OPINION
Tani Newton
New Zealand’s economy has been pulverised in the last six years, and it is nice to be able to hope that it will get some relief. I say this with hesitation, as I have no liking for big government, whatever colour tie it wears. But even a modicum less interference can make a big difference.
The housing crisis is one of the most significant issues currently affecting our society. New Zealand is a prosperous country, with fertile soil, hard-working people, ample land and abundant resources. Yet almost four-fifths of the land is uninhabited, and thousands of families are homeless.
As matters now stand you can buy a section and then spend two years getting consents and permits before a stroke of work can be done to build a house. This is not practicable: people can’t put themselves into a state of suspended animation while they wait to have somewhere to live.
It’s no better for investors. Under the current “bright-line test”, if you buy an investment property, improve it and sell it within ten years, you can be charged a punishing 39 per cent tax on any profit made. This makes property investment unattractive, and that’s deliberate: according to the Labour Party’s website, driving investors away will “make things a little easier for first home buyers” and “help more Kiwis into homes”. This somehow ignores the fact that there aren’t enough homes to get into. It also ignores the fact that hundreds of thousands of New Zealanders are in no position to buy a house and want and need rental accommodation, 85 per cent of which is supplied by private investors.
You might decide to buy an investment property, rent it out for 10 years and then sell it. But if you’re paying off a loan on it, the Labour Party decided that you shouldn’t be able to claim your mortgage interest as a tax deduction. (And after 10 years, you know, you’d have to renovate it all over again.) Add to this the burdensome cost of bringing houses up to the Healthy Homes Standard (which state housing doesn’t have to meet) and it’s not surprising that investors take their money elsewhere. In the worst cases, houses have been left standing empty because landlords couldn’t afford to bring them up to the required standard, and tenants couldn’t afford the higher rent they would have had to pay to support it.
The new Government has undertaken to bring the bright-line test back to two years, restore tax deductibility for mortgage interest and more or less force local councils to make land available for housing. They also propose to cut back red tape and improve infrastructure – rather more ambitious projects.
We’ll probably never know what a free market could have achieved. But if even some of this gets done, it could mean a lot more houses soon. And for the thousands of Kiwis living in cars, in garages and in emergency accommodation, that can’t be soon enough.