Yesterday’s announcement on housing was mere tinkering.
It broke the promise of Grant Robertson that there would be no changes to the bright line test and Jacinda Ardern’s promise there would be no capital gains tax while she was leader.
What makes it worse is that the broken promises will do nothing to solve the housing crisis. It could well decrease the supply of rental accommodation and will lead to increased rents.
That pressure on rents will be compounded by the decision to single property owners out by ending their ability to claim the cost of interest against their income for tax purposes.
This is not as the government asserts, and some in the media parrot, closing a loophole, it’s a change to tax law that has until now applied to every business.
Higher costs for landlords will inevitably be passed on to their tenants.
Increasing income caps and house prices for First Home Grants is a token gesture when house prices are so high and if it does anything it will add fuel to the fire. Anything which makes it easier for people to buy a house without increasing the supply will push up prices.
At first glance the infrastructure accelerator looks good, but will it be effective?
. . .However, Kiwibank chief economist Jarrod Kerr said the policy changes simply “tinkered at the edges”, and were not enough to address the systemic supply issues that have caused New Zealand’s house prices to soar beyond the reach of many.
“It was pretty disappointing to be honest. Some of the ideas are good, but the size is pathetic. It’s a drop in the bucket and it’s a leaky bucket at that.”
Kerr said the tool with the most potential was the $3.8b infrastructure accelerator, which is intended to help local councils create the necessary services infrastructure – plumbing, roads, power – to unlock remote land for property development.
“I think the idea is great; we need to get funding into councils to sort out woeful infrastructure and get it to areas that need to be developed. But the fact that it only got $3.8b means that it’s going to be ineffective – $3.8billion spread across all our councils is a rounding error.” . .
The whole package is underwhelming, it’s just broken promises and bromide that ignore the root cause of the crisis – a lack of supply and the foundation for that is an unwillingness to cut the red tape that holds back development.