Counting down

June 30, 2019

David Farrar has been doing a regular count-down on what’s required for the government to keep its KiwiBuild promise:

I don’t usually gamble, but am confident to wager they’re not going to make it, even with all the new ministers.


Labour pains National delivers

January 31, 2019

The National Party will put an end to tax bracket creep:

A National Government would link income tax brackets to inflation, ensuring income taxes are adjusted every three years in line with the cost of living and allowing New Zealanders to keep more of what they earn, National Leader Simon Bridges says.

“New Zealanders’ incomes are struggling to keep up with the rising cost of living because this Government is imposing more red tape and taxes,” Mr Bridges said in his State of the Nation speech in Christchurch today.

“Over the next four years, New Zealanders will be paying almost $10,000 more per household in tax than they would have been under National. The Government is taking more than it needs, only to waste billions on bad spending.

“On top of that, by 2022 New Zealanders on the average wage will move into the top tax bracket. That’s not right or fair. So in our first term National will fix that by indexing tax thresholds to inflation.

“We will amend the Income Tax Act so tax thresholds are adjusted every three years in line with the cost of living. That will mean that within a year after every election, Treasury will advise the Government on how much the thresholds should be adjusted for inflation.

“This would prevent New Zealanders from moving into higher tax brackets even when their income isn’t keeping up with the rising cost of living. It would ensure New Zealanders keep more of what they earn to stay on top of rising costs of living such as higher prices for necessities like petrol, rent and electricity.

“We will include a veto clause so the Government of the day can withhold the changes in the rare circumstances there is good reason to. But it will have to explain that decision to New Zealanders.

It would take a very serious change in economic health, or a very stupid government, to do that.

“The changes would make a real difference. Assuming inflation of 2 per cent, someone on the average wage would be $430 a year better off after the first adjustment, $900 after the second and $1,400 after the third.

“A family with two earners – for example, one earning $80,000 and the other $40,000 – would be $600 better off a year after the first adjustment, about $1,300 after the second and $1,900 by the third.

“That’s more of their own money in their own bank accounts.

“The first adjustment would prevent Kiwis from paying an extra $650 million a year in tax based on today’s estimates. We can afford that by managing the books prudently and spending wisely.

“We will also do more on tax – but add no new taxes – and I’ll continue talking about our plans between now and next year’s election.

“National is committed to helping New Zealanders get ahead. This step means that as well as cancelling new taxes this Government has piled on, we won’t allow future governments to use inflation as an annual tax increase by stealth.” 

This is a very positive start to the political year from National and a stark contrast to Labour’s which featured what amounts to an admission of failure on their flagship policy:

KiwiBuild’s “interim” targets for this electoral term have been scrapped as the Government recalibrates the programme.

Prime Minister Jacinda Ardern and Housing Minister Phil Twyford told media from their caucus retreat on Wednesday that their commitment to building 100,000 affordable homes over the next decade remains intact, but the interim targets for this term did not.

The Government has been dealing with the fallout from an admission by Twyford that the Government would not be able build 1000 of the homes by July 1, its first interim target. Instead it expects to build just 300.

The KiwiBuild policy aims to build 100,000 affordable homes for first-home buyers over 10 years, half of them in Auckland. . . 

They expect us to believe they can build 100,000 affordable homes in a decade when they can’t build 300 in the first year?

Labour is planning to waste money on houses for a relatively few people earning well above the average income. National has committed to letting people keep a bit more of their own money.

It gives voters a very clear choice – Labour pains over housing or National delivering clear policy to end bracket creep.

 

 


KiwiBuild is KiwiFail again

January 24, 2019

A report from the New Zealand Initiative calls KiwiBuild Twyford’s tar baby:

  • Relative to income, dwelling prices in New Zealand are among the highest in the OECD. This is New Zealand’s housing affordability problem in a nutshell.
  • High population-driven demand growth has collided with inflexible supply-side constraints.
  • Land prices have sky-rocketed, but construction costs are also too high.
  • KiwiBuild cannot hope to materially increase home ownership proportions – the original 2012 objective. Additional housing, if achieved, will likely lift renting and ownership more or less in tandem.This report explains why KiwiBuild – defined as the government’s pledge to build or deliver 100,000 homes within a decade – fails against all the objectives set for it:
    • It is not about social housing to help those at the bottom.
    • Nor is it about helping struggling first-home buyers. They cannot afford KiwiBuild homes at current costs. KiwiBuild is for the relatively well-off.
    • It is intended to be subsidy free, since wealth transfers to the well-off are hard to justify. But its inducements to attract private developers are subsidies.
    • Even more paradoxically, if there were no subsidy, there would be no gap for KiwiBuild to fill. Private developers will meet unsubsidised market demand.
    • It cannot hope to increase the housing stock sustainably. Only enduring lower property prices can induce people to own more dwellings than otherwise. KiwiBuild reduces neither land values nor construction costs at the margin.
  • The enduring effect of the policy is a changed composition of the housing stock by decree rather than by public demand.
  • KiwiBuild is floundering having no clear public interest objective. It constitutes a massive political and bureaucratic distraction from what is really needed – direct action to reduce land values and construction costs.

The government should not be in the business of subsidizing property developers and people on well above average incomes.

It purports to be focused on helping the poorest and most vulnerable.

Instead, policies like KiwBuild and fee-free tertiary education waste millions on people who aren’t poor, many of whom are or will be wealthy.

Not only is it a bad policy, it hasn’t a show of meeting its target to build 1000 houses by July.

KiwiBuild is KiwiFail again.


KiwiFiasco

December 10, 2018

Last month we learned only seven of Wanaka’s KiwiBuild houses sold.

Last week we learned Housing Minister Phil Twyford hadn’t bothered to run his decision to substantially reduce the penalty KiwiBuild rule breakers would face face for flipping homes past the Prime Minister or cabinet.

We also learned five Auckland KiwiBuild houses failed to sell off the ballot and the runners-up didn’t want them either.

Mike Hosking sums it up:

• A housing scheme that doesn’t have enough money put in, in the first place. That’s Treasury’s assessment.

A housing scheme that won’t contribute anywhere near what the Government said it would to the market. That’s from Treasury and the Reserve Bank.

• A housing scheme that isn’t even close to getting people locked out of the market into a home, given the prices.

• A housing scheme in parts of the country that’s actually more expensive than the open market prices already in play.

• A housing scheme that doesn’t actually have any real demand, given they extended the ballot in places like Wanaka.

• A housing scheme with some homes in Auckland now on the open market, due to the fact the people who won the ballot didn’t want the property, and the runners up didn’t either.

• A housing scheme that is unilaterally being fiddled with, with our money, by a bloke whose head is so big it can’t get through a door.

• And now, a housing scheme that because they changed the rules unilaterally, now needs a dedicated team to monitor who is selling their houses for the profit they’re allowed to keep due to the changes of rules, and that team costs upwards of half a million dollars a year.

That was before Saturday when we learned that the chief executive of KiwiBuild, Stephen Barclay, had resigned a month ago, after just five months in the job, but no-one bothered to let the public know.

KiwiBuild is turning into KiwiFiasco.

 

 

 


KiwiCon lottery gets better for lucky few

November 8, 2018

KiwiBuild – or as it should be KiwiCon –  isn’t popular in Wanaka:

The South Island’s much-heralded first foray into KiwiBuild home ownership has been a bit of a fizzer — at least so far.

So few prospective homebuyers have entered the ballot for 10 KiwiBuild house and land packages in the Northlake suburb of Wanaka that the developer has asked to extend the ballot period by 10 days.

The ballot was due to close on Thursday.

KiwiBuild senior media adviser Mark Hanson said yesterday 20 ballot entries had been received.

‘‘Some houses have received no entries and the developer has asked us to extend the ballot to Sunday, November 18, to allow for people who they are working with more time to work through their pre-qualification process.’’ . . 

And Housing Minister Phil Twyford has backed down on penalties for those who flip KiwiBuild properties early:

Documents obtained by Newshub show owners will no longer have to give up all capital gain they make on the house if they sell it within three years. . . 

When Labour announced the policy in 2016, its plan to stop buyers reaping windfall gains was they must not on-sell their home for five years – or else they had to hand all the money they made to the Government.

That’s now changed to if buyers sell within three years, they must give up 30 percent of their profit. . .

There is big money to be made. Based on the last three years, the average price of a home in Papakura has risen from $569,000 to nearly $700,000, meaning house owners could have made $130,000 in the last three years.

That means even after the 30 percent penalty applied by the Government, they’d still pocket more than $90,000.

A $90,000 profit for selling up after three years – that’s very easy money.

But you don’t have to wait three years – you will get to keep 70% of the profit it you sell the very next day.

This is not the first KiwiBuild backdown we’ve seen. Since being in government, Mr Twyford has changed the price caps, the eligibility criteria and now this – a change which has the potential to leave KiwiBuild open for abuse.

With each announcement the KiwiBuild lottery gets better for the lucky few who win.

The government keeps saying KiwiBuild houses aren’t subsidised but if the government isn’t putting money in why would the owners have to hand over any profit if they sell?

At the very least there’s an opportunity cost with money spent on this policy not available for spending on the many areas of much greater need – and that’s people on well below the income level for those who qualify for the KiwiBuild lottery.

You can follow progress on the scheme here – so far only four houses have been sold.

 

 


Growing middle income welfare

November 1, 2018

Housing Minister Phil Twyford says KiwiBuild houses aren’t for the poor:

​KiwiBuild isn’t intended to help low-income families, Housing and Urban Development Minister Phil Twyford says, in the face of criticism about some of the scheme’s first buyers. . . 

To qualify for a KiwiBuild house, buyers must have joint income up to $180,000 as a couple, or $120,000 as a single person.  Buyers must be first-time purchasers or in the same financial situation as first-home buyers.

KiwiBuild houses sell for up to $650,000, for the largest homes in Auckland.

Twyford said KiwiBuild was aimed at building affordable houses because market failure has led to only 5 per cent of houses being built in this price range in recent years. 

“KiwiBuild is aimed at those families who years ago would have expected to own their own home but have been locked out of the market because of the national housing crisis,” he said.

“It is not a programme aimed at low-income families because they may not be able to service a KiwiBuild mortgage.” . . 

If the houses aren’t for the poor, why are taxpayers’ paying for them?

Houses that are only affordable for people on well above average incomes are affordable in a very limited definition of the word.

People earning that much ought to be able to afford a house without taxpayer assistance.

It might not be brand new. It might not be in the best condition. It might not be in a really desirable suburb. But it would get them on the housing ladder which is a big step above anything low income people could afford.

Labour purports to be the party that helps the poor but its policies increasingly use taxpayers’ money to help people who aren’t poor, boosting the growth of middle and even upper income welfare.

 

 


KiwiCon

October 29, 2018

The new owners have moved into the first KiwBuild house.

. . .”It feels amazing, it feels like we have won the Lotto,” said Jayne, who at 25 and about to graduate as a doctor, was thrilled at winning a ballot for one of the first 18 KiwiBuild homes at McLennan Park.

Jayne and her 24-year-old partner Ross, an online marketer, were on the verge of giving up hope of getting on the property ladder in Auckland before “getting lucky” with KiwiBuild. . .

This is Lotto at the taxpayers’ expense.

The new homeowners have won but Auckland Action Against Poverty isn’t impressed:

 While the Government prioritises its flagship home-ownershp scheme, tens of thousands of people continue to be homeless in Aotearoa, with no hope of being able to ever afford living in one of these Kiwibuild homes. Auckland Action Against Poverty warns that the focus on building so called affordable private housing, subject to market speculation, will further exacerbate the housing crisis, instead of fixing it.

“KiwiBuild homes are out of reach for the working poor and the unemployed, who are the ones facing the real brunt of the housing crisis. With a price-tag of half a million dollars, KiwiBuild homes are a future speculator’s dream”, says Ricardo Menendez March, Auckland Action Against Poverty’s Coordinator.

We echo the concerns of Monte Cecilia Housing Trust’s Bernie Smith, who called KiwiBuild a ‘community trainwreck’. Displacing thousands of public housing tenants in order to build private housing in public land is a form of partial privatisation of public land, and will cause distress for the tenants evicted.

“The planned net increase to the social housing stock will only be marginal. In South Auckland, the Government is planning to build 10,000 new homes, 3,000 being state homes, which will be built after demolishing 2,700. This means that altogether only a few hundred additional state homes will be available for our fast growing homeless population.

“The Government needs to recalibrate its priorities and instead focus on building far more permanent social housing than it is currently planning. For that to happen, Housing New Zealand needs to be properly resourced and public land needs to be used to house people in public housing, not unaffordable private houses.

“In a few years time we’ll have state led gentrification, with middle and high income earners being able to access some of the KiwiBuild homes while those at the bottom continue to struggle with fast rising rents and lack of social housing.

“We are calling on the Labour Government to get its priorities right and focus on the creation of social housing, instead of entrenching housing unaffordability”.

The price of the house and the age and occupation of the new owners make KiwiBuild look like more middle to upper income welfare.

If this young, professional, childless couple fit the criteria for a brand new home subsidised by taxpayers, then the criteria is wrong.

Yes it’s hard for people to buy any house in Auckland, and lots of other places. But why is helping people earning well above the average income into their own home a higher priority than meeting the needs of poorer people?

Mike Hosking calls it a con:

We may have discovered the crux of the KiwiBuild problem through some new figures from CoreLogic.

The median price paid by first home buyers for a home, for example, in Auckland, is $699,000. KiwiBuild do them for $650,000, so yes a saving, but not a lot.

What we are discovering here, is that the Government doesn’t appear to be able to do anything the market already isn’t. . . 

The real issue here – and this has become clearer and clearer with time and experience – is not the price of the KiwiBuild home, but the affordability.

At $650,000, you can call these homes anything you want. But affordable, for most, they are not.

Affordable for higher earners, a struggle for middle income people and the poor would need to win Lotto to afford them.

It’s called KiwiBuild, it should be KiwiCONstruction with the empahsis on con.

I don’t blame the couple for playing the game but do blame Labour for bad rules and bad policy.

 

 


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