The level of property ownership among New Zealand’s Members of Parliament has led to lawmakers ignoring or watering down policy solutions that could have made housing more affordable, the Green and ACT parties have claimed.
In a rare show of agreement, Green Party co-leader James Shaw and ACT leader David Seymour said Tuesday’s Parliamentary Register of Pecuniary Interests, showing interests in at least 350 real properties across 118 MPs, should be read as indicating why certain policies had not been enacted.
The two leaders agreed that the supply side of housing needed to be addressed in the affordability debate, although they maintained differences of opinion on how well a capital gains tax (CGT) might help the situation. Shaw defended the Greens’ long-standing policy against Seymour’s assertions that a CGT has not reduced property prices in major cities around the world.
Read Alex Tarrant’s take on the interview further below, including a comment that it would be great to see the Green and ACT party policies merged to tackle demand and supply, while broadening the tax base.
In the minority
Shaw and Seymour are in a minority of 10 MPs on the Register who did not declare any interest in real property. The two were interviewed Wednesday morning on Radio NZ’s Morning Report programme.
Shaw said he had lived most of his working career in the UK, where, “like most people who live over there I didn’t buy…property in London, and most of my spare capital was tied up in a small business. So I just didn’t get around to it.”
The Greens co-leader was saving to purchase a house in the Wellington Central electorate, where he currently couldn’t afford to buy in. “It’s the seat that I hope to represent and property prices here are crawling slowly towards a million dollars.”
Seymour said he had spent most of his twenties travelling around the world. “I also haven’t had a long-term partner and it’s very difficult to do if you don’t have another person saving towards it with you,” he said.
‘MPs’ property ownership makes them self-interested in not changing policy settings’
Both said they believed MPs’ levels of property ownership had blinkered policy making when it came to housing.
Seymour said National Party MPs’ property ownership levels “might suggest why they’ve spent a lot of time introducing solutions that you’d almost suspect weren’t supposed to work, because they certainly haven’t.”
Shaw added: “The fact that the vast majority of our members of Parliament own multiple properties is quite a good signal for why there isn’t a capital gains tax in this country. There’s very little appetite amongst the National caucus for a proper capital gains tax.”
Supply vs demand; Capital Gains Tax
Home ownership rates were now back where they were in 1951, Seymour said. “They peaked in 1986 at 75%, they’re now heading south of 60%. That just reflect the fact that the number of homes being built is about half what it was in the 70s on a per capita basis. We’ve got to fix that market.”
“It’s generational, frankly. Because, 1974 was the peak year for home building – 39,000 homes that year, when we had vastly inferior technology, when we had a population that was a third smaller than it is today. We actually built a quarter more homes – 25% more homes – than we have in the last year to date,” Seymour said.
Now, as the younger, millennial generation wanted to build homes, “we have an infrastructure funding policy, and a land use planning policy that has strangled the supply of housing,” he said.
“The next government is going to have to do more substantial stuff than the current one has, which has frankly amounted to tinkering. All of the issues – we have people living in cars and garages etc – comes back to the fact that our housing market simply does not respond to demand.”
Meanwhile, Shaw indicated the Greens would keep their capital gains tax policy going into the 23 September election: “We’ve been advocating a capital gains tax since we entered Parliament in 1999 and we haven’t given that up.”
Seymour challenged Shaw to name one city where a capital gains tax had worked to reduce house prices. Shaw’s response was that Seymour was correct when talking about supply. “It’s really obvious that we simply do not have enough houses in this country.”
However, “…by focussing only on supply, and ignoring the demand side of the equation, you’re actually ignoring the effect of the international market,” Shaw said.
“And property in Western countries has become an international commodity. It’s a place for people to park their money. So you have to look at both supply and demand measures.”
Seymour responded: “Nowhere where it’s been tried has it suppressed house prices. They have it in Sydney, Los Angeles, Vancouver and London. They all have the same issues with overpriced housing.”
Shaw: “There are places where it’s contributed. But the thing about it is it’s only one measure. And the thing about property is that you…need to pull all the measures at once.
“If you look at what happened in Vancouver, they said - in addition to a capital gains tax – they said you could see the impact of non-resident foreign buyers was having on their market. So they introduced special stamp duty for that,” Shaw said.
“That helped to bring house prices back down about 20% over a period of about a quarter [of a year]. You’ve got to look at a whole series of measure.”
Seymour, not to be outdone: “People who are talking about taxes as being the solution, if you’ve got a fundamental mismatch between supply and demand and prices going up $100,000 a year, you put a 30% tax on, but people are still going to speculate if they make $70,000 a year after tax. If you don’t fix the underlying fundamentals and build as many houses as there is demand for, prices keep going up.”
It was refreshing listening to Shaw and Seymour being interviewed this morning. We knew they would both look to different solutions to improving housing affordability. It would be great if the two could merge their positions.
One point I want to make is, people seem to forget that a capital gains tax should be viewed foremost as one way to further broaden New Zealand’s tax base. All this talk of using it primarily as a tool to reduce house prices leads to the debate becoming emotional, and has led to the unfortunate belief that the ‘family home’ should be exempt.
Seymour’s point that someone would still speculate if they only made 70k rather than 100k on selling a property effectively missed the point that the government in this instance would have booked 30k in capital gains tax.
This would allow for cuts in personal income or company tax rates and deliver ACT’s desire for a flatter system.
If I work for a salaried income of $100,000 and pay a portion of that in tax, the same should hold for someone who receives a capital gains income of $100,000 – something they have also worked for.
It was good to hear Shaw say that a CGT would be only part of a package if you thought it would contribute to bringing property prices down. It's a recognition that on its own a CGT cannot be the answer, just as getting rid of the RMA, on its own, cannot be the answer.
Let’s not forget, the Green Party are the only bunch who responded ‘positively’ to several economist comments in recent years that the government should look to drive prices down 40%-60% to 2012 levels by launching widespread state house building programmes and by changing tax and other settings.
Then-PM John Key had dismissed the call as “crazy,” while Andrew Little even scrambled as far as to claim that the Econ 101 textbook would show that reducing prices would not lead to more houses being built. ('Econ 101' would maintain the reverse: that increasing supply would lower the price – the Labour leader unfortunately got cause and effect the wrong way around.)
The bottom line is that making homes more affordable by bringing prices down or at least holding them steady, would require both supply and demand responses. The Greens seem to agree on both sides of that equation. Seymour still seems scared of talking about a new tax, even though a comprehensive CGT would allow for a broader, flatter and fairer tax system.