Leave it to the property market to correct the imbalances caused by high demand for housing in Auckland.
So the Prime Minister is considering restraints on residential landlords, joining the clamour of nonsense spouted on this subject in recent times. Here are some observations, but before there's a deluge of "he would say that, wouldn't he" letters, note that I've never owned residential property and never will. The lousy returns and tenancy hassles would drive me to tears.
First, if Auckland's housing woes can in part be laid at the door of residential investors as alleged, simply ban them. Give landlords three years to dispose of their properties and, hey presto, paradise. Or would it be?
Let's say an orderly sale of the tens of thousands of rental properties is achieved to owner-occupiers, then where do the former tenants live, now private renting is illegal? There's only one answer - the Government will have to house them, and remember, when the Government spends, it's your money. I doubt anyone would be too delighted at that prospect.
So why place impediments in the landlord's way? To the contrary it's in society's interest to encourage the private rental housing sector; it even makes sense to give it subsidies if we must adopt a tweaking of the market system.
Another foolish cry is that landlords buying houses drive up prices. As they buy to rent and will stop abruptly if the tenancy demand dries up, that argument is not very logical. Lately, world-class foolishness has been on display with the "unfair" claims that a landlord can deduct his mortgage interest while an owner-occupier cannot.
It's not hard. The landlord is running a business and pays tax on his earnings. And if be doesn't pay much, that's because he doesn't earn much because of the minuscule returns. One can equally argue the homeowner should pay a fringe benefit tax for the use of his house.
To illustrate the point away from the emotion surrounding housing, imagine two people buy two $50,000 paintings with half paid by bank loans. One keeps his and enjoys looking at it. The other rents his out, deducts the interest and pays tax on the residual. Both are receiving returns which they logically equate to the purchase price, otherwise they would not have bought the paintings.
But the one taking his return in cash pays tax while the other receiving an identical value return on his outlay, but in pleasure, does not.
We're also hearing nonsense about foreigners driving up prices by buying up Auckland's housing stock. Really! So where are the tens of thousands of unoccupied residences?
Then there's the claptrap about Kiwis' love of property and "misplaced resources". Mostly this comes from self-serving fund managers whose worldwide woeful historic returns (except for them from their ticket-clipping role) is a damn good reason to opt for property as the small investor understands and controls his investment.
But how can there be a misplaced resources situation hand in hand with a housing shortage? If everyone had several houses then the argument would have validity. These "misplaced resources" lightweights would presumably prefer us living in tents.
The Prime Minister of all people should appreciate that the best way to deal with the housing demand induced by Auckland's burgeoning population is to leave it to the market. When imbalances occur in any commodity, inevitably the market reacts, but obviously with housing it can't happen overnight.
John Key should also take a cue from former Australian Prime Minister John Howard. About a decade ago I watched Howard being harangued on television by a commentator about Australia's then rising house prices, Australia then, like Auckland now, was experiencing mass immigration inflows with the inevitable housing shortfall. Finally, Howard spoke.
"For 30 years," he said, "I've been earbashed from one end of the country to the other on every conceivable subject. But I've yet to hear anyone complain about the value of their houses going up." That applies here and is a good thing, inducing confidence.
Market systems indisputably produce the best outcomes but inherent in them is volatility, failing which they're not functioning properly. We need to recognise that and have less infantile handwringing when balances swing one way, confident that in the course of time they'll be self-correcting.
One thing I will say is that should I learn Sir Roger Douglas has committed suicide or retreated to a Trappist monastery, I will not be even a smidgen surprised. He certainly has grounds for despair.
Three decades ago, he radically simplified our economy and restored it to a sound footing. But ever since he's had to watch his splendid work chipped away at and read arrant nonsense about whatever element of the economy is either running hot or cold and the woe-is-us cries from the ignorant, not comprehending that, ultimately, it will be self-correcting.