A villa on Great North Road, Avondale, which sold for nearly $2 million recently.

Labour’s recent moves on housing were an embarrassment, writes Matt McCarten, and won’t do anything to fix housing affordability.

Our housing crisis is a result of political gutlessness and self-interest.  

The hand-wringing about the housing affordability is all bunk. We used to believe the Kiwi dream was to own our home. But, over the decades, it’s become, instead, a scheme where those fortunate to own a property have been offered cheap loans to buy rental properties for no money down. 

In the not-too-distant past, stamp duty for property was abolished, owners got to write off their property expenses against their own taxes, and capital gains were tax free. 

As a consequence, money poured into property and prices went through the roof. This outcome now makes it impossible for working class people to get a home. Yet current property owners can just borrow more cheap money to buy multiple rental properties. 

The simple truth is the well-heeled middle classes are delighted with how things are going. Property owners can make more money off their renters and their capital gains without doing a scrap of work. 

The average house in New Zealand is now $815,000. In Auckland it’s $1.2 million. And rising spectacularly. 

According to the International Monetary Fund (IMF) in 2016, New Zealand already had the highest home prices to income in the world. It hasn’t changed. The average weekly rent for a studio in Auckland is $380. The average room in a flat is $200 before utilities. 

How does any worker save up a deposit on their average gross wage of $1000 a week? Remember half of workers earn less than that. 

Meanwhile, the government pays a rent subsidy to the landlord to keep them sweet. No amount of tinkering by the government or any earnest hand-wringing is going to change that reality. 

I note the rise of professional property managers to manage the renters. This allows squeamish owners to avoid seeing the struggle their tenants endure because of the high rents demanded.

Property prices are skyrocketing for one reason only. Owners can get mortgage rates for 3 percent to buy a property that is increasing by 20 per cent. So, there is a feeding frenzy. 

Mike Treen, in a recent Daily Blog article, writes that “this is all a direct consequence of government policies that give almost complete free rein to banks to create and allocate debt without almost any control”. 

This has been compounded, he adds, by the Reserve Bank printing money to buy bonds and drive down interest rates, giving banks virtually free money to lend to whoever they want.

It’s a no-brainer for any owner to join the queue at the bank. Banks have lent $6.6 billion — a whopping 57 percent increase in two years. Every time I hear politicians spout that the reasons are complex and the answers aren’t easy or simple, I want to reach for the bucket. 

There is a housing crisis — but only for the working class. It’s a bonanza for the owning class. Successive governments have pampered the property owners who get rich off the backs of their renters. They get rich without lifting a finger. It’s called bludging. 

When Jacinda Ardern is applauded by the rich because she won’t tax their unearned wealth, then she has to come up with how the working class, who pay the bills, are going to get a fair go.

Labour, under David Shearer, promised 100,000 homes. Ardern’s government abandoned that goal. Labour’s recent announcements were an embarrassment. They tinker. This government and the property class in this country won’t do anything that will reduce the house prices. 

No amount of smoke and mirror spin can cover the reality that few first home buyers can afford a home deposit while their wages remain low, and they currently spend up to and over half of their incomes on rent. And that’s not counting having to pay off student loans or pay into KiwiSaver. 

The only way we will fix housing affordability is to make it our priority for New Zealanders to have a secure home. It must not be about housing investments for those with excess cash. 

The market doesn’t help renters. Working people can’t afford house prices and most never will. In any event, families need to spend their money on their children rather than giving it to a bank. 

The immediate solution to the rent crisis is to deal with the tens of thousands of “ghost” houses in New Zealand where owners buy properties for capital gains purposes. They don’t even want tenants. 

The Auckland Council believes there are up to 40,000 empty properties in their region. That’s 7.3 per cent of the housing stock — an astonishing one house in every 14. 

According to an article in Newsroom by Cat MacLennan, Vancouver in 2016 put a 1 per cent tax on empty properties. In one year, rentals increased by 7 percent and new apartment rentals increased by 21 per cent. It was such a success they increased the tax rate. 

If we taxed empty houses at 2 per cent, we could solve our homeless problems overnight. It would reduce overall rentals too. How does any landlord justify rent increases when interest rates have halved in recent years and their capital gain windfalls are still tax free?

We must stop peddling the delusion about home ownership. The housing market does not work for the overwhelming majority of working people. The government is the only entity that can provide homes on any mass scale. The problem is the availability and cost of land, and building materials. 

Pat Snedden, the former chair of Housing New Zealand had a creative solution. Iwi have land they can’t sell or commercially use in most circumstances because of communal ownership. 

The proposal was to enter into long-term leases for nominal rates, and then build houses. In return, the iwi would have a number of the houses allocated to them. This works on so many levels. I understand iwi were queuing up with suitable land. I can only assume that people at the top got cold feet. 

A senior Chinese government representative told me that that unlimited home kitsets can be built in China and shipped here for a fraction of our prices. Local builders say they could erect them and finish a house within weeks of delivery. Without having to purchase land, the reality and timeline of affordable homes becomes obvious. 

And if we don’t have the local workforce, we can call on overseas builders who are queuing up to work here. Right now, we have 10 Chinese construction workers languishing in Mt Eden prison because they were working without visas on a building site. Go figure that immigration policy silliness.

An added benefit is that having a couple hundred thousand leased homes would make freehold homes much cheaper. More importantly, it will solve the housing crisis and provide every New Zealander a lifelong home. 

If working people had the choice of having a lifetime capped lease of not more than 25 per cent of their income, would they take it? Of course, they would. 

We hear vested interests speaking solemnly about the country not being able to afford this. But that’s nonsense. As a result of Covid, trillions of dollars are sitting idly in banks around the world. Lenders would fall over themselves to send our government billions of dollars at peppercorn rates. 

The solution is simple. The choice is clear. Either the government housing policy is to provide homes for all the people or it’s to maintain wealth opportunities for the few. The only impediment is the courage of our leaders to determine whose side they are on.

Did I mention that most of our MPs own more than one property? 

Matt McCarten (Ngāpuhi) is a unionist with a long involvement in politics, mainly as a political strategist and organiser with the Alliance and then the Labour Party, where he was formerly chief of staff. He’s based in Auckland.

© E-Tangata, 2021