11 Jul 2016

Govt not sold on Labour's housing plan

5:57 pm on 11 July 2016

The government is dismissing Labour's new plan to bring down soaring house prices as "underwhelming", saying it is basically what it itself intends to do - with a few tweaks.

Sold sign outside a new house being built in East Auckland

Photo: RNZ / Claire Eastham-Farrelly

High levels of migration are still the elephant in the room, however, particularly in light of the comments made by the Reserve Bank last week, urging the government to consider what impact that's having on the housing market.

Labour's package, announced on Sunday, included:

Senior government minister Steven Joyce described the package as "underwhelming".

"They're talking a huge game, lots of bluster about what they'd do and actually basically they come out with an endorsement of the government's current programme with a few tweaks."

In his speech, Mr Little said a Labour government would "reform Housing New Zealand", so it would not be "making a profit off the most vulnerable", and would not require an annual dividend.

Mr Joyce said Housing New Zealand had already told the government it would not be paying it a dividend for the next two years, as it ramped up its house-building programme.

"So in effect, there's no difference there at all, he's just pushing around the deckchairs.

"On the one hand, he wants to turn Housing NZ into a ministry, and then he wants to create a new sort of Housing NZ, so go figure."

The May Budget showed Housing New Zealand paid a $109 million dividend in 2015, with forecast payments of $38m in 2016, and $54m the year after.

Labour's finance spokesperson, Grant Robertson, said that was contradictory to what Mr Joyce was saying.

"I just think Steven Joyce is just making things up as he goes along, National's really panicking in response to Labour's comprehensive housing plan.

"What we know is the National has extracted dividends from Housing New Zealand over recent years and it's quite clear that National has seen Housing New Zealand as a cash cow in the past."

Mr Little defended the policy to create a stand-alone housing agency.

"Because, at the moment, we don't just have a shortage of houses, we have an urgent situation so we need the means to break through some of the barriers, get the work done.

Andrew Little announces Labour's affordable housing policy in Auckland.

Andrew Little announces Labour's affordable housing policy package in Auckland on Sunday. Photo: RNZ/ Todd Niall

"And it's not just about building the houses, it's about making sure that the facilities and the community interests are there as well."

The shortage was in affordable homes, and for first-home buyers, Mr Little said.

"You look at the proportion of Auckland house sales going to first-home buyers, it's at the lowest level in many, many years.

"They're the ones who are being shut out of the market, they've got to be given priority, which is what the plan does."

Anyone buying one of the affordable homes under the Kiwibuild programme would have to live in it for at least five years; if they sold it before then, they would have to repay the capital gain to the government, Mr Little said.

Mr Little told Morning Report today he expected the plan would reduce house price rises in the long run to around the level of inflation, which he said was what should be happening in a proper, stable economy.

Finance Minister Bill English said there was nothing about the policy that the government would adopt and he was not sure how Labour would even achieve it.

"A real problem with the Kiwibuild policy that's been mentioned; $2 billion will build 4000 houses - they'll have to show how they're going to get to 100,000."

Migration question still open

Last week, Deputy Reserve Bank Governor Grant Spencer urged the government to look at migration, and the impact it was having on the housing market.

Mr Little said one of the issues was the "rapid rise" in the number of work permits, which he acknowledged was a problem.

"It's an issue that we would look at, that we shouldn't be increasing the number of work permits when the economy's slowing, so we would gauge that depending on the state and the strength of the economy."

Mr Joyce said the government did not intend to change its approach.

"The bulk of the change that's occurred is because of Kiwis that aren't leaving and Kiwis that are coming home and also Australians moving here, and that's all good because of the economic opportunities in this country."

New Zealand First leader Winston Peters said there was no point talking about supply without looking at the demand created by immigration levels.

"Just because a whole lot of people in politics, and society and dare I say it the commentariat, don't like the substance of this debate is not a reason we should put it aside.

"It is just kidding people that you can bring in the number that they're bringing in, the population of New Plymouth every year, and provide the housing numbers that Labour for example is talking about or anyone else talks about."

Not a capital gains tax

After the last election, Labour dumped its capital gains tax policy.

Mr Little said extending the so-called "bright-line test" from two years to five was quite different to its former policy.

"Capital gains tax is more widespread, it's much more crude.

"The promise is to review the tax system, look at all those issues of fairness, but in the meantime we've got this major issue of speculators in the property market."

Labour would include negative gearing, which allows investors to write off any losses they make in property investment against the rest of their income, in its broader tax review, if elected to power.

Mr Little was asked why Labour did not decide just to do away with negative gearing altogether.

"The target is speculators, we're not trying to get the Mum-and-Dad long-term investors who hold on to a house for 25 years. It's those who are in the market for a quick buck, and we want to make sure that whatever rules we develop are focused on them and them alone."

Mr Joyce said Labour was obviously backing away from doing anything about negative gearing.

And he said National would not be reconsidering its own position.

"Well, we have a broad-based tax policy in New Zealand where people are taxed on all their different activities and their gains and losses, so it would be a big shift away from that."

Get the RNZ app

for ad-free news and current affairs