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When we get an undersupply of any item, the price goes up. This is a basic fact of economics.
We have a chronic shortage of houses in this country, which successive governments have failed to address. Accordingly, the price of houses has continued to go up - and many people cannot now afford to buy a house, not just first-home buyers.
When house prices go up, rent goes up as well, because the seller of the rental space must recover his/her costs - or go out of business.
When rent goes up, some can no longer afford the higher prices. The direct result of higher rent is homelessness.
The chronic housing shortage is the common driver of it all.
This is being obfuscated by misguided information and choice of words in the media about "homelessness is a deeply rooted problem", "closing tax loopholes", focusing on first-home buyers not being able to afford a house, "bright-line tests" (read capital gains tax) and "greedy landlords" – to name just a few.
We simply need more houses.
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When we get enough houses, house prices will come down, rents will come down, homelessness (and the associated issues with that) will all come down. A semblance of normality will resume.
Almost all the houses that are being built were being built by the much-maligned "property investors". By closing the so-called "loophole" we have made our New Zealand residential property owners probably the only business in the world who are not allowed to claim the interest on their business as a legitimate tax-deductible expense.
We have also discouraged the building of new houses and further added to the shortage, thereby fuelling further house and rental costs.
The introduction of a capital gains tax could not come at a worse time.
Capital gains taxes have a place, but we should be helping the only group who can cure the housing shortage, rather than penalising them for helping.
- Bryce Heard is the chief executive of the Rotorua Chamber of Commerce
