By Bernard Hickey
Just imagine if someone told you that the ratepayers of Auckland and the taxpayers of New Zealand in general were providing billions of dollars of subsidies to the wealthiest property owners in the land.
How do you think the public would react? The assumption would be not very well. Yet that is exactly what they've been told and I haven't heard the chorus of talkback abuse or any outraged front pages or indignant questions in Parliament or reports of stormy council meetings.
So here goes. Did you know that 1,400 members of the Remuera Golf Club currently receive the exclusive benefit of using a piece of Auckland Council-owned land that has just been valued at up to NZ$517.1 million?
For the privilege, the Remuera Golf Club pays rates of NZ$130,000 a year. If up to 70% of that land was broken up and sold off for housing with the remaining 30% left in parks, it would produce rates revenues to help ease the burden of ratepayers in general of NZ$16.5 million a year. That's an annual subsidy of NZ$16.37 million, or NZ$11,700 per member per year. That includes Prime Minister John Key, who is an honorary member of the club. Even if each member played 50 rounds a year, that would be a subsidy of NZ$233 per round or NZ$13 per hole.
The estimates of the Remuera club's true value and the forgone rates comes from investment bankers and consultants Cameron Partners and EY in two reports delivered this month to the Auckland Council, which is looking at other ways to fund its looming infrastructure investment bill as Auckland grows.
"This represents a significant subsidisation to private interests and raises questions about whether at least parts of this asset, the land the golf course occupies, could be considered for higher value uses," EY wrote in its report.
"We pass no judgment about whether this is the right use of this land. However, we assert the Auckland public is likely to be unaware of the significance of this subsidy," said the consultancy from the top end of town.
"By making this subsidy and others like it transparent, Aucklanders can make their own minds up about whether this represents fair value and, ultimately, whether capital locked away in this investment could be put to uses that serve the wider vision for Auckland."
That's only part of the subsidy. Cameron Partners estimated the value of Auckland Council's 13 golf courses at NZ$2.1 billion, including the top four courses of Remuera, Chamberlain Park, Pupuke and Takapuna with a value of NZ$1.4 billion. This value assumed 70% of the courses were redeveloped for housing and the remaining 30% remaining as publicly available parks.
And the subsidy for Auckland's land owners doesn't stop with Council ratepayers.
The most startling statistic regularly touted this year has come from Finance Minister Bill English. He regularly points out that 60% of all landlords are subsidised by the Government, which spends around NZ$2 billion a year on accommodation supplements and income related rent subsidies to fewer than 30,000 landlords.
Auckland landlords will be the dominant recipient of this redistribution of income from several million taxpayers, thanks to Auckland rents being the highest in the land and, in particular, the highest relative to incomes.
Imagine the outrage if these billions of taxpayer subsidies were paid to farmers or manufacturers or a religious sect? Farmers are rightly proud of kicking the subsidy habit in the late 1980s, yet there are few howls of outrage about the subsidies for Auckland's property farmers.
The unfairness of these subsidies becomes doubly important in the context of Auckland's painful housing shortage, driven at least partly by the NIMBY property owners of the leafy suburbs around the CBD -- some of whom will be members of these golf clubs too.
The release this week of a report by the Salvation Army showing dozens of children having to sleep in cars, garages, on couches and in caravans emphasised the point. The Army called for urgent action to build thousands of new affordable homes.
The Remuera subsidy is doubly painful because not only is it costing taxpayers and ratepayers at large in the form of forgone rates and higher taxes, but it is costing tens of thousands of Auckland's most deprived children a chance of a stable home from which to learn, be healthy and eventually bring up their own happy, healthy and productive kids.
Ultimately, of course, we all pay when a small group of the population benefits in the short term at the expense of the many. Eventually, the extra housing, health and education costs (not to mention the lost productivity of sick and poorly educated workers) will be paid for by taxpayers at large. Its more than a pity these subsidies are not clearly identified and the tradeoffs measured. It's a tragedy and it means the Remuera subsidy costs three times over.
A version of this article first appeared in the Herald on Sunday. It is here with permission.