Labour's loudly heralded housing policy announcement today will be received with more interest than an opposition party normally receives. The public no longer expects the Government to do very much about either the galloping prices or the plight of the homeless. The Prime Minister last week resorted to urging the Reserve Bank to restrict lending on investment property and the bank in turn suggested the Government should review immigration. Clearly neither knows what more to do.
Labour's offering today is expected to be directed mainly at the poor end of the market. It wants to build more state houses and turn Housing NZ back into a social housing department, providing accommodation for the needy and appointing case managers for every tenant. It will no doubt reprise its 'Kiwibuild' scheme to help young people own a newly built bungalow. Like the Government, Labour has been talking about setting up urban development authorities to hasten consents for new developments.
If it is truly daring, Labour will also crack down on tax deductions for residential investment property, perhaps disallowing any losses on rental expenses to be set against other sources of income. It will be interesting to see whether it revives its plans for capital gains tax. The decision to drop it when Andrew Little took over the leadership, looked decidedly timid when the Government brought in a "bright line" test last year, making gains taxable if a house is sold within two years of purchase. Labour should simply make all houses not owner-occupied taxable on resale at any time, at the seller's income tax rate.
But the most effective dampener of housing inflation in Auckland might yet be the council's Unitary Plan, if commissioners currently working on it, write into it permissible housing densities the city needs. Arthur Grimes, formerly of the Reserve Bank, reasonably asks why the Auckland waterfront, from the city to St Heliers, does not resemble the Gold Coast. That may be overstating it but he is right that Auckland has a small population by Australian comparisons, smaller than Brisbane and Perth.
We do not need to stop people coming here. We need them, and the rest of us, investing in something other than houses. It can be done but requires a government with the will.