Last week we learned the average house price increased by a near-unbelievable 20 per cent in a single year.
This has rightly intensified scrutiny on Reserve Bank Governor Adrian Orr as he slashes interest rates and prints $130 billion in the name of economic stimulus. The unintended consequence of loose monetary policy is that New Zealanders take that extra cash to the nearest property tender.
However, Orr wasn't the first to pour accelerant on the housing fire. John Key, and now Jacinda Ardern, have pumped money into the housing market with a series of kind-sounding policies – and they've done so intentionally.
The First Home Grant – formerly branded as HomeStart – gives $5000 to New Zealanders buying their first home in the lower end of the market. In its latest annual report, Kāinga Ora boasts it paid a total of $78m in First Home Grants to 14,150 applicants within 12 months.
Kāinga Ora also spent $11.7m on mortgage insurance for first-home buyers under its First Home Loan programme. This programme lets buyers jump into the housing market with just a 5 per cent loan deposit. Banks would usually consider that risky, but that's clearly not the case when loans are insured by the taxpayer.
This year, the Government injected $400m into a new Progressive Home Ownership scheme – money that community housing providers will use to buy up homes which are then sold to tenants bit-by-bit.
The largest stream of housing-price propellant comes from KiwiSaver. The Government blocks young New Zealanders from accessing their KiwiSaver money unless they promise to spend it in the housing market. It's a perverse threat that has seen New Zealanders withdraw $1.144 billion to purchase homes in the past financial year, and the trend is upward. Of course, a significant portion of this comes from taxpayer-funded subsidies and the interest borne on those subsidies.
It should be obvious that foisting cheap money onto first-home buyers means prices are bid up higher – especially in the "affordable" segment of the market. But the Prime Minister is relaxed. In fact, she wants to extend these programmes, saying last week: "I want to look again at whether or not there is more we can do to overcome that big significant hurdle of that first deposit."
Adrian Orr excuses his money-printing by pointing to the Reserve Bank's strict mandate. The Prime Minister has no such excuse. Handouts for first-home buyers are a political gesture aimed at middle-class voters.
First-home buyers – or those on the cusp of becoming such – are by definition not the worst-hit by rising house prices. The real victims of house price inflation are those who lose hope entirely of owning a home, whether that be in five years or 50. These New Zealanders are too busy managing weekly bills and payments on existing debts to even think about a house deposit.
Maybe, if they're lucky, they'll inherit property upon the death of a family member. Some luck.
Ardern will be acutely aware that first-home buyers and their parents are more likely to vote, and to be swinging voters at that. The Prime Minister's response to Covid-19 and subsequent electoral landslide has built enormous political capital for her. For the sake of a burgeoning rental class, she needs to spend this capital and extinguish the housing market inferno.
This means admitting to would-be homeowners that housing handouts are a sham, intensifying the very problem they are purported to solve. It means being tough to be kind – withdrawing the First Home Grant and cancelling absurd 5 per cent loan deposits. It means freeing up the sacred cow that is KiwiSaver, so it can be used for non-housing expenditure such as starting a business, buying insurance, or paying down a debt. It means abandoning piecemeal, sticking plaster policies like "Progressive Home Ownership" in favour of radical reform of land-use regulations and building codes so that housing supply may one day catch up with demand.
There will be backlash. Voters on the left and right alike will squeal. But the housing calamity risks supplanting Covid-19 as the lasting memory of Ardern's leadership. She should fear for her legacy.
• Louis Houlbrooke is the campaigns manager at the Taxpayers' Union