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Susan St John looks into the 'housing elephant rampaging across New Zealand society' and assesses potential solutions

Susan St John looks into the 'housing elephant rampaging across New Zealand society' and assesses potential solutions

By Susan St John*

Good policy requires first that there is a clear understanding of the problem to be solved. As 2020 draws to an end, the problem is SURELY unmissable. A housing elephant is rampaging across New Zealand society creating intergenerational havoc, making already well-off people enormously wealthy and leaving a growing number of families desperately poor, ill-housed, over-mortgaged and increasingly homeless.

Please let’s just deal with that problem and not worry for now that some people make money out of holding art or shares. Real resources not paper money is at stake here.  

The bricks and mortar and labour are totally misdirected, flowing to expensive owner-occupied housing, and hogging the resources needed for building basic houses. Rental housing is increasingly traded as a speculative commodity at the expense of secure housing for all as a fundamental human right.

A Capital Gains Tax would be a limited response as it would only apply to gains made on houses bought and sold in the future. In any case the government has taken CGT off the table along with any chance of a comprehensive net wealth tax or land tax. But doing nothing is JUST not an option. Extending the bright line test is like trying to close the stable door once the horse has bolted. Loan-to-value-ratios (LVRs) likewise could be changed to force new investors to hold more of their own money as equity in their houses but is also only tinkering.alue.

Should the government reintroduce stamp duty on housing transactions?    

I was astonished to find that on $1,000,000 house stamp duty in Australia is as high as $40,000 in some states. However when we look at Australia we find that it doesn't work very well there at all. It is highly inequitable as it imposes a tax only on those people who sell the properties while people who stay put escape. It provides an incentive for people to renovate or extend rather than trade upwards and move. It doesn’t appear to be the answer to New Zealand’s housing crisis. 

But we will have to do something. 

The latest research from Auckland University is very interesting (Betting on capital gains: housing speculation in Auckland, Department of Property). Authors Michael Rehm and Yang Yang base their analysis on the premise that legally, the responsibility to pay a tax on the capital gains on the sale of a property derives from the intention one had in buying the property in the first place. They found the vast majority of landlords consistently make losses on their investment properties indicating that their intention is to make tax-free capital gains. They are not serious landlords and their houses often poorly tenanted or empty. 

Clearly there is something amiss when tax consultants routinely advise on how to minimise taxable profits with fully deductible nominal interest and expenses that in practice add to the property’s value. Rehm and Yang argue that anyone who is making less than having money in the bank is, by definition, a speculator and should be taxed in full on the gains they make on sale. But fair as this idea sounds, like stamp duty, there are avenues for avoidance and it only touches those landlords who actually sell.  

But of course ALL landlords should be making AT LEAST as much from renting as they would if their money had been put on deposit at the bank. Disallowing nominal interest to be deducible would be a partial solution, but may create pressures for rent rises while not affecting the overinvestment in luxury owner-occupied homes nor encourage the desired reallocation of scarce building resources. The current problems require a more comprehensive approach.  

Perhaps the only way forward is the brave step of extending the income tax base with the risk free rate method (RFRM) – discussed in the Tax Working Group’s minority report.  

In brief, in the RFRM the individual’s aggregate holdings of all housing less registered first mortgages (net equity) is treated as if it had been invested at the bank generating a taxable income.  A per person exemption of net equity of say $1 million in the family home could apply so that the RFRM would not affect ordinary home-ownership.  

Genuine landlords in the serious business of renting may even be better off under the RFRM. They would be saved the accountants’ cost of complicated rental returns and disputes over what to deduct. This encouragement is fair enough as they are in the business of doing something useful. Rents may even fall. Other landlords whose properties lie vacant or who are deducting huge costs against their rentals will not be able to return tax losses and would be taxed fully on their net equity imputed income. If they sell there will be more supply for first home owners and that may begin to make home ownership a little more affordable.

Of course there will be problems around the edge but these don’t appear insurmountable. But please let's go into the new year with a plan!

*Susan St John is an Associate Professor at the University of Auckland Business School.

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I'd really need to see how the RFRM ties in with local rates (hint: do away with them) and income tax rates on labour (slash them) before I'd say it's a fantastic idea. I'd also have concerns about inadvertently setting a price floor for rents in the process. But this is about what the level of intervention we're going to need - actual plan aside - if we want to get back to where we should be (3x - 4x).

I personally like that author refers to the housing issue as an elephant in the room ignored. I already previously wrote the comparison of that to how things are done in NZ when it comes to housing ,
-when an elephant is small it fits the room easily , and hence ignored by the govt
-the elephant grows it is uneasy to ignore but some of the people inside say that it is actually cute(e.g. RE , investors and other people thinking they are benefiting from that)
-when elephant is huge small part of people inside become uncomfortable (understanding the elephant does not leave room for their kids)
-the elephant start smelling because it actually alive and poos sometimes
-to reduce the smell interested parties add some fragrance (media about wealthy NZrs ) and try to swipe the sh!t under the carpet
-smell becomes toxic and fragrance does make smell worse , and they try to swipe the elephant together with it's sh!t under the carpet
-when the carpet becomes small enough and everyone even outside the room (FHBs and potentially even any school kids) can see the elephant with the sh1t with the carpet on top of it - next stage is taking place:
---Bring Wider CARPET !!!! -- (QE, Funding for lending and bunch of other alphabetical terms meaning money printing)

Indexing PAYE to inflation, removing ESCT and tax on the first 15-20k of annual income all do make sense.
These reforms alone would cost the Crown several billion dollars in lost revenue.

Rates are a local tax for local services and based on the gross CV valuation. Quite different They are not tailored to the individuals income nor is any allowance made for mortgages. All properties pay rates, only home owners of significant net equity pay tax on their imputed net equity income. It is a national level tax and additional to any local government tax.

Property investors tell us they are providing much needed housing for people and it is a business. Both are incorrect. First, nearly all investors buy existing houses rather than build. If investors got out of the housing market,houses would not disappear as we have been told. Owner occupiers will buy them. Secondly, they tell us it is a business. Most business employ people and are in it to make money from production etc. Most landlords are in it for the heavy subsidies the Government give them through tax deductions etc. This is why I do not think interest for existing houses should be tax deductible. Remove incentives from rental properties and house properties will stabilise.

Investors buying existing housing helps set a price floor that gives developers the confidence to build new / makes it economically viable for developers to build new.


I never have really understood the kiwi desire for an investment property. We own an investment property ( a house inherited almost 10 years ago and shared with my brother) and I have to say its really been more hassle than its worth- even though we use a property agent and have had the same tenants for 7 years, there is the ongoing maintenance and constant government changes which we have complied with, all of which takes up time and effort on our part. We each make after tax about $6000 (which is about 3% against the inital value) however the wear and tear on the property means when this tenant moves out it will be time for a significant renovation (new carpet, bathroom and kitchen) which will use up most of the revenue generated over the last 9 years. Whilst since owning it the capital gains have doubled - I often suspect that if we had just sold up and put the money in a solid managed funds we would have made just as much with a lot less hassle. We wont buy a second investment property- the share market, commercial property and managed funds , all feel much more attractive these days and a lot less time consuming.


To be a successful property investor in NZ you have to not care about the tenant or property condition. You just have to sit back and watch the capital gains grow. When it's time to sell, at the most slap on some cheap bunnings paint. A FHB or first time investor will snap it up at a premium, they probably won't even do due diligence because they've missed out on several properties already and are desperate. It ain't easy having no conscience, but that's the game and you're currently greatly rewarded for it by the powers that be.

Again an extreme, baseless and ridiculous comment - one to simply to get upticks. Happy?
Yes there are some landlords who are poor landlords and deserve to be criticised. Any landlord who does "not care about the tenant or property condition" gets the tenant - and associated problems - that they deserve. For a tenant who finds that the property is not kept to an appropriate standard there is the Tenancy Tribunal.
Quite simply, one does not have considerable capital tied up in property and not care for that investment.


Most rentals In Wellington are of extremely poor quality, given the cost. I’ve rented all over the (first) world and it’s a pretty shabby deal here in NZ.

To think that nearly a-third rental houses in NZ bring some form of taxpayer-funded supplements to their investors. Add to that the winter energy payments, allowing landlords the choice to not insulate their investment properties.

Our households pay the highest proportion of income as housing costs in the OECD+ (worse ranked than Turkey, Chile and Mexico) for arguably the crappiest houses.


Many landlords don't care about can see it all around you.

But i understand why. These people are just running their properties into the ground, betting on a developer to buy and bulldoze. A bit like owning a car at 300k, not worth spending any money on.

All based on pumped up immigration of course....squash us all into boxes. But as this is ended, what now? Who is gong to keep these trashed properties up to spec?

No sensible tenant will risk that as the cost improvements will be passed onto the tennant through rent increases. Our landlord isn't amazing but i'd rather take care of things myself than pay more rent.

printer8, I recall you mentioning on these pages that your wife bought an investment property with the intent of making capital gains. Assume that means she'll pay tax on those gains?

"To be a successful property investor in NZ you have to not care about the tenant or property condition."

No clue! The ironical thing is a homeowner occupier lives in an uninsulated unmaintained property and no one cares but just don't try and use the same house as a rental (as an affordable rental) or the authorities and newspapers will be in your face

easy solution, Sell the rental, fix your own house , someone will buy your rental and own it and fix it=> result? 2 well presented houses instead of 0 => means economy becomes more productive as at least tradies involved in renovating 2 houses would be benefiting and pay taxes

add 5% capital gain makes 8%....not bad at the moment and almost risk free !

But yet looking at something like Fisher funds as an example of managed funds- their funds have averaged over the last 10 years -9% with some such as their growth funds averaging 13%- even the balanced fund has averaged 8.4% - only 2 funds have averaged less than 8% - the income and conservative fund. My point is if we had invested this money in a managed fund we would have made as much money with less effort

But you wouldn't have 3 - 5 times leverage with a managed fund.

You'd have to pay more tax aswell on that managed fund...

I have always been very happy with Fisher Funds. They are excellent. I wish I had invested more with them.
Superlife are also great.

But not all funds are good, and direct investment should not be forgotten either - it can be really rewarding (and actually fun) if you always do your due diligence first.

We need to BAN investment on existing and new properties altogether, it is too late for mild measures. Just do it for as long as it takes to wages to come back to sensible levels of 3-5 average household income, with a special focus on highly populated areas.

You inherited your rental property, which is probably a different avenue than most take to gain a rental property.
Most people would take a bank loan out for the property.
Try going to the bank and asking for a million dollars too invest in managed funds or the sharemarkets, probably not going to happen.

interactive brokers proved 5x leverage just after registration , so if you have first deposit 100k , you can invest 500k , no problem , most of NZs will just not be feeling wealthy , Sometimes I think some of them are just enjoying their feeling of control they have over other people in need of basic needs.

Rents may even fall.

More explanation/rational needed there - as I think that could well be empty hope.

Also, does not a tax based on net equity encourage greater leveraging across a portfolio?

It's fascinating that everyone seems to want to promote taxation, as opposed to regulation, as a way out of this mess. Taxation does nothing to address the fundamental problem of NZs high cost-of-living which starts with accommodation costs.


Possibly not- i've been watching the rental market in lower hutt for the last couple of months. Rental property availability has doubled in the last 6 weeks and a number of properties have had to take between $50- $100 off their listed price to be able to rent them - a key driver has been the number of newly built proeprties coming onto the market- previosuly these would make up less than 1% of available properties now- there are roughly 10% of rentals coming on the market that are brand new - with close to 50 developments currently in progress and to be delivered in the next 6 months (with each development ranging from 3-30 properties) there is likely to be a flood of rentals available- unless population growth picks up (unlikely with no immigration) then it wont take long for supply to start exceeding demand- when this happens rents will fall.

Auckland is heading the same way. Everywhere I look when driving around the city there are new developments underway at various states of completion. Apartments,Townhouses, Infill, Brown fields , Green fields. Meanwhile NZ as a whole is losing 2-3 k people per month. Auckland. Who knows how many? A few unsold houses with vendors who cant afford the carrying costs could see prices turn down sharply.

Yes, I've been seeing that too but even when these new builds are reduced in rent (say from $800 to $700/week) - that rent is still unaffordable for the median household income (which is $102,613 gross as at 2020);

Plug that number in here;

And an affordable rent (30% of gross household income) is $592/week.

And we have 31 percent of households spending 30 percent or more of their income on housing costs;

So, a third of our population are struggling - pressure on food banks, the housing wait list, etc. will not be resolved until we bring the cost-of-accommodation down. The alternate is putting welfare benefits and accommodation supplements up.

You affordability calculations appear to omit the accomodation supplement. Also 40% seems like a better target than 30%.

The accommodation supplement proves the unaffordability. Policy should be directed at measures which will reduce its need going forward.

It depends on the detail of how it is done. If those rogue landlords sell and more people can buy their own homes instead of renting who knows how the market might shake down. If a good landlord finds they are better off under RPRC they may be willing to drop the rent...It is interesting that Berlin is reducing rents by mandate but these ideas need further exploration.
A tax on net equity should not encourage more leveraging as the costs of the loan have to be serviced with no tax relief. Suppose I have a home worth $1.5 million with $0.5 borrowed against it to finance my business. If I am using interest paid as a business cost the $0.5 m would not be deductible for net equity calculations .
It needs a taskforce to iron out all the wrinkles

A tax on net equity should not encourage more leveraging as the costs of the loan have to be serviced with no tax relief.

As I understand your proposal, Susan, interest costs would still be a deductible business expense for buy-to-let property investors, and (it seems logical) to minimise the amount of tax paid under RFRM to have as little capital paid in the property as is acceptable to the bank. Therefore the higher the leverage, the less tax that would be paid - am I right?

Additionally, one can service the "costs of the loan" with increasing rent/income. And as we know, it is the government by way of the general taxpayer that then subsidises the increases in cost-of-accommodation (as the largest of households the COL expenses) by either increasing accommodation supplements and/or welfare benefits and tax transfers (WFF).

If RFRM brings DOWN the cost-of-living I'd be all for it. But I suspect it doesn't.

To my mind, it's time academia and others concerned about housing policy started considering regulation of the rental market. It really doesn't matter what house prices are or how much capital gains increase over time, provided the cost of renting remains affordable.

I'm thinking about regulation of the rental market based on a weekly rent maxima, determined by a formula based on (RV/1000) +/- x% (x relating to regional variations) and applicable to all residential rental property. The formula being tailored to provide weekly rent maxima in the vicinity of 30% of household income, particularly at the lower quartile end of the spectrum.

The point is that the RFRM takes the place of the tax return of rental income and costs. So no, interest is not deductible.
You can borrow to buy but you have to service the loan. If borrowing 100,000 reduces the RFRM net equity by 100,000, then if the RFRM rate is 2% - the saved taxable income is $2000 but you are probably further behind because you have to pay more than 2% on the loan

Not much more than 2% on the loan these days - and we are entering a period of an even lower interest rate environment, I suspect.

I am of the opinion that no matter what new 'tax' regime one might propose - be it CGT, RFRM, Stamp duty or whatever - they are all subject to tax minimisation schemes and the intended punitive aspect of the tax which is largely aimed at speculative investors in housing - ends up capturing owner-occupiers as well.

It seems so simple to me to instead apply a rent control mechanism to shield our most vulnerable citizens (i.e., non-asset owners) during this period of global QE/asset price inflation from the effects of monetary policy and subsequent speculation in the housing market.

Just a comment Kate, you indicate 30% of the household income should be the level that the rent be controlled to. I suggest that a range of 25 - 30% of the median wage is better as then people have more incentive and ability to save. I also suggest that any such move should specify that the rent is for a whole house, to avoid LLs renting by the room.

Median household income is the metric used by MBIE and Stats when reporting on affordability, so I thought best to stick with it. Median wage wouldn't take account of two (or more) person households - so it would undershoot total income by a considerable amount. Here's how the government discusses the affordability metric they use;

And yes, weekly rent maxima is for a whole house, as the proposed formula is based on the RV for the whole house.

Thanks for the further thoughts!

Thanks Kate. I looked at that source and could see that they used it (median household income) but not why as opposed to the median wage. If I understand correctly the median wage sits around $55,000 , but two on that wage make household income $110,000. A big difference in potential rent.

My rationale is that I would like young families to be able to choose, if they wanted, to have one stay home to raise children. If they choose not to, fine then they get ahead quicker, but a part of the picture of housing affordability is the consequences and child poverty, and a part of the picture of child poverty is parental presence (it's not always about money), and the ability to provide for yourself as well as the children.

Agree many aspects of child wellbeing and future prospects would be improved if one parent could afford to stay at home while children were young. Setting a rent maxima at that level however would effectively half the affordability equation;

I think however, that this aspiration (i.e., increasing the number/ability for a stay-at-home parent) is better achieved by government choosing to introduce a Universal Basic Income policy - as the UBI recognises the worth of unpaid work (such as childcare/caring for a dependent relative). I'm very confident a UBI will come about in the future, as it is particularly relevant as more and more jobs become casual, part time and insecure.

I'm not worried about halving the affordability equation Kate, especially about land lords. They've made a business decision and i suggest have no right to expect the tax payer to underwrite that. With more money in peoples hands (and this is where I struggle with a UBI) the benefits will flow into other parts of the economy a lot easier. A UBI would mean most of the benefits would be lost because the Government would be raising taxes to pay for it (unless they accept the MMT premise that they can just print the money, but that will have other costs).


This is a good stab.

But we need to have a discussion about all clippers-of-the-ticket. At the end of the day, they're all parasiting off a resource/energy flow. Without them, housing can be both affordable, and future-proof (which is NOT currently a target). We have to factor in total resource availability and displacement (inequality is what we call it) of many by a few.

We also need a discussion about population. Because without addressing that, all bets are off.

The biggest driver of climate change is energy use which is of course linked to population growth. So reducing population growth goes hand in hand with Jacinda's climate emergency. Perhaps the greens should remind her? But I doubt it...they too are hopelessly conflicted.


She had me - right up until the last bit about the RFRM. That's where she fell off the boat. But she is right something has to be done. the problem is that no-one is advocating the Government do what they are elected to do, what their role requires that they do - regulate the damn market! Penalise vacant properties by putting a tax on them that is due monthly and make the tax steep, introduce a Rental licence as mandatory for anyone who wants to rent out a property, establish quality standards that are mandatory before a property can be rented, put rent controls that limit the amount that can be charged for a whole house to no more than 25 - 30% of the median wage, and ban foreign ownership (any property owned by foreigners not living here will be sold into local ownership within 2 years). This is just the beginning!

Murray86 - You should go and live in a communist regime with those ideas !!
Why stop there lets tax unused cars, introduce 1 child families and throw in a toilet tax !


Utter BS. You clearly don't like the calls to fix the housing market. How many houses do you own? Any effort by the Government to fix the current mess will hurt you. But it is the Government's role to represent ALL of the population, not just the ones who think they'r the worthy! This is not communism it is about everyone getting a fair deal. If you don't like it move to China or Russia and join their respective ruling parties.

murray86 - Owch ! touchy touchy, I can tell you now this Government will never implement your suggest.
You want a fair society, has it ever been fair ? Life's not fair and the Government is not going to make it fair sorry.
You want to know how many houses I own, well that would be telling but I need to use all my fingers and some of my toes to count them all !
So I guess that makes me a bad guy yes ??
Maybe I've worked my arse of to get where I am instead of wanting the Government to make my life fair ?
For your info all my rentals are up market and there is no Government accommodation subsidies in my rent.
All my rents are under market to encourage long term tenants, the longest rental I have at present is 7 years with one rent review of 7%.
In my opinion the market will never be fixed so building social housing on a massive scale gets my vote !

"You want a fair society, has it ever been fair ?" What a cop out. life is not fair, but when it is not fair due to the predations of parasites and the authorities fail to move to protect the vulnerable then that must be corrected. And today those vulnerable include the next generations. I don't care that you've worked hard to get to where you are, and "market rent" is a term used today to disguise a rip off. You say your rents are below that, but are they set at 25 - 30% of the median wage? I suspect not, that makes you a parasite. A rent review of 7%, when inflation is somewhere in the vicinity of 1 - 2%, and what kind of pay increases have your tenants received? More leeching. Your practice while maybe not as bad as others, is still one of the bigger contributors to poverty today.

So, speaking of communist, you're someone receiving wealth transfers from society around you for each of those protected and subsidised investments. Pot calling the kettle black.

Oh... the old mantra of communism when all people are talking about are taxes and a more fair society.

Yeah, about that.. communism, aka here in NZ is socialism only for certain section of community. I wonder why there's always on-going tweak of air traffic control, road traffic, alcohol, gambling, drugs, expensive cancer treatment funding (never met a single property moguls that rejected tax payers subsidy for their treatment).. etc. - How many tweaks being done to the NZ housing the past 30yrs? that makes any difference? precisely. So, just leave it to RBNZ next to go hard on this negative OCR, keep LVR out, open up FLPs into housing (for 'supply reasons'), then more QEs/LSAPs into climate emergency. Here's a simple basic things to try: in Kids party? try to turn up the music volume to the max, then equally to the low.. observe the effect.


If you agree with that, you have lost all credibility in the debate.

The debate itself is about the housing 'market' having lost all credibility; or perhaps the labour 'market' has lost all its credibility. When market approaches no longer serve the wider population, good democratic governance calls for regulation.

And you were agreeing to arbitrary rent controls as a solution.

If there is a stupider response to this crisis, I am yet to encounter it.
You must really hate renters, Murray. Like. Really abhor them.


Renters or Land lords Nymad? But no I don't hate either. I just think they should have a choice and renters today largely do not have a choice at all, and this is just wrong. i think it is wrong for our society tolerating people having to live in cars, or under trees in parks. I think land lords today are mostly parasitic. Are there any out there who is setting a rent at $150 - $200 per week? Are there any concerned that their tenants have enough money to live off after they've paid the rent? I doubt it. Everyone of them is expecting a Government subsidy of their rent they receive. A year or two back one person told me that they were entitled to a return on their investment. But I ask are they entitled to expect a tax payer subsidy to get that return? And they made a business investment, what right do they have to expect the tax payer to underwrite the risks in their business choices and decisions?

Personally in the type of society I aspire to, I think any other response is utterly stupid.

I agree 100% - the state of things is terrible and we need to fix it; subsidies, poor living conditions, poverty.

Rent control does not at all fix this, though.
In fact, the most sure fire way to make landlords care even less about their tenants is to implement rent controls.

Rent controls cannot and must not be introduced in isolation, or they would be more damaging than not at all. that is why I suggest the other rules as well.

A good analogy is road transport - consider just one law to control road traffic take your pick. The result would be carnage, thus we don't have just one law, there's screeds of them. The same would be needed for the Government to regulate housing. But it must be done because as we see the current situation is destroying the country and the futures of our youth.

Rent controls must not be introduced at all. Period.

Wrong, Rent Controls must be a part of the picture. what is your issue with the whole picture. You're a land lord Nymad?

I did some research a few years back based on what many commenters on this forum said, into the international evidence. Internationally rent controls failed because they were imposed in isolation. No other regulation was put in place to manage the impact of them. That is why i hold the position I do, the whole picture must be managed not just a part of it.

No, Murray. I'm not a landlord.
I hate rent controls because they ultimately result in categorically worse off conditions for renters and cities.

There is no better sure fire way of to reducing living standards and killing cities than to implement rent controls on private tenancies.
"No other regulation was put in place to manage the impact of them."
I cannot understand why you are arguing for a regulation to control a regulation.

Try the analogy of road transport Nymad - just a rent control is like saying there is only one law for road traffic and it will just be one speed limit. I won't and can't work because there is no rule to govern the condition of vehicles, or how people drive. Those other rules I suggest are not regulations to control a regulation as you suggest. You are just trying to confound the issue. They are regulations to manage other behaviours that manifest or are evident in private tenancies, such as ensuring the houses are of a fit state, that they cannot be banked and not be available for housing people, that landlords understand the laws and requirements in providing tenancies and so on. It is not hard.

Ha ha, expected.. exclusion of certain option from elimination, the mindset of try the same things, albeit impossible task. Resulting to the same practices, delay=time=$$$ - But once, you're in the recipient of super brutal painful terminal illness.. you'll see even the unthinkable of control measure that you believe in previously?.. apparently need to be revisited.. even begging to have one at any cost (mostly, the tax payers subsidy though).

Relax Nymad. Mr Orr has just found $28 Billion of tax payers money to prop you up.
Any wonder why landlords are heading towards most disposed group in society?

Indeed. People are okay with welfare for helping out poor people. It's the continual and excessive welfare scheme for property investors that doesn't gel so well with others.

64kB should be enough for anyone....

Anything with a fixed arbitrary amount - here the 1 million - is doomed to fail. Governments have shown they are incompetent at maintaining those.

It don't work. More thinking required.

Yip. Ditch the threshold, apply it to all properties. Give everyone a UBI and a flat tax rate. Job done.

RFRM = rental price floor?

Politically the lowest risk option would be to make a few token gestures but do nothing effective to remediate the situation.


I would be very, very surprised if this government did anything regarding housing. They just got voted in with a huge majority, by doing nothing. For them this is a clear signal - doing nothing wins votes. Doing something could only cost them at the polls. Therefore, do nothing.

And the rein of caretaker, do nothing, blame the electorate leaders continues. Ardern may have a photo of Savage in her office but she is such a shadow of the man, so weak as to be basically transparent.


blobbles - Well said, maybe a diversion like a 'Climate Emergency' !! and people might forget about other stuff !

The picture of Savage is the ultimate in virtue signaling.
She is a phoney.

Yes and no, the other main option was considered by most of voters that would make things even worse by their past record, so I do not think they should take this as a command of the people just because they got voted, it is not the only thing that got them there.

Looks to me like house price inflation was highest under Helen Clarke followed closely by Jacinda Ardern. John key doesn’t even come close...

A place to start is to convince the banks to offer interest only loans as a Rental mortgage product.
In the current RE climate there is no need to pay principal and interest as long as equity is sensible. But banks hate interest only.

That change across the board would massively increase the cash available to landlords. And so make it feasible for the rent control pressure to be applied to reduce rents - or at the very least stop them increasing.


Why is the answer to housing price inflation to add another tax?

We know the issue is caused by cheap money and lack of supply? Make investment in property subject to higher interest rates (in the same way that businesses pay higher interest rates).

Obviously the supply issue is more complicated but it looks like more supply is starting to come on stream through higher consents being issues. Keeping a lid on immigration for another 24 months will help with the demand side. Obviously RMA changes, scrutiny on local government practices, investigation in to building supply company oligopolies will all help.

I'm still surprised that we're not looking to taxing Overseas Investors considering the massive amounts of empty homes there are in our larger cities. We need to reverse that damage done by Foreign Buyers, Speculative Investors and Money Launders. Potentially an Empty Homes Tax in Auckland city could generate revenue of around $421,505,100.

Empty Homes Tax has proved to be hugely successful for generating large amounts of revenue that can be used to build new affordable homes. Canada is a shining example of this where the EHT (Empty Homes Tax) was introduced in to Vancouver in 2017 to help their housing crisis. The EHT first introduced as a 1% annual tax of the property value, and they collected $33.6 million in their first year! Canada has since then increased their rates of EHT and considering expanding the program to Toronto.
So far $61.3 million of net revenues from the EHT have been allocated to support affordable housing initiatives in Vancouver since the tax launched in 2017. In that same time period, the number of vacant properties has fallen by 25%.

For NZ; Auckland would be a good place to introduce the Empty Homes Tax, helping to free up property for rental and provide much needed revenue considering the impact of the pandemic on our economy.

So knowing that most of these empty homes are in the multi million bracket even if you taxed them at 1% year based on their current value, they could generate an average yearly revenue of $421,505,100 potential in revenue fist year of Auckland's empty homes tax!! A Win! Win! for NZ residents since this can help to build new homes.

This calculation based on Auckland City April 2020 median house price of $1,070,000. Auckland median house price $1,070,000 - 1% yearly tax = $10,700 per empty home x 39,393 Auckland officially unoccupied dwellings (Based off recent census results) = $421,505,100 Tax revenue gathered.
AKL evidence here:

Vancouver Empty Homes Tax Annual Report:

Sure there will be some money grubbing Aucklander's out there who will object to this tax, But that's probably because they're living overseas and leaving their property empty for over six months a year. What I say is, if they can afford to leave a property empty in a major city for long periods of time then they can afford to pay tax on it!

Some misinformation here
"Astonished to find stamp duty on $1,000,000 house in Australia is as high as $40,000"

"Stamp duty in Victoria AU is calculated on the purchase price. Scale rate rises to 5.5% on properties valued at or above $960,000"

On a $1.2 million house that's $60,000 not $40,000
Stamp Duty in Australia is a distinct hand-brake on buying a house. You have to make sure you really want to buy it and it suits your job location, because you are out of pocket straight away $60,000 with the result if you decided you had made a mistake and want to flip it you'd be lucky to get out with your capital intact after paying $30,000 RE commission and auction fees. Then there is the $60,000 on the next house. You are down $150,000 on the round turn

This guy gets it.

That’ll teach first home buyers! ;p

The RFRM will be complicated. A simpler way is to deny the advantages of gearing by denying any tax deduction for interest on monies used to acquire residential property (possibly on all capital assets). Puts FHB on the same footing as the investor. Interest should be seen as a cost of accessing capital and not a cost of production.
Other measures to curb foreign investment and accumulation will also be required.

What does this achieve given loss ring-fencing?

You can still claim mortgage interest costs as an expense, you're just no longer able to claw some of the tax back from taxes paid on PAYE. At least that's how I understand it. I think Philby is saying that mortgage interest should not be regarded as an expense at all, like insurance, rates and maintenance would.

Correct ZS, borrow as much as you like but there is no tax deduction at any point for interest/borrowing cost. The gearing advantage is gone. This is not a new tax or a capital gains tax so the Government could implement this without breaking promise. It could be applied to all new loans from 1/1/21

Yes, this is needed to level the playing field between owner-occupiers and buy-to-let purchasers.

Still also need #rentcontrolnow in order to reduce the cost of living for many households in the lower income brackets.

That needs to be posted on Jacinda Ardern's Facebook page - that's where she conducts all her business and gets feedback from the masses

Sigh. Another 'expert' suggesting another tax idea fiddle to help New Zealanders who are being slaughtered by housing cost.
Did they not take note of King Canute's lesson.
Time to work on fundamentals instead. One is demand. Time for a population policy. I suggest a maximum of five million people. But I would prefer two million.
Actually not hard to achieve.

Thats the modus-operandi of the aristocrats - get the prolific go-to opinion writers to write long complicated epistles that yap about everything except immigration and population - it's called misdirection

Yep... it must be time for an article from Leonie Freeman next week...

And your reply is the modus operandi (or one of them) of the arrogant right. Try addressing the article - you might sound more credible.

It is not taxes what is "slaughtering" New Zealanders but the manipulation of the mortgage market, no tax was changed recently yet housing inflation has kept rising anyway as a result of the RBNZ decisions.

Extremely cheap credit is new. The housing market has been boiling away for two decades. The only consistency has been the lack of change in tax settings.

When the first, and only disciplinary tool Nanny State has is the tax stick, then you know it's the parent's fault.

Tax is not some sort of tough love to save us from ourselves, all it really is about is rewarding the bad parent.

We are in effect paying them to treat us badly. There is a word for that.

Of course, we could just remove the impediments that cause high prices to begin with, but for any Govt, that is not near as rewarding and as much fun as using the tax stick.

More taxes will simply mean people will take their money and invest it elsewhere, like in Australia. All these socialists forget that we live in a global world, where most countries welcome people with money that they are prepared to spend or invest. For instance, Thailand is currently offering permanent residency to anyone buying a $330k apartment there.
For all the socialists out there, when you make the wealthy poor, you do not make the poor wealthy. All you do is end up with a country full of poor people.

Yes and the current system seems to make the wealthy morally poor.

You do realise that if you invest in investment properties in Australia you pay "premium owner-non-occupier" land tax of 5%

They are free to do so, their money invested in housing is creating a problem so we'd rather not have it here.

New Zealand's socialists are receiving wealth transfers from younger Kiwis' wages and savings to their asset values, FYI to you socialists out there. That's our biggest socialist wealth transfer scheme. I'm sure more younger Kiwis would prefer to see you paying your own way.

Good article. Points to some interesting avenues to deal with the runaway house prices . Is the declaration of a "Climate Change Emergency" i somewhat a red herring ? To divert attention from the more immediate emergency of housing?

It is obvious to me that all of these great ideas about how to solve the housing issue are written by people who are not themselves providers of housing to normal tenants. All of the stories presume that all tenants are in a holding pattern waiting for the day when they will buy a home of their own. This used to be true 40 years ago but it is not the situation now. Some writers even suggest mum and pop investors are worse landlords than people like me with 30+ rentals. Society is where it is now. Do not try and wind the clock back because that risks breaking the spring. Sure help first home buyers and reward those who hold onto their properties past the seven year itch point. Reward landlords who hold onto long term tenants.

I love how you frame rent seeking and your role as a barrier between people and their homes as you "providing housing". Landlords are effectively leeches inserting themselves between people and their need for shelter to extract the proceeds of their labour.

The solution to this situation, that we've known for a long time now, is to base the tax system first and foremost on the natural resources of the nation, and tax land before the sweat of the working classes, and added bonus for taxing all income at the same rates including capital gains.