Friday's Top 10: David Whitburn on the RMA and housing affordability; Why state house sales are good; Is the Labour Party in terminal decline? Why CGT's a lemon

Friday's Top 10: David Whitburn on the RMA and housing affordability; Why state house sales are good; Is the Labour Party in terminal decline? Why CGT's a lemon

Today's Top 10 is a guest post from David Whitburn who is a professional property investor, property development consultant, author, member of the Auckland Property Investors’ Association board, and proud father of three young kids. David is a co-founder of Fuzo Limited, an infill housing company, and he blogs on

As always, we welcome your additions in the comments below or via email to And if you're interested in contributing the occasional Top 10 yourself, contact

See all previous Top 10s here.

My top ten at 10 focuses on property and political issues looking at the decline in home-ownership since the Resource Management Act was introduced, housing affordability, the Government’s state house sales, tax avoidance in Luxembourg and some key policy changes likely from the Republican Party regaining control of the US Senate.

1. The interesting relationship of the Resource Management Act and housing affordability.
A lot has been said about housing affordability lately. One of the lesser appreciated culprits is the Resource Management Act 1991 (“RMA”). Since this legislation took effect on 1 October 1991 New Zealand has declined from its record peak of 76% home-ownership down to just 63% and falling.

Source: Statistics NZ, RBNZ, NZIER

The simple fact is the excessive regulations, difficulties, uncertainty, delays and costs that the RMA has introduced have made housing much less affordable.  The RMA is the major reason cited for the massive decline of the large group of housing companies of yesteryear like Beazley Homes, Reid Housing, Universal Homes, Neil Homes, Keith Hay Homes and Fletcher Construction who used to build many thousands of affordable houses every year in New Zealand.  Neil Homes built over 22,000 homes in the 30 years immediately prior to the introduction of the RMA.

The purpose of the RMA is stated in section 5 with “the purpose of this Act is to promote the sustainable management of natural and physical resources”. Where did we go so badly wrong to delay or in some cases dash the hopes and aspirations of so many home-owners?

2. Tackling the world’s affordable housing challenge.
The McKinsey Global Institute (research arm of McKinsey & Co) has released a report stating that current trends in urbanisation and income growth indication that we could have 1.6 billion people worldwide by 2025 who are so financially stretched by housing costs that they have to give up other essentials.

The full report is large, so if pressed for time just look at the executive summary. They estimate that 330 million households worldwide are financially stretched by housing costs, with 200 million households living in slums. 60 million households in the developed world are financially stretched by housing costs.

Their four solutions offered are:

- Unlocking land supply

- Deploying an industrial approach for mass development

- Reducing financial costs and open up finance for more people

- Achieving economies of scale to bring down construction costs

On a local level I am on the panel with Shamubeel Eaqub (NZIER), Penny Hulse (Deputy Mayor of Auckland Council) presenting on Affordable Housing in Auckland – What about Renting? This is part of the Auckland Conversations series and will be an informative discussion at the Aotea Centre at 5:30pm on Tuesday 25 November 2014.  Register here for free entry.

3. State house sales.
The Ministers of Finance and Housing have talked a lot recently on some changes to best suit delivering the social service of providing housing to our nation’s most vulnerable people. I believe a civilised society should place a roof over the head of every citizen. The changes announced are good in terms of delivering the right houses in terms of number of bedrooms and location of the houses. 

Yesteryear’s farmland on the outskirts of a city, e.g. Orakei in Auckland becomes today’s section with a land value of over $1,000,000. Some properties and areas have no need for HNZC ownership any more therefore selling these kinds of properties can be great.

A number of these properties will be offered to first-home buyers with household incomes under $80,600 per year and with a gift of $20,000 to buy state homes by the Government.  In addition taxpayer’s equity can be better deployed to house more needy families.  The state house sales (reform) programme is a good thing.

4. Will rents go up with state houses being sold?
Russel Norman from the Green Party has stated that “rents will be driven higher” with the Government’s ‘reckless’ housing plan. However the Executive Officer of the NZ Property Investors’ Federation, Andrew King, has stated that “it is incorrect and misleading to the link the sale of state houses with the likelihood of higher rents.”  There are a multitude of factors at play involved in setting rental levels and a wide variety of subsidies available to many low or no income HNZC tenants right now.

I think that income related rents should be made available to tenants of social housing providers and not just state houses.  This would minimise overcrowding and those unsightly carports (with tarpaulins on the site and astroturf flooring) and garages that too many people have to sleep in.

5. Help affordable housing by increasing the accommodation supplement.
We have over 300,000 Kiwis receiving the Accommodation Supplement (“AS”) which is nearly five times the number of people living in state houses who pay income related rents. $1.2 billion/year is paid on the AS but there is still pressure in tenants being able to pay market rents. The AS is based on the recipient’s actual accommodation costs, but the amount paid is limited to 70% of the difference between actual accommodation costs and 25% of the recipient’s weekly income. The AS is capped at maximum levels and currently over a quarter of all recipient’s get the maximum amount.

Private landlords operating in the lower end of the market are patriots who house some of the nation’s most vulnerable people. There is a massive amount of capital that we taxpayers, via Housing New Zealand Corporation, tie up in state housing.  Income related rents giving an atrocious rental return.  Whilst we have had devastating earthquakes in Christchurch and come out of the Global Financial Crisis, we cannot keep flogging taxpayers to come up with the capital to create new stock.  KiwiBuild was another Labour policy that although it felt nice, wasn’t thought through properly, and wasn’t going to be achieved with capacity issues in the construction sector.  This was Labour’s Team America moment – “We’ll use the power of Government to build 10,000 houses per year”. 

We need private residential property investors to keep taking the risk of personally guaranteeing collectively billions of dollars of loans, paying interest, risking vacancies and repairs and maintenance issues, and threats of regulation such as compulsory building warrants of fitness and ring-fencing of tax losses.  There is a real need for those on the lowest incomes not in state houses who suffer the most from rent increases.  Many councils and territorial authorities across New Zealand are increasing rates about three times greater than the rate of inflation, insurance premiums rising sharply after the devastating Canterbury earthquakes, and there are repairs and maintenance costs.

6. Is the Labour Party in terminal decline?
This graph sourced from KiwiBlog maps every general election result in New Zealand from 1938 until now. There is a very clear downhill trend, which matches union membership. Of course there are cycles and some weak National parties (Bill English’s class of 2002 for example), but every peak in Labour’s share of the vote or party vote has been lower than the one before and every trough lower than the one before.  In this 2014 General Election Labour got 25.1% of the party vote which is their lowest percentage ever, worse than the party’s dismal 27.5% from the 2011 General Election.

Winning the party vote in just five of the electorates is an annihilation.  I know many Labour party members have joked about a return to FPP (First Past the Post) – it might not be such a bad idea when looking at this graph.  Here’s one tip below to instantly address this decline.

7. Learning time for Labour – voters want CGT to de dropped.
Labour have gone into two election campaigns now with a Capital Gains Tax as one of their key policies. With National adopting or maintaining many of Labour’s previous policies such as working for families, it was a key policy distinction.  A number of their own candidates disagreed with the policy.

There has to be a realisation for the Labour leadership that your market is the voter base of New Zealand.  Having policies to head left takes out the space the Greens choose to occupy.  This is not a smart strategic move – elections are won by winning the centre.

Issues with CGT include:

- It’s not a big revenue generator;

- Refunds are likely to be given in some years for capital losses from business and house price drops (e.g. Andrew buys 10,000 Xero shares at $40/share but sells then at $17/share losing $230,000 – how much refund does he get for his capital loss?);

- It will not fix the ‘housing crisis’;

- It is not aspirational – if you build an asset and try to not be dependent on the Government, we’ll take some of that away to penalise you;

- When a family member dies and you inherit a property the tax position was unclear (the WhaleOil blog has this image below).

CGT is simply not needed.  It is like trying to fix a leaky pipe with a band aid over the wrong part of the pipe. Time for Labour to drop this policy to have the best chance of affecting meaningful changes. You cannot govern from opposition. Imposing CGT is a loser policy and must be dropped.

8. Luxembourg busted being enablers of massive tax avoidance.
The European Union is struggling for cash and the tiny country of Luxembourg has cost EU members many billions of dollars of tax revenue. Some 343 companies from dozens of countries negotiated secret tax agreements with Luxembourg. The ICIJ has created a visual and searchable database of 548 tax rulings approved by Luxembourg officials with a signed and stamped confirmation letter.

Luxembourg has GDP per capita of US$103,859 (2012) with the financial services industry being its biggest employer and earner.  Let’s take a look at Luxembourg in comparison to Germany and UK for both GDP per capita and also total assets of banks as a percentage of GDP.

I wonder just what would happen to that GDP per capita figure if this tax haven was shut down?

9. Impact of US Senate change.
The Republicans have reclaimed control of the US Senate on Capitol Hill. President Obama and the Democrat Party have been soundly beaten in the mid-term election results announced two days ago.  The Affordable Care Act (‘Obama Care’) will be under the microscope with attempts to repeal and chip away at it imminent.

The Keystone XL pipeline project from Hadisty, Alberta, Canada to Steele City, Nebraska, USA is likely to be pushed through, and corporate taxes are like to be cut amongst a raft of other minor tweaks in government policy.

10. Frankie Valli and the Four Seasons – Who Loves You (1975) vs Pitbull and Kes$ha – Timber (2013)
I love some of the musical maestros of the past.  Frankie Valli didn’t need to be auto-tuned and still doesn’t aged 80. Call me old fashioned but too many modern signers appear to be auto-tuned and better at exotic dancing than singing.


We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Do #1 and #2 contradict each other?
I thought that other countries, besides NZ, had unafordable housing. Do all of those countries also have an RMA?
Or was it the impacts of Free Market ideology starting to kick in?

The all have restrictive planning processes to a greater degree.

If it is a general trend (and for instance trying to claim that the diversity of the U.S. planning options is the same as NZ is quite a reach) then a general explanation is generally seen as a better one.

The end game of the NIMBY's is to push prices higher......and until people wake up to the full game being played they won't be looking at all the strategies that are employed.

Interestng case/data destroying the case for austerity,


Spending and Growth, 2009-13


"Prima facie, cutting spending depresses economies."



#1 or pure circumstance?

#6 and put National's along side it? otherwise it looks meaningless...
Actually it is I think, As for the later years add the green's and alliance in on one side, and Act in on the other.
So not so much Labour as left v right v the swing voter % growth would be more tell tale.

#6 Lies, damn lies and statistics, oh and er bloggers shilling for the other side.
So taking election % results from,
and plotting a chart in excel,
We see that from 1938 to 1993 BOTH parties declined and pretty equally over that time period.
For the last 2 elections, you could arguably add NZF to National's % and the Alliance to Labour

The AS (accomodation supllement) is also asset tested (kiwi saver exempt). $8,100 for singles, $16,200 for couples.  Doesnt say much the asset levels of the 300,000 plus recipients does it? And begs the question...why save for your first home if you will loose AS?

#3&4, I grew up in Naenae, lived in Dinsdale and Papakura, among others, look them up. In the '90's we as a family of 5 with kids 2-8 yrs moved into a newly constructed HNZ home as first tenants, with a view to possible purchase as was being offered at the time. In 3 months we were gone from there, unable to abide the behaviour of the other recent arrivals in the cluster of new HNZ homes. We moved to another HNZ home in an established neighbourhood where owner occupied and privately tenanted homes outnumbered HNZ by some way. The environment was markedly better for all.
The affordable home babble is going to fail to improve as long as you focus on "socio-economics" as causation. The fact is that some people accept a lower standard or more populated living arrangement not simply because they cannot afford it, but because they do not need to work harder, or smarter, in order to earn more to pay a higher cost for accomodation.
By asking the wrong questions and assuming the wrong things from statstics you incorrectly target the wrong issue and fail to resolve the incorrectly perceived problem, if one exists at all.
Cheap or even free housing is not a solution, it is a magnet for the lazy who will doss anywhere and will abuse the privilege by damaging the home and the neighbourhood.
While very politically feel good, the accommodation supplement just allows higher rents which flows to higher property values as %ROI can be maintained.
I won't pretend to try to solve this, greater minds than mine are paid way more than me to do that. To date though, they fall at the first hurdle by failing to correctly identify the problem.

We should STOP giving tax money to Landlords.
Just imagine if the government was to abolish some of the Landlord gifts tomorrow. Thousands of people would sudenly find they cannot aford the rent and give the landlord notice. Landlords would then be forced to sell up (no tennants), or slash rents.
The more you put up subsidies the more rents will go up.
How come they say if you take the GST off food the shopkeeper will just keep the extra but if you give people more rent money the landlord wont want it.
Are landlords more honest than shopkeepers?

The accomodation supplement is a genie that is impossible to put back in the bottle
It's the dance of the tarantula's and the deadly hand-shake combined
Once started it can't be stopped
How would you stop it?

I am surprised the proprietor continues to engage with your ill-informed outpourings of false certainty. I find it rather tiresome. 

David Whitburn


On the taxpayer teat
Total annual cost of Accomodation Supplement is $1.2 billion which ends up in the pockets of investment property owners

What you fail to mention is the additional benefit to property investor-landlords of the Tax remmitted back for negative gearing

How many more $ billions would that amount to?
Add it all up

Labour is "DEAD" not because of its policies but because of its crappy caucus.
Labour has a simple choice "get rid of the dead wood or die yourself"
But i think, and have done for some time, that Labour is a Dead Duck.
I am amazed that the Greens, NZ First and the Conservatives are not battling it out to take Labours place.

#1 is a sad but in hindsight predictable trajectory.
I won't retrace all the steps (I've thoughtfully assembled them all here) but two great streams are evident.
1 - The RMA was intended from the outset to be Effects-based.  This should have meant that small effects = wave it through, effects offset by e.g. paying off those affected = problemo solvato, and in general, a risk-based approach to everything.  Small risks = small costs, quick process times, small economic externalities.
But the TLA staff of that time, and indeed ever since, would not adjust to this (admittedly, radical) methodology.  They had always run off Plans, Zones, Rules, Regulations and in general, 'things wot could be looked up'.   Risk assessment and judgements about Effects, (including the first and most obvious question:  'So What?' ), were and remain completely beyond their training, intellectual capacity, experience, and inclination.  So none of the effects-based stuff really ever happened except for nationally significant cases.  Where, and by no coincidence, the intellectual horsepower was indeed available.
So, in reaction and by (staff, not elected Councillor) design, what we got saddled with was what we have (and which the Productivity Commish has brilliantly skewered in their latest tome):

  • Arbitrary, lengthy, costly and opaque processes
  • Thousands-pages long Schemes and Plans which take expensive consultants weeks of paid-for time to interpret for applicants
  • Schemes and Plans which rely totally on spatial zoning, massive schedules of haram and halal uses, (most of which are cheerfully ignored by those with high fences and quiet work habits):  the old, repealed Town and Country Planning Act schtick, revivified and shambling around like - well, in fact, Being - a baleful zombie attack.
  • Schemes and Plans which are frequently internally inconsistent, are subject to constant amendment via scheme changes and case law, and are, maise naturellement,  wildly inconsistent across TLA boundaries.
  • All of which imposes simply staggering economic deadweight costs on unfortunates such as your good self, who get to wrestle the Hydra and pass on the associated costs into house /plot purchase prices.

2 - As if this was not sufficient, there is a further, more subtle and even more dispersed economic externalilty caused by the TLA's adherence to spatial zones.
Zones and monoculture uses, cause commutes.  It's as sad and as simple as that.
So by not being able to live over the shop, bunk down in an employer-supplied donga in the far corner of the yard on a construction site or meatworks, live a bike ride away from the mall, walk to the brewery, and in general do everything that any of us Boomers can remeber from their youth, there is Cost upon Cost imposed upon, oddly enough, the least able to accommodate it:  the young, poor, indifferently skilled, or really old.
In darkest Invergiggle in the late 50's, within walking distance of our Ythan Street home there was:

  • A church across the intersection
  • A fibrous plasterer's yard next to that
  • A garage-sized small grocery right next door (milk dipped out of the can, flour out of the bin)
  • A flour mill
  • A butcher
  • A fishmonger
  • A primary school, a Tech, an intermediate and a High school
  • A railway line (unfenced)
  • A Municipal Baths

But, in them far-off days, TLA's did roads, streets, drains, three waters, bridges and a very few Parks.  Nothing else.
Mixed uses.  No apparent zones.  And, hey, it worked a treat.  Until the Planners and Improvers (UK motto"  'We Finish what the Luftwaffe Started!") got a hold of everything.
For our Own Good, of course.

Waymad, I love your posts. This is sheer brilliance.  'We Finish what the Luftwaffe Started" gave me a chuckle.

"The simple fact is" um no, not from that graph.
Yet home ownership was declining earlier, right after the 1987 clusterbonk? where inequality in NZ grew substantially?
really great reporting.........maybe I should go and look at what ele I can find that correlates with that home ownership graph.

#6 can anyone explain how that graph is dealing with the introduction of MMP. Because before MMP only electroates matter for deciding government and total vote is unimportant, after MMP only total vote matters and number of electorates is unimportant
 (putting aside there is no context from other parties results, for example how does labour + greens compare to National)

Put National and Labour election %s together on the same graph and we get,
This top 10 then begins to look like the least factual and politcally biased pile of doo doo yet seen.
PS for #1 it looks like the real drop in home ownership started in the late 1980s, just when we saw increased in-equality and nothing to do with the  RMA.

This graph only goes up to 1993! What's the use of that? It doesn't answer dh's question about the significance of party vote percentage pre MMP, it also doesn't answer any questions about changes MMP has had on voting patterns between labour and national, and it misses the last twenty years!! If you're trying to defend the Labour party you're doing a lousy job of it by presenting that data.
Bull like this is actually *exactly* what I really hate about the labour party. Have you seen their press releases? They immediately issue reactionary statements about everything the government does regardless of if it's a good thing or not. They don't add anything interesting to the debate, just criticise criticise criticise. They give the impression of not caring about changing New Zealand, just playing the political game. Shame then that they're not even very good at it...

It does, however show that the graph from kiwiblog is rubbish for the pre 1993 that was in that graph. This graph shows that for the majority of the kiwiblog graph Labour have been doing the same thing as National, one or two election cycles behind.

Clever people those Luxembourg types. Maybe we could learn a thing a two from them. Calling them naughty and stamping one's foot rather misses the point - they run rings around the Germans and Brits. Well done them. We should ask them for advice.

Comapring a principality with a population of 500K with countries of 60 and 80 million, really!
Better to compare GDP per capita with the population of "The City" in London.

#6 If home ownership was plunging then wouldnt we expect renting to have increased by a significant amount?
yet, um, no.
"We do know that the number of dwellings affected by family trust ownership grew by at least 28% in the seven years to 2013 (to 13.7% of all occupied dwellings)."

Here's how you turn that horse around, you phase out accommodation supplements to private investors and pay it only to charitable organisations and build a heap MORE state houses. That way, eventually and hopefully there will be no further need for private investors and social housing becomes true social housing. The taxpayer topping these people up is actual welfare for them
Reply to twootherguys at 1.30

Please explain
#6 Labour has been dying over many years and has now reached its lowest level ever
#7 Labour only lost the election because it wanted a Capital gains Tax
Are we seeing blatant one eyed capitalism at work to the point they do not care how obviouse there one eyed opinion is.
I think they call it arogance.

I was enjoying a bit of nostalgia and thinking Frankie was pretty cool ... until I watched the 2nd video. Damn!! I don't remember country life being like that at all. As for auto-tuned ... huh, what? there was singing??

It would be best to do exactly the opposite of what the property parasites recommend.