MPs' property ownership has affected policy making, Greens and ACT claim; Shaw and Seymour agree on supply, clash on capital gains tax solutions

MPs' property ownership has affected policy making, Greens and ACT claim; Shaw and Seymour agree on supply, clash on capital gains tax solutions

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.”

Alex’s view:

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.

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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14
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they are so correct, why would the foxs cover up the hole to the hen house.
and this goes right back to the last PM from labour jumping on the band wagon
the advantages for OO verses investors are to tilted and need to be changed back for the good of society

10
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Is it any wonder our young people have given up and so few vote? They just see our Parliamentarians as a bunch of rich people looking after the rich people. Certainly National couldn't care less.

15
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It's not just our MP's. It's the well-healed across the board. Accountants, lawyers, doctors, dentists, business owners and so forth.

And then there's the wealthy from abroad - including a growing number of celebrities.

Not sure what the solution is. In any case, it appears that there are plenty of people out there who don't see a problem......

"well heeled"

Yes the well healed obviously by god himself
At least MPs see it that way

10
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Except that the next generation of professionals... your "Accountants, lawyers, doctors, dentists"... are locked out of housing just the same as anyone else.
There is a growing discontent, even amongst the current generation of "Accountants, lawyers, doctors, dentists" that their children can no longer realistically purchase houses on 6-figure professional salaries.

There's good reason for that.

So your house has soared in value to $1.5 million dollars, but unfortunately you have three children. Now you have to choose between taking advantage of your unearned windfall or giving your children a chance at owning their own home in future.

For a typical Kiwi couple with one family home and a couple of kids...they're only going to be spectacularly better off if they choose not to help their kids. And not helping one's kids is basically putting them on the wrong side of the split of multigenerational haves and have-nots.

You are right. I know several high income professional people who park their money in housing rather than in any productive businesses. They say it is the most tax efficient way to protect their money from tax department and still make high returns.
Good on them as it is legal but one can see why our politicians will not change any laws to channel capital into job producing enterprises.

It used to be that disinterestedness was valued and regarded as a necessary quality for politicians. According to the video "NZ Parliament 101", the first purpose of the government is to represent (and defend the interests ?) of all New Zealanders. I think it is essential we address and expose any conflict of interest.

33
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Well, I think it's pretty clear that National has to go,
JK jumped ship once he realized he steered it towards the rocks with one sided property and immigration policies aimed at benefiting just one side of society and then backed it up by nonsense logic

Their housing and immigration policies can be best described as disastrous, a calamitous failure for everyday new Zealanders and the only benefactors are those who owned property or bought property from 2012 through the biggest surge in population we have seen since 2000 with no plan for moderation or unified strategy to manage the strain on the countries infrastructure - particularly in Auckland

While buying a home has never been 'easy' (nor should it be when you are getting started) when a middle class family earning a reasonable household income of $80-120K per annum cannot afford a home and when Auckland rated as the 4th or 5th least affordable city in the developed world - something is clearly wrong

The National government has led us to this point, and have no solutions.. .It is time to hand it over to someone who actually cares about NZ families and the impact their policies have on the people who pay them to serve their best interests...

While buying a home has never been 'easy' (nor should it be when you are getting started)

Why shouldn't it be easy? When an economy relies on the consumption of goods and services it seems plain stupid that one should have to spend the bulk of their lives, the bulk of their incomes paying off debt to own their own home. The concept of borrow and spend that governments and central banks push is idiotic and helps no one except the banks. The banking system exists only to enslave. The powers that be can't afford to allow the masses to have any sort of economic/financial freedom. Much harder to control them and have a ready supply of slaves serfs employees.

14
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"MPs' property ownership has affected policy making"

Absolute Truth.

Being nominated by public and Not acting in public interest to protect and persuade their own personal goals, agenda is corruption that is firmly rooted in NZ - may be was always their but now more prominent and obvious - in extreme.

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Every MP who owns an residential investment property should recuse himself ( or herself) from voting on any matter related residential property in the House .

They are patently conflicted , and no matter how you look at it , the risks of them being swayed by self interest is simply too high to get an outcome that is in the best interest of all New Zealanders .

Why not just make parliament accountable to the constitutional rights of the people? It's not that hard if the media encouraged debate and focused on this rather than the current situation of focusing on bits and bobs all the time.

Is it an Ancient Right to own the roof over one's head?
Should it not be considered an ancient right to keep the fruits of one's labour.
Conflict can only exist if the Rights of the voters have been abrogated in some way.

Let the TOP party sort this corruption out.

Do you trust Morgan not to form a coalition with National?

Gareth would be a disaster in Government. What he likes to be and often is good at a new look at things and coming up with something different. Quite good at different perspectives but not immune to dumb ones.
In Government he would not be able to work through stuff in a manner democracy needs. Always the fox terrier in my view.

NATIONAL PARTY AND COALITION GOVERNMENT LEGACY BUDGET 2017; Increasing Accommodation Supplements vis-a-vis Increasing tax thresholds?
ie Benefiting some / benefiting all!

Increase accommodation supplement so it does help low income family but it will also help rich people to get more rent as rent will increase.

Anything that national does is suspicious.

Election 4 months away. Too near yet so far.

Oh definitely. Accommodation supplement is a lovely transfer straight from the taxpayer into the pockets of property investors.

Bennetting some / Benefiting all!

Kevin Hague the former Green M.P,from memory owned aroud 7 rentals.

13
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I agree with you Alex. A capital gains tax is not so much a housing issue but just a means of broadening the tax base and taxing every body equitably. Why should a property investor enjoy tax free wealth creation while hard working people who make a real contribution to the economy bear all the tax burden?

"Every MP who owns an residential investment property should recuse himself ( or herself) from voting on any matter related residential property in the House"
How dumb is that?
IF an MP has chickens should he abstain from voting on poultry matters?
If an MP like beer shoud he abstain from voting on liquor laws?
What if an MP has a sheep as a good friend? Does that stop him from voting for farmers rights?

If a matter is paltry we probably don't need to vote on it, he said sheepishly.

Every MP that pays tax should abstain from voting on tax matters as well!
Property investors should not be treated any differently to other businesses and they aren't.
If a business is sold they don't pay tax on the profit of what they originally paid for it!
They pay tax on the revenue gathered less expenses just as every other business.

very poor argument, you need to compare apples with apples
a business creates employment whom in turn pay PAYE,
a business pays GST
a Business has to comply with a range of government departments which creates cost
the diffference between a business owner and a property investor are vast
but if you want lets treat property investors the same as a small business owner im all for that

I employ people who pay tax!
I pay GST on the GST I collect on a commercial property but to pay it on residential I would need to collect it from the tenants.
I am treated exactly the same as a small business owner.

When you say you employ people, are you referring to your slaves (renters?)

13
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..how about you pay commercial rates on your propertyy? How about you pay for the trashing of our suburbs by your unkept rentals? How about you pay for the social harm of our kids going from one school to another as they are moved on? How about you pay a penal tax (as opposed to refunds) to cover all the health issues our kids are suffering from your dog boxes? How about you pay tax on you cap gains when we all know thats the game? How about your interest, repairs, rates etc become non deductiblel...as it is for all private home owners.

The landlord rort is a disgrace...why it has been tolerated for so long is even more disgraceful

You should also add that if a business buys a capital asset and sells it later (at any point, not just earlier than two years later) at a profit they are required to pay tax on the profit and the depreciation claimed. Why should people who buy then sell houses be treated so differently? Having asked it, it's a naive question question really. This article clearly illustrates the reason why and it has nothing to do with fairness, justice or the interests of the general public. Do we have to see something like Brexit or Trump in NZ before issues like this are addressed?

The time looks ripe in the next few years to rebalance tax away from its overdependence on income and back to a split of income and land - as it used to be in the past (that being one of the measures that created affordable home ownership in NZ).

The Opportunities Party needs to hammer that sort of simple message - 80% of people will be better off because their income tax goes down more than their property tax goes up.

" .. a capital gains tax should be viewed foremost as one way to further broaden New Zealand’s tax base."
So there - all that talk about housing is merely a pretext - to tax and spend some more.

Did you read the same article as me? There's no talk about increasing spending, just discussion about where the tax comes from.

"This would allow for cuts in personal income or company tax rates"

" 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."

The discussion about how much the state should spend is distinct from the discussion about how tax should be raised, and only the latter has been raised here. There is a school of thought that the taxing of income isn't ideal as it discourages work, and that we should lower income tax and make the difference up elsewhere. My personal favourite is inheritance tax, what better time to be taxed than after you're dead?

"The discussion about how much the state should spend is distinct from the discussion about how tax should be raised" - yes , it should be - in perfect world - that we do not unfortunately inhabit. In the real world how much is spent is driven by how it is raised .

The party advocating CGT ( the Greens ) does not of course propose any offsetting tax cuts on personal or company income - that is merely a bit of friendly spin from Alex to make them sound a little more reasonable.

"It is not the job of government to work how much it needs. Government must go out and get as must as it can and then work out what to spend it on."

Sir Humphrey Appleby.

If we didn't have this crazy price bubble in housing, MP's conflicts would be much less important. We need to fix the price craziness for a multitude of reasons.

Property ownership by MPs is far more better and nobler than the money laundering that is being allowed to be forgiven for migrants who deal in huge sums and buy citizenships and get to stay in this country, after such blatant crimes. The authorities are happy to take part of that money and forget and forgive ? What a sham and shame...
Also with all that emphasis in Banking about anti-money laundering, how a confessed money launderer can continue to be provided banking services here ?

If I ever founded my own country (which seems highly unlikely) I would place on the parliamentary steps a guillotine - just so the elected officials and power hungry could have a daily reminder of who holds ultimate power.
"Do You Hear the People Sing" would be the elevator music, playing just above subliminal level throughout the parliamentary complex.

>If I ever founded my own country (which seems highly unlikely)

Don't give up on your dream!

LOL, top work!

My view is that it maybe ignorance and outside, vested interest, influence on the part of Govt ( and not so much , indiviual self interest of MPs')... ( I think Bill English has shown ignorance.)

My view is that it is an incessant need for power and control on the part of Local bodies.. expecially Auck. City

Wymad has shown me that this is NOT rocket science.
A fundamental truth seems to be.... " If the land price is wrong (ht the much-missed Hugh Pavletich), everything on top is wrong."
Other factors exasperate things from there

http://waymad.blogspot.co.nz/2016/05/why-housing-supply-is-strangled.html

I tend to agree. There are other factors but they all pale in comparison.

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.

Exactly. The bias towards taxing labour and not capital is outdated. Hoarding/selling existing property and shares to each other does nothing for the productive economy.

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.

Capital gains on property or shares has not been worked for. Capital gains are a result of factors completely outside of any individuals personal efforts. Maybe these gains should be taxed at a higher rate.

If I was in Government and owned a business and then voted on a contract, for example, to substantially benefit my business, then I would be accused of corruption.
Why is it then that these National ministers who own dozens of rental properties, either in their own names or in family trusts, can make decisions and vote on issues that will increase rents and house prices, thus substantially increase their personal fortune??
I call this corruption and do not understand why we look the other way and do nothing.
MPs with property investments should substain from voting on housing issues.

This situation will only change when the next generation of MP's struggle to afford a home.

One previous commenter in this thread recalled that I had about 7 rental properties. This is wrong. In addition to my own home near Greymouth I own two houses on adjoining small sections in Greymouth (combined value about $270,000). I own them because my partner and I intend to combine the sections and build our own home there (selling our existing home) but in the meantime the two houses are rented.