth of too many voters is bound up in far too many properties for enough politicians to agree to impose it.

We know this because the current Government had the chance to further develop such a tax as it grappled with runaway house prices, housing unaffordability, and inequitable access to increasingly scarce homes. NZ First opposed it, and the Labour Party demurred.

Since then, there has been little sign of improvement. Price increases have slowed — but remain unpalatably high — in Auckland, but the housing squeeze has moved into regions where population-attracting economic growth and has outpaced the market’s ability to provide enough homes.

Supply and demand means southern property owners have enjoyed remarkable property value growth, their homes and rentals outstripping the value of their retirement plans and allowing them the chance to fund new investments and more comfortable lifestyles.

And why shouldn’t they? They have worked hard for what they have, they took calculated risks, and they have paid whatever was necessary to meet the seemingly countless rules and regulations there are, these days, to build or rent or extend or redevelop their properties.

The idea a capital gains tax would unfairly penalise these hard-working Kiwis — that such a tax would "socialise" their hard-won earnings — was such a strongly held belief that it was very quickly identified as electoral kryptonite. Neither of the big parties wanted anything to do with it.

The "Special Rapporteur on the right to adequate housing to New Zealand", Leilani Farha, was not here to look at how imposing such a guaranteed vote loser would almost certainly prevent whatever party endorsed it from forming the next Government. Her remit was much wider than that.

At the end of a 10 day visit this week, she said New Zealand’s housing problems were a significant human rights crisis with violations of the right to housing, health, security, and life. She praised the small gains made, including ramping up public housing, but said the crisis was still being fuelled by the speculative property market.

The Government could disrupt it with a capital gains tax; by further limiting the debt to income ratio; and by introducing a progressive refinancing scheme for primary homes to limit the effects of negative equity that could result from changes to taxation and mortgage lending.

It also should redirect efforts to provide alternative housing schemes for low-income and vulnerable groups, including targeted funding, finance and capacity building for iwi and Maori housing providers. Such providers, she said, needed significantly more support.

This is an interesting point that sits uncomfortably alongside the dead-in-the-water pitch for a capital gains tax. Last time, it was argued such a tax could help fund alternative housing solutions; now, such solutions will need funding from elsewhere.

The rapporteur makes other suggestions that may prove politically problematic, among them that tenant protections should be further strengthened beyond the proposed reform of the Residential Tenancy Act, to provide for security of tenure and regulated rent increases, and even rental freezes in tight markets.

The Government invited the rapporteur to New Zealand, and the Labour caucus will almost certainly be relieved a heavyweight third party sees the same problems they saw as they fought the last election. That relief may turn to concern, though, if the party faithful demand renewed action as they prepare to seek another term.

Her observations have, in effect, put New Zealand on notice as a country that has significant issues to overcome.

But progress will stall if change threatens property owners’ perceived right to self-determination, and encourages them to say so at the ballot box.