Exactly what to do with the housing market – if anything – is going to be a real test of Labour's principles.
Labour is going to have to choose which set of voters to please: its 2017 voters or the new Labour voters of 2020. Because – at the risk of making too great a generalisation here – these two groups probably don't want the same thing for the housing market.
Before we get ahead of ourselves though, let's go back to last month's election, to understand the tension between what these two distinct groups want.
The real winners on election night 2020 were not Labour's long-suffering left-of-centre supporters. The real winners were Middle New Zealand voters: the slightly conservative centre voters, who don't actually support all that transformation stuff Jacinda Ardern used to talk about.
Labour didn't win the 2020 election because of its long-suffering voters. It didn't defend the hill those voters occupy. What it actually did was pull up its flag, march over to the hill occupied by Middle New Zealand, drive its flag into that ground and join that team. Middle New Zealand won the 2020 election because it convinced Labour to abandon its own ideology and policies.
The difference between Labour 2017 and Labour 2020 is stark. Gone is the promise to build 100,000 houses in 10 years, to tax water use, to introduce a capital gains tax, to be transformational.
Instead, Jacinda Ardern and Labour promised a new holiday and a tiny tax increase for the top 2 per cent of earners. On election night, Ardern couldn't have signalled more clearly that she's abandoned the transformation aspiration, by promising in her speech that Labour would be a party "that governs for every New Zealander".
Middle New Zealand should feel chuffed. It managed to convince one of the world's most celebrated modern progressives to quietly shelve most of her progressive ideals.
Which brings us to the housing market and the conundrum Labour has.
Labour's 2017 voters most likely have an appetite for something radical. They are the voters who supported the party while it still toyed with the possibility of a capital gains tax and the dream of being able to build 100,000 Kiwibuild homes in a decade. They will likely expect Labour to not just halt the dramatic rise in house prices, but to truly make housing more affordable.
Labour's 2020 voters most likely want nothing radical. They are the voters who only supported the party after it abandoned a capital gains tax and Kiwibuild's unrealistic targets. Retaining these voters is the reason Ardern and Grant Robertson repeatedly ruled out the Green Party's wealth tax or anything similar.
If Labour does something too radical it risks losing the 2020 voters. If it doesn't do enough, it risks losing its credibility as a party that claims to care for the most hard-up among us.
The tension here is already on display. The exchange of letters between Robertson and Reserve Bank Governor Adrian Orr this week was nothing more than political theatre. It won't make much difference at all, other than creating the perception of Labour dealing to house prices.
Robertson has a few tools he can turn to – extending the bright line test beyond five years, introducing debt-to-income ratios, adding the house price measure to the Reserve Bank's job description – but that is really only tinkering to slow the price increases. It is not the massive reform needed - and expected by the 2017 cohort of voters – to truly make homes affordable.
In time, the planned RMA reforms may release the supply needed, but that is years away. These rising house prices are a problem right now.
It's not unusual for a government to have to balance the competing demands of completely distinct voter groups. But it is unusual to have a party move so fast and so far from one position to the other and try to hold onto both groups.
Housing will be the first real test of whether it can.